CA INTERMEDIATE

DEPARTMENTAL ACCOUNTS

11. 1 Treatment Memorandum Stock

Apportionment Manager
of of Commission 2 Mem .

Markup
Expenses Unrealised
Profit
I
I to

General
Direct

↓
-

Action
Rent
Employee CEO
Salary
I
wages
Dept X

↓
P&L+
org resogn.
.

unrealised Profit

Papa Beta

C =
100 1 = S 1P = 150 - outsider
↑
Realise
Nabli -
-
-

zon
100U IOOU - outsider

C =
100 1 = 50 1P = 150 SP 150
=

Nakli Profit CS = 20U

100 X SO =
500
=150/
- 3000

CA Tejas Suchak
 CA INTERMEDIATE
Dadaji /Organisation)

profit :
Papa : -5000 (10oU) closing stock :
-

Papa =
0

(150/)
=
200x50 Beta 3000

Transferber
=>

.
:

204x5 =
1000

C
-

⑤
Papa pft Bett
less
: -
Bett
nosing ⑳0
- -

stock 1e35
sation
-
Rient
organ organisation -

Profit 200 x 50 4000

crosing
St 200x100 2000
: =
= =

Organisation Pol

Papa P& L Dr . 204x58

Bett CS Cr . 200x50

Points to Reserve
closing
remember :
stock

Point of
1
organisation view
. .

2 .
Beta :
closing stock Received from papa
: (xxx + A)
charged (xy B)
Papag t
-

Reserve (AXBI

CA Tejas Suchak
 DEPARTMENTAL ACCOUNTS 12.5

Individual Identifiable Expenses: Expenses incurred specially for a particular

department are charged directly thereto, e.g., insurance charges of stock held by
the department.
Common Expenses: Common expenses, the benefit of which is shared by all the
departments and which are capable of precise allocation are distributed among the
departments concerned on some equitable basis considered suitable in the
circumstances of the case.
Allocation of Expenses
S. No. Expenses Basis
1. Rent, rates and taxes, repairs and Floor area occupied by each
maintenance, insurance of building department (if given) otherwise
on time basis
2. Lighting and Heating expenses Consumption of energy by each
(e.g., energy expenses) department
3. Selling expenses, e.g., discount, bad Sales of each department
debts, selling commission, freight
outward, travelling sales manager’s
salary and other costs
4. Carriage inward/ Discount received Purchases of each department
5. Wages/Salaries Time devoted to each
department
6. Depreciation, insurance, repairs and Value of assets of each
maintenance of capital assets department otherwise on time
basis
7. Administrative and other expenses, Time basis or equally among all
e.g., salaries of managers, directors, departments
common advertisement expenses, etc.
8. Labour welfare expenses Number of employees in each
department
9. PF/ESI contributions Wages and salaries of each
department
Note: There are certain expenses and income, most being of financial nature, which
cannot be apportioned on a suitable basis; therefore, they are recognised in the combined
Profit and Loss Account, for example, interest on loan, profit/loss on sale of investment,
etc.

© The Institute of Chartered Accountants of India

 12.12 ACCOUNTING

Cost of Closing Stock (`) 400 х 24 600 х 27 700 х 30

9,600 16,200 21,000
Illustration 4 ->

wks
M/s Omega is a departmental store having three departments X, Y and Z. The
information regarding three departments for the year ended 31st March, 20X1 are given
below:

X Y Z
` ` `
-Opening Stock -> TV . 36,000 24,000 20,000
Purchases
~ -> Tr .
1,32,000 88,000 44,000
Debtors at end 15,000
P2L
x57 10,000xsY10,000 xST
X
- .

Sales Tr 1,80,000 1,35,000 90,000

.
·

- ->

Closing
r stock -> Tr 45,000 17,500 21,000
Value of furniture in each department 20,000 20,000 10,000
Floor space occupied by each department (in sq. ft.)
-
-
n
3,000 2,500 2,000
> Number of employees in each Department 25 20 15
E

Electricity consumed by each department (in units) 300 200 100

-

The balances of other revenue items in the books for the year are given below:

Amount (`)
Carriage inwards -
-> Purch 3,000
Carriage outwards -> P2- sales 2,700
Salaries P2L -> Pel- No Of emp
.
-
48,000
Advertisement ->
Pol- sales 2,700
Discount allowed -> P21- Sales/Dectors 2,250
Discount received -> P2L- Purch 1,800
-

Rent, Rates and Taxes -> P2L- 7,500

floor
space
Depreciation on furniture -> Or-value of Fur 1,000
Electricity expenses - P2L Elec :
3,000
Labour welfare expenses -> PCL- No -
2,400

You are required to prepare Departmental Trading and Profit and Loss Account for the
year ended 31st March, 20X1 after providing provision for Bad Debts at 5%. - -

© The Institute of Chartered Accountants of India

 Solution
Departmental Trading & Profit and Loss Account for the year ended 31st March, 20X1
in Books of M/s Omega
Particulars Deptt.X Deptt.Y Deptt.Z Total Particulars Deptt.X Deptt.Y Deptt.Z Total
` ` ` ` ` ` ` `
To Stock (opening) 36,000 24,000 20,000 80,000 By Sales 1,80,000 1,35,000 90,000 4,05,000
To Purchases 1,32,000 88,000 44,000 2,64,000 By Stock (closing) 45,000 17,500 21,000 83,500
To Carriage Inwards 1,500 1,000 500 3,000
To Gross Profit c/d
(b.f.) 55,500 39,500 46,500 1,41,500 ________ _________ ________ ________
2,25,000 1,52,500 1,11,000 4,88,500 2,25,000 1,52,500 1,11,000 4,88,500
To Carriage Outwards 1,200 900 600 2,700 By Gross Profit b/d 55,500 39,500 46,500 1,41,500
To Electricity 1,500 1,000 500 3,000 By Discount received 900 600 300 1,800
To Salaries 20,000 16,000 12,000 48,000

© The Institute of Chartered Accountants of India

To Advertisement 1,200 900 600 2,700
To Discount allowed 1,000 750 500 2,250
To Rent, Rates and 3,000 2,500 2,000 7,500
Taxes
To Depreciation 400 400 200 1,000
To Provision for Bad 750 500 500 1,750
DEPARTMENTAL ACCOUNTS

Debts @ 5% of
debtors
To Labour welfare 1,000 800 600 2,400
expenses
To Net Profit (b.f.) 26,350 16,350 29,300 72,000
56,400 40,100 46,800 1,43,300 56,400 40,100 46,800 1,43,300
12.13
 12.14 ACCOUNTING

Working Note:

Basis of allocation of expenses

Carriage inwards Purchases (3:2:1)
Carriage outwards Turnover (4:3:2)
Salaries No. of Employees (5:4:3)
Advertisement Turnover (4:3:2)
Discount allowed Turnover (4:3:2)
Discount received Purchases (3:2:1)
Rent, Rates and Taxes Floor Space occupied (6:5:4)
Depreciation on furniture Value of furniture (2:2:1)
Labour welfare expenses No. of Employees (5:4:3)
Electricity expense Units consumed (3:2:1)
Provision for bad debts 5% of respective debtors balance

Illustration 5
M/s X has two departments, A and B. From the following particulars prepare the
consolidated Trading Account and Departmental Trading Account for the year ending
31st December, 20X1:
A B
` `
Opening Stock [consisting of purchased goods -at cost]
- 20,000
a
-
12,000
-
-

Purchases
- 92,000
-
68,000
- -
-

Sales
W 1,40,000 1,12,000
Wages
~ 12,000 8,000
Carriage
~ 2,000 2,000
I
-

Closing Stock:
a

(i) 2Purchased goods

-
4,500
-
6,000
- - -
-

(ii) Finished
e goods 24,000 14,000
=-

© The Institute of Chartered Accountants of India

 CA INTERMEDIATE

I
A B A B

OS 20000 12000 S 140000 12000

P 92000 68000 PG transf 2000 10000

↑

W 12000 2000 FG trans .

35000 40 000
,

2 2000 2000 VG ret .

(7000) (0 000)
,

PG mans - 10000 8000

-

#G trans- 40000 35000 CS : PG 1500 6000

-

FG ret .

110000)
.
(7000) FG 24000 14000

GP
50046000
38,

GY A 38508
&

B 46000
(B (5) (A profits]
-

CSR : :
642

(A (3) (B
:
:

profits) 1555

NP
-303

-
A B -

I B : (s =
14000 x 20 % = 2800 1 A : (S = 24000 x 20% = 4800

profiti 22 92% profit/ 32 39%

·

2 . A : .
=- :
·
2 .
B :
= 00 :
-

168000 142000
-

3 . CSR I 642 3 .
CSR = 1555

CA Tejas Suchak
 DEPARTMENTAL ACCOUNTS 12.15

Purchased goods transferred:

e
-
-

by B to A
~ 10,000
- =
=

by A to B
E 8,000
->
- =

Finished goods transferred:

-

by A to B
- 35,000
-

=
E

by B to A 40,000
-

Return of finished goods:

- by⑧
A to B
by B to A
E
10,000
7,000
-
-

You are informed that purchased goods have been transferred mutually at their
respective departmental purchase cost and finished goods at departmental market price
and that 20% of the finished stock (closing) at each department represented finished
goods received from the other department.
Solution
M/s X
Departmental Trading A/c for the year ending 31st December, 20X1
Deptt. Deptt. Deptt. Deptt.
A. B A B
` ` ` `
To Stock 20,000 12,000 By Sales 1,40,000 1,12,000
To Purchases 92,000 68,000 By Purchased Goods 8,000 10,000
transferred
To Wages 12,000 8,000 By Finished goods 35,000 40,000
transferred
To Carriage 2,000 2,000 Return of finished 10,000
- -
7,000
Goods
4000-10000
-

To Purchased By Closing Stock:

Goods
transferred 10,000 8,000 Purchased Goods 4,500 6,000
To Finished 40,000 35,000 Finished Goods 24,000 14,000
Goods
transferred
204500 1 72 000
, ,

© The Institute of Chartered Accountants of India

 DEPARTMENTAL ACCOUNTS 12.17

Illustration 6
Department P sells goods to Department S at a profit of 25% on cost and to Department
- -

E
- -

Q at a profit of 15% on cost. Department S sells goods to P and Q at a profit of 20% and
-

0
30% on sales respectively. Department Q sells goods to P andO S at 20% and ⑦
- -

10% profit
- -
-

on cost respectively.
-
-
- - -

Departmental Managers are entitled to 10% commission on net profit subject to

unrealised profit on departmental sales being eliminated. Departmental profits after
charging Manager's commission, but before adjustment of unrealised profits are as
below:
`
Department P 90,000
I =

Department S 60,000
Department Q 45,000

Stock lying at different Departments at the end of the year are as below:

Figures in `
DEPARTMENTS
⑦
P ⑧
S Q

I!
Transfer from P - 18,000 14,000
O
- -

0
-
- -

Transfer from S 48,000 - 38,000

- 0
-
-

-
Transfer from Q
-
12,000
n
8,000 -
Find out correct Departmental Profits after charging Managers' Commission.
Solution
Calculation of correct Departmental Profits

Department Department Department

P (`) S (`) Q (`)
Profit after charging Manager’s 90,000 60,000 45,000
Commission
Add: Manager’s Commission (1/9) 10,000 6,667 5,000
1,00,000 66,667 50,000
Less: Unrealised profit on Stock (5,426) (21,000) (2,727)
(WN)

© The Institute of Chartered Accountants of India

 CA INTERMEDIATE
NP
-- 100000 NP 100000 100
- -

UP e
r 10

Profit
10000
- -

-
-

M
-> ->
9000098

proft
P S Q

NP after adjust .

(90) 90000
↑
60000
S
45000
↑

t MoC-
(10) 10000
S
6667
/
5000

before
NP
adj . 100000 66667 50000
7

-
Unreal pft (5426) (2000) (727)
NRP 94574 45667 47273

-
10 % M C .

19457 145677 (47277

Final pft 85117
=> -
41100
-
42546
>

Pft *
·*
-
Dept s

-> -
-

P 3

1 -
S : <S ->
18000 1 P : (3 -> 48000
-

1 P .
:

(S -> /2000,
↑
I

2 :
P :
< L SP 2 .
S : Ple L IP G Q: .
< 1 IP

100 25 125 20 20 100 100 20 120

x 3600 18000
=

&
x = 960048008 e = 2000/2000
-

P - Q
Q a - S

1 .
Q : CS -> 14000 1 .
Q : (S -> 38000 1 5 : <3
. - 8000
P -

.
2 P C ↳IP 2 .
S :
PY .
2 L IP 2 0:
. CL IP

100 15 15 TO 30 100 100 10 110

x =

1826 14000 x = 1140038000 x =

72/8008

CA Tejas Suchak
 12.18 ACCOUNTING

Profit Before Manager’s 94,574 45,667 47,273

Commission
Less: Manager’s Commission 10% (9,457) (4,567) (4,727)
Correct Profit after Manager’s 85,117 41,100 42,546
Commission
-
- - - -
- -

Working Notes:

Department P Department S Department Q Total

(`) (`) (`) (`)
Unrealised Profit
of:
Department P - 25/125X18,000 15/115X14,000
=3,600 =1,826 5,426
Department S 20/100X48,000 - 30/100X38,000
=9,600 =11,400 21,000
Department Q 20/120X12,000 10/110X8,000
=2,000 =727 2,727

Illustration 7 *A As

M/s. Suman Enterprises has two Departments, Finished Leather and Shoes. Shoes are
made by the Firm itself out of leather supplied by Leather Department at its usual
selling price. From the following figures, prepare Departmental Trading and Profit &
Loss Account for the year ended 31st March, 20X3:
Finished Leather Shoes Department
Department
Papa (`) Bets (`)
Opening Stock (As on 01.04.20X2)
~ 30,20,000 4,30,000
-Purchases 1,50,00,000 2,60,000
-
- -

Sales
- 1,80,00,000
-
45,20,000
- -

-Transfer to Shoes Department 30,00,000

-
-
-

Manufacturing
- Expenses - 5,00,000
-

Selling Expenses
w 1,50,000
-
60,000
-
-

Rent and Warehousing

- 5,00,000 3,00,000
-
-

Stock
- on 31.03.20X3 12,20,000
-
5,00,000
&
-
u

© The Institute of Chartered Accountants of India

 CA INTERMEDIATE
Dept .

Trading & 92) 22 23

.

leather shoes leather shoes

OS 3020000 430000 S 180000004520000
- ... L &
-

P 15000000 260000 Tr 3000000 -

-
- - -

Tr . -
3000000 CS 1240000 500000
-
~ -

↑E - 500000
-

GP 4200000 830000 S
~ -

GP 4200000 830000
- -

SE 150000 60000
. ↑

Rent 500000 300000

....

NP 3530000 470000
....

General iCL

Gen expo
.

85,
000 NP leather 3530000
~
↑

shoes 470000
-

CSR 75000 OSR 48375

- -

NP
-
3143375
- -
.

CSR
=
R
1 . Shoes(B) -> (3 : 500000 x 75 % = 375000 0S =
430000 x 75 .
= 322500
~
=
/ -

Profit;
Se

Kather(P) ! Profit 157

200000
2 .
- ↑
- x100 =
0 .

...
= 48375
-

3 .
Unrealised Profit : -500
-

CA Tejas Suchak
 DEPARTMENTAL ACCOUNTS 12.19

The following further information are available for necessary consideration:

(i) The stock in Shoes Department may be considered as consisting of 75% of
-
~
-

Leather and 25% of other expenses.

- -
- - -

O
-
- -

(ii) The Finished Leather Department earned a Gross Profit @ 15% in 20X1-X2. -
-
-

(iii) General expenses of the business as a whole amount to ` 8,50,000.

-- - =

Solution
Departmental Trading and Profit and Loss Account
for the year ended 31st March, 20X3
Particulars Finished Shoes Total Particulars Finished Shoes Total
leather leather
(`) (`) (`) (`) (`) (`)
To Opening stock 30,20,000 4,30,000 34,50,000 By Sales 1,80,00,000 45,20,000 2,25,20,000
To Purchases 1,50,00,000 2,60,000 1,52,60,000 By Transfer
to shoes
Deptt. 30,00,000 - 30,00,000
To Transfer from 30,00,000 30,00,000 By Closing 12,20,000 5,00,000 17,20,000
Leather stock
Department
To Manufacturing 5,00,000 5,00,000
expenses
To Gross profit 42,00,000 8,30,000 50,30,000
c/d (b.f.)
2,22,20,000 50,20,000 2,72,40,000 2,22,20,000 50,20,000 2,72,40,000
To Selling 1,50,000 60,000 2,10,000 By Gross 42,00,000 8,30,000 50,30,000
expenses profit b/d
To Rent & 5,00,000 3,00,000 8,00,000
warehousing
To Net profit
(b.f.) 35,50,000 4,70,000 40,20,000
42,00,000 8,30,000 50,30,000 42,00,000 8,30,000 50,30,000

General Profit and Loss Account

Particulars Amount Particulars Amount

(`) (`)
To General expenses 8,50,000 By Net profit 40,20,000
To Unrealised profit (Refer W.N.) 26,625
To General net profit (Bal. fig.) 31,43,375
-
---

40,20,000 40,20,000

© The Institute of Chartered Accountants of India