Which of the following are advantages of departmental accounts? I. The department making the highest profit can be easily determined II. The capital of the ...
Question 1 Report
Which of the following are advantages of departmental accounts?
I. The department making the highest profit can be easily determined
II. The capital of the business can be calculated easily
III. Easy knowledge of the sources of funding
IV. Encouragement of healthy rivalry among the various departments
Answer Details
The correct option is (I and IV only).
Departmental accounts have several advantages, including the ability to determine the department with the highest profit, which encourages healthy competition among departments. This is the advantage referred to in option I.
However, departmental accounts do not make it easier to calculate the capital of the business (option II), as this information is not related to individual departments. Additionally, while departmental accounts can provide information on the sources of funding for individual departments, they do not make it easier to obtain knowledge of funding sources for the entire business (option III). Therefore, options II and III are incorrect.
Option IV is also correct because the use of departmental accounts encourages healthy competition among the various departments of a business, which can ultimately result in increased profitability for the business as a whole.
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