Departmental Accounts


Welcome to class! 

In today’s class, we will be talking about departmental accounts. Enjoy the class!

Departmental Accounts

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Usually, in a large organization, the operation is divided into separate departments. This is because such organizations have a large volume of transactions coupled with a wide range of lines of product and as such finds it convenient and for accounting purpose to separate or divide its operations into different departments. This affords the organization easy operations and accountability.

In departmentalized organizations, the accounting process entails keeping separate journal and ledger books for each of the departments such as separate cashbook separate purchases and sales books, separate stocks, separate returns and personal ledgers etc.

At the end of the financial year, the accountants bring together the separate journal and ledger books to integrate, compare and determine the department that performs better than the other (see final accounts).


The trading, profit and loss accounts of each of the departments in a departmentalized organization are drawn separately but in a combined format called DEPARTMENTAL, TRADING, PROFIT AND LOSS ACCOUNT.

The aim of departmental, trading, profit and loss account is to compare trading result and to assist the owner of the business in formulating policies, having known the departments that perform better and those that perform worse.

NB: The Balance sheet follows a normal procedure: not in a combined format.


Departmental Trading, Profit and loss Account for the year ended 31st Dec. 19xx

                               A          B        C          Total                             A         B          C         Total

                               N         N        N            N                                N        N          N            N

Opening stock        x          x          x             x          Sales               x          x           x             x

Add purchases       x          x          x             x          Returns I.R      x           x           x            (x)

Inter dept. T/f        x          x          x             –   

X          x          x             x


Less clo. Stock         (x)       (x)       (x)         (x)

Cost of sales x          x          x         x

Gross profit c/d       x          x         x             x

X          x          x             x

x          x          x               x

Expenses                                                                            G/P b/d        x          x          x               x

Wages & Salaries      x          x          x              x                Dis. Rec.        x          x          x               x

Rent                          x          x          x              x

Commission             x          x          x              x

Depreciation            x          x          x              x

Motor expenses       x          x          x              x

Net profit c/d           x          x          x              x

X          x          x              x                                   x          x          x                x

  1. Inter-Departmental Transfer: Sometimes goods purchased by one department may be transferred to another department by reason of sales and such purchases transferred is deducted from the department giving it out and is added to the department receiving it.
  2. Apportionment of Expenses: Expenses are usually not separated to reflect expenses incurred by each department. As a result of this, there is a need for apportionment (i.e. division).  Expenses must, therefore, be adjusted and then apportioned for each of the departments.
  1. Turnover Basis: This is the use of sales (i.e. Turnover as a basis of sharing (i.e. sharing ratio).
  2. Floor Space Basis: This uses the area of floor space occupied as the basis of sharing i.e. sharing ratio.
  3. The number of Articles Sold Basis: Ratio used is the items sold.
  4. Direct Analysis Basis: Ratio used here is specified.
  5. Equality Basis: The ratio used here is the number of departments existing.

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Below is the trial balance of Akinbode Electronic shop for the year-end 31st December 2006.

N                                         N

Sales: Dept E                                                                                                           30,000

Dept F                                                                                                           20,000

Stock (1/1/2006): Dept E                                             800

Dept F                                             750

Purchases: Dept E                                                       22,000

Dept F                                                        18,500

Commission                                                                1,500

Salaries                                                                        800

Insurance premium                                                     1,000

Stationery                                                                    450

Discount allowed                                                        100

Discount received                                                       350

Sundry expenses                                                         110

Stock at close: Dept E                                                 1,100

Dept F                                                 900


  1. The total floor area occupied by each department is
      •  Dept: E (2/5)
      • Dept F: (3/5)
  2. Apportionment basis is:
      • Commission, discount allowed – sales ratio
      • Discount received – purchases ratio
      • Insurance – floor area
      • Other – equal apportionment



                                                 DEPT E          DEPT F                                       DEPT E          DEPT F

Stock (1/1/2006)                       800                 750                        Sales                       30,000            20,000

Purchases                                 22,000            18,500

Cost of goods avail.                 22,800            19,250

Less stock (31/12)                   (1,100)              (900) 

Cost of sales                           21,700           17,350

Gross profit c/d                       8,300              2,650                                                                                

 30,000            20,000                                             30,000            20,000 

Expenses                                                                                       G/P b/d          8,300              2,650

Commission                             900               600                          D/R                   190               160   

Salaries                                    400               400

Insurance                                 400               600

Stationeries                              225               225

Discount allowed                     60                 40

Sundry expenses                      55                 55

Net profit                                6,450            890 

 8,490          2,810                                                 8,490              2,810  


Apportionment Basis

(A) Sales Ratio

Dept. E: 30,000:                                          Dept. F: 20,000         =          50,000

=          30,000/50,000                                                             =          20,000/50,000

 (B) Purchases Ratio

Dept. E: N22,000                 Dept. F: 18,500        =          40,500

= 22.000/40.500                  =          18,500/40,500

  1. Floor area gave Dept. E 2/5; Dept. 3/5
  2. Other expenses = equally = (÷ 2) or 50%; 50%
  1. Explain five errors that would affect the agreement of the trial balance
  2. List and explain three classifications of ledger accounts
  3. List ten accounts found in the nominal ledger
  4. State the purpose of departmental accounts
  5. List six items each found in the asset and liability sides of the balance sheet of a sole trader


In our next class, we will be talking about Manufacturing Accounts.  We hope you enjoyed the class.

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