Departmental Accounts

Q: - 1 Following is the Trial Balance of Mr. Mohan as on 31.03.2017:

Particulars Debit (Rs.) Credit (Rs.)

Capital Account 40,000

Drawing Account 1,500
Opening Stock Department A 8,500
Department B 5,700
Department C 1,200
Purchases Department A 22,000
Department B 17,000
Department C 8,000
Sales Department A 54,000
Department B 33,000
Department C 21,000
Sales Returns Department A 4,000
Department B 3,000
Department C 1,000
Freight and Carriage Department A 1,400
Department B 800
Department C 200
Furniture and fixtures 4,600
Plant and Machinery 20,000
Motor Vehicles 40,000
Sundry Debtors 12,200
Sundry Creditors 15,000
Salaries 4,500

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 Power and water 1,200
Telephone charges 2,100
Bad Debts 750
Rent and taxes 6,000
Insurance 1,500
Wages Department A 800
Department B 550
Department C 150
Printing and Stationeries 2,000
Advertising 3,500
Bank Overdraft 12,000
Cash in hand 850

1,75,000 1,75,000

You are required to prepare Department Trading, Profit and Loss Account and the Balance Sheet
taking into account the following adjustments:

(a) Outstanding Wages: Department B- Rs.150, Department C – Rs.50.

(b) Depreciate Plant and Machinery and Motor Vehicles at the rate of 10%.

(c) Each Department shall share all expenses in proportion to their sales.

(d) Closing Stock: Department A - Rs. 3,500, Department B - Rs. 2,000, Department C -
Rs.1,500.

1. ANSWER

Trading and Profit and Loss Account for the year ended on 31st Match, 2017

Particulars A (Rs.) B (Rs.) C (Rs.) Particulars A (Rs.) B (Rs.) C (Rs.)

To Opening Stock 8,500 5,700 1,200 By Sales less 50,000 30,000 20,000

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To Purchases 22,000 17,000 8,000 By Closing Stock 3,500 2,000 1,500

To Freight & 1,400 800 200

carriage

To Wages 800 700 200

To Gross profit 20,800 7,800 11,900

53,500 32,000 21,500 53,500 32,000 21,500

To Salaries 2,250 1,350 900 By Gross Profit 20,800 7,800 11,900

To Power & Water 600 360 240 By Net Loss - 465 -

To Telephone 1,050 630 420

Charges

To Bad Debts 375 225 150

To Rent & Taxes 3,000 1,800 1,200

To Insurance 750 450 300

To Printing 1,000 600 400

&
Stationer
y
To
1,750 1,050 700
Advertisi
ng
To 3,000 1,800 1,200
Depreciation
(2,000 +4,000)

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 To Net
7,025 6,390
Profit

20,800 8,265 11,900 20,800 8,265 11,900

Balance Sheet as at 31.03.2017

Liabilities Rs. Assets Rs.

Capital A/c 40,000 Furniture & Fixtures 4,600

Add: Net Profit Plant & Machinery 20,000
(Rs.7,025 + Rs.6,390) 13,415

53,415 Less: Depreciation 2,000 18,000

Less: Net loss in Dept B 465 Motor Vehicles 40,000

52,950 Less: Depreciation 4,000 36,000

Less: Drawings 1,500 51,450 Sundry Debtors 12,200

Sundry Creditors 15,000 Cash in hand 850

Bank Overdraft 12,000 Closing Stock 7,000

Wages Outstanding 200

78,650 78,650

Q:- 2 The following balances were extracted from the books of M/s Division. You are required to

prepare Departmental Trading Account and Profit and Loss account for the year ended 31st
December, 2018 after adjusting the unrealized department profits if any.

Deptt. A Deptt. B
Rs. Rs.

Opening Stock 50,000 40,000

Purchases 6,50,000 9,10,000

Sales 10,00,000 15,00,000

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General expenses incurred for both the departments were Rs.1,25,000 and you are also supplied
with the following information: (a) Closing stock of Department A
Rs.1,00,000 including goods from Department B for Rs.20,000 at cost of Department A. (b) Closing
stock of Department B Rs. 2,00,000 including goods from Department A for
Rs.30,000 at cost to Department B. (c) Opening stock of Department A and Department B include
goods of the value of Rs.10,000 and Rs.15,000 taken from Department B and Department A
respectively at cost to transferee departments. (d) The rate of gross profit is uniform from year to
year.

2. ANSWER

Departmental Trading and Loss Account of M/s Division

For the year ended 31st December, 2018

Deptt. A Deptt. B Deptt. A Deptt. B

Rs. Rs. Rs. Rs.

To Opening stock 50,000 40,000 By Sales 10,00,000 15,00,000

To Purchases 6,50,000 9,10,000 By Closing stock 1,00,000 2,00,000

To Gross profit 4,00,000 7,50,000

11,00,000 17,00,000 11,00,000 17,00,000

To General Expenses (in 50,000 75,000 By Gross profit 4,00,000 7,50,000

ratio of sales)

To Profits c/f to general 3,50,000 6,75,000

profit and loss account

4,00,000 7,50,000 4,00,000 7,50,000

General Profit and Loss Account

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 Rs. Rs.

To Stock reserve required (additional: By Profit from:

Stock in Deptt. A Deptt. A 3,50,000

50% of (Rs. 20,000 - Rs. 10,000) (W.N.1) 5,000 Deptt. B 6,75,000

Stock in Deptt. B
40% of (Rs. 30,000 - Rs. 15,000) (W.N.2) 6,000

To Net Profit 10,14,000

10,25,000 10,25,000

Working Notes:

1. Stock of department A will be adjusted according to the rate applicable to department

B = *(7, 50,000 ÷ 15, 00,000) х 100+ = 50%

2. Stock of department B will be adjusted according to the rate applicable to department

A = *(4, 00,000 ÷ 10, 00,000) х 100+ = 40%

Q:- 3 A firm has two departments--Sawmill and Furniture. Furniture is made with wood supplied by
the Sawmill department at its usual selling price. From the following figures prepare Departmental
Trading and Profit and Loss Account for the year 2018:

Sawmill Furniture
Rs. Rs.
Opening Stock on 1st January, 2018 1,50,000 25,000
Sales 12,00,000 2,00,000
Purchases 10,00,000 7,500
Supply to Furniture Department 1,50,000 --
Selling expenses 10,000 3,000
Wages 30,000 10,000
Clsong Stock on 31st December, 2018 1,00,000 30,000
The value of stocks in the furniture department consist of 75 % wood and 25 % other expenses.
The Sawmill Department earned Gross Profit at 15 % on sales in 2017. General expenses of the

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 business as a whole came to Rs. 55,000. The firm adopts FIFO method for assigning costs to
inventories.
3. ANSWER

Department Trading and Profit and Loss Account

Particulars Sawmill Furniture Particulars Sawmill Furniture

To Opening stock 1,50,000 25,000 By Sales 12,00,000 2,00,000

To Purchase 10,00,000 7,500 By Transfer to 1,50,000

furniture dept

To Wages 30,000 10,000 By Closing stock 1,00,000 30,000

To Transfer from saw mill - 1,50,000

To Gross profit 2,70,000 37,500

14,50,000 2,30,000 14,50,000 2,30,000

To Selling 10,000 3,000 By Gross profit 2,70,000 37,500

expenses

To Net Profit 2,60,000 34,500

2,70,000 37,500 2,70,000 37,500

General Profit & Loss Account

Particulars Amount Particulars Amount

To general Expenses 55,000 By Net Profit from

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To stock reserve (WN2) 4,500 Saw Mill 2,60,000

To Net Profit 2,37,813 Furniture 34,500

By stock reserve (opening WN-1) 2,813

2,97,313 2,97,313

Working Notes

1. Calculation of Stock Reserve (opening)

25,000 x 75% wood x 15% = Rs. 2,813

2. Calculation of closing stock reserve Gross profit Rate of Saw Mill of 2018
2, 70,000 / (12, 00,000 + 1,50,000) x 100 = 20%

30,000x 75% x 20% = Rs. 4,500

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