Yallawa Stores Ltd has two departments. The following balances Were extracted from its books as at 31st December 2017.
Purchases: Department A 720,000
Department B 520,000
Rent and rates 50,000
Commission 55,000
Insurance 5,000
Sales: Department A 1,500,000
Department B 1,250,000
Discount received 124,000
Advertising 20,000
Salaries and wages 250,000
Depreciation 35,000
Administration and general expenses 50,000
Opening stock: Department A 150,000
Department B 100,000
CIosing stock: Department A 175,000
Department B 142,000
Additional information: Expenses are to be apportioned to the departments as follows
i. commission on the basis of sales:
ii. salaries and wages - 3:2 for Department A and B respectively
iii. discount received - 10% of purchases
iv. other expenses are to be apportioned equally.
You are required to prepare a Departmental Trading, Profit, and Loss Account for the year ended 31st December 2017.
Approach. Each department is traded separately for gross profit, then indirect expenses are apportioned on the stated bases and charged against each department to find net profit.
Workings - apportionment of expenses
- Commission N55,000 on sales ratio A:B = 1,500,000:1,250,000 = 6:5 -> A 30,000; B 25,000.
- Salaries and wages N250,000 in 3:2 -> A 150,000; B 100,000.
- Discount received = 10% of purchases -> A 72,000; B 52,000 (total 124,000).
- Other expenses shared equally: Rent and rates 50,000 (25,000 each); Insurance 5,000 (2,500 each); Advertising 20,000 (10,000 each); Depreciation 35,000 (17,500 each); Admin and general 50,000 (25,000 each).
Departmental Trading, Profit and Loss Account for the year ended 31st December 2017
| Particulars | Dept A (N) | Dept B (N) | Total (N) |
|---|
| Sales | 1,500,000 | 1,250,000 | 2,750,000 |
| Opening stock | 150,000 | 100,000 | 250,000 |
| Add Purchases | 720,000 | 520,000 | 1,240,000 |
| Goods available | 870,000 | 620,000 | 1,490,000 |
| Less Closing stock | (175,000) | (142,000) | (317,000) |
| Cost of sales | 695,000 | 478,000 | 1,173,000 |
| Gross profit | 805,000 | 772,000 | 1,577,000 |
| Add Discount received | 72,000 | 52,000 | 124,000 |
| Total income | 877,000 | 824,000 | 1,701,000 |
| Less expenses: | | | |
| Commission | 30,000 | 25,000 | 55,000 |
| Salaries and wages | 150,000 | 100,000 | 250,000 |
| Rent and rates | 25,000 | 25,000 | 50,000 |
| Insurance | 2,500 | 2,500 | 5,000 |
| Advertising | 10,000 | 10,000 | 20,000 |
| Depreciation | 17,500 | 17,500 | 35,000 |
| Admin and general | 25,000 | 25,000 | 50,000 |
| Total expenses | 260,000 | 205,000 | 465,000 |
| Net profit | 617,000 | 619,000 | 1,236,000 |
Check: total gross profit 1,577,000 + discount received 124,000 - total expenses 465,000 = net profit 1,236,000.
Approach. Each department is traded separately for gross profit, then indirect expenses are apportioned on the stated bases and charged against each department to find net profit.
Workings - apportionment of expenses
- Commission N55,000 on sales ratio A:B = 1,500,000:1,250,000 = 6:5 -> A 30,000; B 25,000.
- Salaries and wages N250,000 in 3:2 -> A 150,000; B 100,000.
- Discount received = 10% of purchases -> A 72,000; B 52,000 (total 124,000).
- Other expenses shared equally: Rent and rates 50,000 (25,000 each); Insurance 5,000 (2,500 each); Advertising 20,000 (10,000 each); Depreciation 35,000 (17,500 each); Admin and general 50,000 (25,000 each).
Departmental Trading, Profit and Loss Account for the year ended 31st December 2017
| Particulars | Dept A (N) | Dept B (N) | Total (N) |
|---|
| Sales | 1,500,000 | 1,250,000 | 2,750,000 |
| Opening stock | 150,000 | 100,000 | 250,000 |
| Add Purchases | 720,000 | 520,000 | 1,240,000 |
| Goods available | 870,000 | 620,000 | 1,490,000 |
| Less Closing stock | (175,000) | (142,000) | (317,000) |
| Cost of sales | 695,000 | 478,000 | 1,173,000 |
| Gross profit | 805,000 | 772,000 | 1,577,000 |
| Add Discount received | 72,000 | 52,000 | 124,000 |
| Total income | 877,000 | 824,000 | 1,701,000 |
| Less expenses: | | | |
| Commission | 30,000 | 25,000 | 55,000 |
| Salaries and wages | 150,000 | 100,000 | 250,000 |
| Rent and rates | 25,000 | 25,000 | 50,000 |
| Insurance | 2,500 | 2,500 | 5,000 |
| Advertising | 10,000 | 10,000 | 20,000 |
| Depreciation | 17,500 | 17,500 | 35,000 |
| Admin and general | 25,000 | 25,000 | 50,000 |
| Total expenses | 260,000 | 205,000 | 465,000 |
| Net profit | 617,000 | 619,000 | 1,236,000 |
Check: total gross profit 1,577,000 + discount received 124,000 - total expenses 465,000 = net profit 1,236,000.
