Unit – 4
DEPARTMENTAL ACCOUNTS AND BRANCH ACCOUNTS
Q1) Write a Short Note on: Departmental Accounting.
A1)
Department is a division of a large organization, dealing with a specific area of activity. Department is distinguished from Branch.
Department are small units, carrying out their own specific activity within a single premises of the business.
Each department is individually responsible to make its profit or loss.
Whenever there are departments in a business, it is also necessary that profit-loss situation is also derived from each department. Hence, departmental accounts are prepared.
Departmental Accounting makes the management to compare the various departments and take remedial actions, if required.
Based on the results of Departmental Accounting,the owners of the business can take decision whether further investment should be made in the department or disinvestment should be done.
With the help of the statistics derived from Departmental Accounting, interdepartmental performance can be drawn.
Departmental financial position helps to reward the Managers of each department with incentives and remuneration.
The information provided by Departmental accounts may be helpful to the management to formulate future plans.
There are two methods of preparing Departmental Accounts viz, Independent Method and Dependent Method.
In Independent Method, each department is treated like a separate establishment and a separate set of accounts are maintained for each department.
In Dependent Method, common books of accounts are maintained for all the departments.
Q2) What are the Objects and Advantages of Departmental Accounts?
A2)
Department is a division of a large organization, dealing with a specific area of activity. Department is distinguished from Branch.
Department are small units, carrying out their own specific activity within a single premises of the business.
With the help of the results derived from the Departmental Accounts, the business owners can take the decision regarding further investment in the relevant department.
The Management can take special care of the departments showing weak results, so that their performance can be improved.
To assist the management for making decision to drop or add a department
It helps to know the efficiency of each department
The departmental managers and staff can be suitably rewarded on the basis of the departmental result.
Whenever there are departments in a business, it is also necessary that profit-loss situation is also derived from each department. Hence, departmental accounts are prepared.
Q3) Write a Short Note on: Branch Accounting.
A3)
To increase profits, a business enterprise increases their volume of sales.
For this purpose, many firms open their trading houses in different parts of a large region.
The parent establishment is known as ‘Head Office’ and these smaller units are termed as ‘Branch’.
Branch is an addition to an existing firm.
It should be noted that a Branch has its separate existence but does not possess any separate legal entity.
A Branch is just an extension and a profit centre of an existing firm.
It should also be noted that all activities of the branches are controlled by the Head Office.
Branches are of different types like Dependent, Independent and Foreign.
Branches are geographically separated unlike Departments. In the latter, they are not separated rather existed under a same roof.
The Branch Accounts are merged with the Head Office at the end of the accounting period.
Q4) What do you mean by a Branch of a business organisation? Distinguish between a Department and a Branch.
A4)
Departments are attached within a single organization under a single roof whereas Branches are separate from the main organization.
Branches are of different types like Dependent, Independent and Foreign. There is no such classification of Department because all departments comes under the same roof.
Departments are not separated rather existed under a same roof.
Branches are geographically separated.
Allocation of common expenses is the primary consideration while preparing Departmental Trading A/c whereas the concept of allocation of common expenses does not arise in case of Branch Accounting.
Departmental Accounting presents the trading results of each individual Department. On the other hand, Branch Accounting presents the trading results of each individual Branch.
To find out the net result of the organization, the reconciliation of different Branch A/c is done.In Departmental Accounting, no reconciliation is necessary because the accounting is done centrally.
Departmental Accounts
Q5) A firm has two departments X and Y. From the following figures prepare the Departmental Trading Account for the year ended 31st December, 2013.
Particulars | Dept. X | Dept. Y |
Opening Stock Purchases Sales | 40,000 1,50,000 2,50,000 | 50,000 1,00,000 1,50,000 |
Closing Stocks were: X Rs.36,000, Y Rs.40,000.
Carriage Inward Rs.10,000.
A5) Departmental Trading Account for the year ended 31-12-2013
Particulars | Dept.X | Dept.Y | Particulars | Dept.X | Dept.Y |
To Opening Stock To Purchases To Carriage Inward (3:2) To Gross Profit c/d | 40,000 1,50,000 12,000
84,000 | 50,000 1,00,000 8,000
32,000 | By Sales By Closing Stock | 2,50,000 36,000 | 1,50,000 40,000 |
| 2,86,000 | 1,90,000 |
| 2,86,000 | 1,90,000 |
Working Note:
Purchase Ratio (PR) Department X : Department Y
1,50,000 : 1,00,000
3 : 2
Q6) Prepare Departmental Trading Account from the following particulars:
Particulars
| Dept. A | Dept. B | Dept. C |
Opening Stock Purchases Sales Wages Closing Stock Return Inwards Return Outwards | 42,500 2,35,680 2,62,450 7,650 93,450 2,450 5,680 | 35,620 3,43,260 3,91,200 8,250 99,230 1,200 3,260 | 43,560 4,12,610 5,24,130 3,240 53,420 4,130 2,610 |
A6) Trading Account for the year ended ---
Particulars | Dept. A | Dept. B | Dept. C | Particulars | Dept. A | Dept. B | Dept. C |
To Opening Stock
To Purchase Less: Returns To Net purchases To Wages
To Gross Profit c/d
| 42,500
2,35,680 5,680
2,30,000
7,650
73,300
| 35,620
3,43,260 3,260
3,40,000
8,250
1,05,360 | 43,560
4,12,610 2,610
4,10,000
3,240
1,16,620 | By Sales Less: Returns By Net Sales By Closing Stock | 2,62,450 2,450 2,60,000 93,450 | 3,91,200 1,200 3,90,000 99,230 | 5,24,130 4,130 5,20,000 53,420s |
3,53,450 | 4,89,230 | 5,73,420 | 3,53,450 | 4,89,230 | 5,73,420 |
BRANCH ACCOUNTS
Q7) M/s Gupta Brothers are having their Head Office at Delhi and Branch at Calcutta. The following are the transactions of the Head Office with Branch for the year:
Particulars | Amount | Particulars | Amount |
Stock at Branch as on 1st Jan Debtors at the Branch as 1st Jan Petty Cash as on 1st Jan Goods supplied to the Branch Remittance from Branch: - Cash Sales - Realisation of Debts | 30,800 16,500
500 1,51,200
10,500 1,57,740 | Amount sent to Branch - Salary - Rent - Petty Cash Stock at Branch as on 31st Dec Sundry Debtors at the Branch as on 31st Dec Petty Cash as on 31st Dec |
7,440 2,400 3,000 23,150 50,460
750 |
Show the Branch Account in the books of Head Office.
A7) In the books of M/s Gupta Brothers (H.O.)
Branch Account
Particulars | Amount | Particulars | Amount |
To Balance of Branch Assets b/d - Stock (from HO) - Debtors - Cash - Furniture To Goods sent to Branch A/c To Cash/Branch A/c (remitted by HO) - For Wages and Salary - For Rent - For Petty Cash
To Net Profit transferred to P&L A/c |
30,800 16,500 500 4,000 1,51,200
7,440 2,400 3,000
30,760 | By Cash/Bank A/c (remitted to HO) - Cash Sales - Collection from Debtors By Balance of Branch Assets c/d - Stock (from HO) - Debtors - Cash
|
10,500 1,57,740
23,150 50,460 750 |
TOTAL | 2,42,600 | TOTAL | 2,42,600 |
Q8) Mithur Brothers and a small branch Mysore. You are required to prepare Mysore Branch account in the books of Mithur Brother for calculating profit made at Mysore Branch. Transactions during the year ending on March 31st,were as follows:
Particulars | Amount | Particulars | Amount |
Stock at cost on 1st April Furniture on 1st April Goods sent to Branch at cost Cash sales made by the branch | 8,000 4,000 1,20,000 1,80,000 | Furniture purchased by the branch on permission from Head Office Stock at the end with branch Expense paid by Head Office |
2,400 7,000 10,600 |
It was required to write off Furniture @10% per annum. No depreciation is provided on additions made during the year.
A8) In the books of Mithur Brothers (H.O.)
Branch Account
Particulars | Amount | Particulars | Amount |
To Balance of Branch Assets b/d - Stock (from HO) - Furniture To Goods sent to Branch A/c Spent by H.O. For Branch
To Net Profit transferred to P&L A/c |
8,000 6,000 1,20,000 10,600
48,000 | By Cash/Bank A/c (remitted to HO) - Cash Sales By Balance of Branch Assets c/d - Stock (from HO) - Furniture
|
1,80,000
7,000 3,600
|
TOTAL | 1,90,600 | TOTAL | 1,90,600 |
