Introduction to Departmental Accounts

The video tutorial introduces departmental accounts, explaining their purpose and benefits. It covers how to analyze profit and loss for different departments, aiding in managerial decisions. The tutorial details the preparation of departmental accounts, including trading and profit and loss accounts, and discusses methods for allocating expenses across departments.

What is the primary purpose of preparing departmental accounts?

• To consolidate all departments into a single account

• To simplify the accounting process

• To evaluate the performance of each department individually

• To eliminate the need for a general profit and loss account

In departmental accounts, how is each department treated?

• As a part of the whole company

• As a separate entity

• As a subsidiary

• As a cost center

Why is it important to prepare departmental accounts instead of a single company-wide account?

• To reduce the workload of accountants

• To increase the overall profit

• To comply with legal requirements

• To identify which departments are profitable or loss-making

What can be a potential decision if a department consistently incurs losses?

• Ignore the losses

• Increase the budget for the department

• Shut down the department

• Merge it with another department

How can departmental accounts aid in managerial decisions?

• By eliminating the need for audits

• By simplifying tax calculations

• By reducing the number of financial reports

• By providing a detailed analysis of each department's performance

What is a common method for allocating rent expenses among departments?

• Equally among all departments

• Based on the number of employees

• Based on floor area occupied

• Based on sales revenue

Which basis is typically used for allocating electricity expenses?

• Sales revenue

• Meter readings or space occupied

• Purchase volume

• Number of employees

How should common salaries and wages be allocated if an employee works across multiple departments?

• Based on the department's profit

• Equally among all departments

• Not allocated at all

• Based on the time spent in each department

What is the basis for allocating insurance expenses for stock?

• Number of employees

• Value of stock in each department

• Floor area occupied

• Sales revenue

Which expenses are transferred to the general profit and loss account?

• Expenses with no basis for allocation

• Only sales-related expenses

• All administrative expenses

• Expenses that can be allocated to specific departments