(a) Which business organizations have the need to prepare departmental accounts? (b) State two reasons for preparing departmental accounts. (c) State how th...
Question 1 Report
(a) Which business organizations have the need to prepare departmental accounts?
(b) State two reasons for preparing departmental accounts.
(c) State how the following incomes and expenses are apportioned in departmental accounts:
i. discount allowed
ii. discount received
iii. rent and rates
iv. staff related costs
v depreciation
vi. canteen expenses
vii. electricity
viii. advertising
ix. bad debts
Answer Details
(a) Business organisations that need departmental accounts
Businesses that operate two or more departments or sections under one ownership and roof, such as departmental stores, supermarkets and large retail/trading firms that sell several different lines of goods.
(b) Two reasons for preparing departmental accounts
- To ascertain the profit or loss made by each department separately.
- To compare the performance of the departments and reward or assess departmental managers.
- To help management decide whether to expand, retain or close a particular department, and to control departmental costs.
(Any two of the above.)
(c) Basis of apportionment
| Item | Basis of apportionment |
|---|---|
| i. Discount allowed | Ratio of departmental (credit) sales |
| ii. Discount received | Ratio of departmental purchases |
| iii. Rent and rates | Floor area / space occupied by each department |
| iv. Staff related costs | Number of employees (or time devoted) per department |
| v. Depreciation | Value/cost of fixed assets used by each department |
| vi. Canteen expenses | Number of employees per department |
| vii. Electricity | Number of light/power points or floor area |
| viii. Advertising | Ratio of departmental sales |
| ix. Bad debts | Ratio of departmental (credit) sales |
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