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What is Departmental Accounting? Give an example

Asked by: Interview Candidate | Asked on: May 1st, 2007
Showing Answers 1 - 2 of 2 Answers

departmental accounting means account prepared separately for the department and here ledgers will be opened trial balance will be prepared and also p&l account will be prepared and profit or loss is included in the main p&l account and also shown in the balance sheet

  
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vasudeo007

Answered On : Aug 31st, 2008

View all answers by vasudeo007

Departmental accounting is not a norm as far as I know.

It is so because, each department does not need to calculate its profits or losses.

In case where the company needs any department or a set of departments to work in such manner where their profit/loss contribution in company's totals would make a difference, the company form Strategic Business Unit.

The idea of departmental accounting is that each department is getting an input from some other department and they process the input to provide an output and that output will be input for the other some process.

Example: In a car factory- the department which collects all steel and moulds the same into car bodies has its own accounts books. And the department that does the wiring part also has its own accounts books. So on and so forth.

Hope the answer is correct.

Vasudeo.

  
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