Illustration-2

From the following Trial Balance prepare Departmental trading and profit and Loss Account for the year
ending 31st March, 1974 and the Balance Sheet as at that date:

Rs. (in ‘000)

Stock, 1st April, 1973 A Department 1,700
B Department 1,450
Purchase A Department 3,540
B Department 3,020
Sales A Department 6,080
B Department 5,125
Wages A Department 820
B Department 270
Rent, Rates, taxes and insurance 939
Sundry expenses 360
Salaries 300
Lighting and heating 210
Discount Allowed 222
Discounts received 65
Advertising 368
Carriage inward 300
Furniture and Fitting 234
Machinery 2,100
Sundry Debtors 606
Sundry Creditors 1,860
Capital Account 4,766
Drawings 450
Cash at Bank 1,007

The following further information is available:

1. Internal transfer of goods from A and B Department Rs. 42,000.
2. The items Rent, Rates and taxes and insurance, Sundry Expenses, Lighting and Heating
salaries and carriage are to be apportioned 2/3rd to A Department and 1/3rd to B Department.
3. Advertising is to be apportioned equally.
4. Discounts allowed and received are to be apportioned on the basis of Departmental sales and
purchase (excluding Transfer).
5. Depreciation at 10 per cent annum on Furniture and Fitting and on machinery is to be charged
¾ hrs to A Department and ¼ th to B Department.
6. Services rendered by B Department are included in wages of department B: Rs. 50,000.
7. Stock on 31st march, 1974 in department was worth Rs. 16,74,000 and in B Department was
worth Rs. 12,05,000.

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Problem-3
Prepare Departmental Accounts on the basis of following particulars:
Dept. A-Television ; Dept. B-Tape recorder, Dept. C-Service after sale.

Sales of Television and Tape recorder is made in the showroom and service after sale is made in the
workshop. Expenses are allocated in the following manner:

(a) Salary and Wages-(i) Showroom 2/3; (ii) Workshop 1/3 and Salary and Wages of showroom
1:3.
(b) Rent of Workshop Rs. 500 p.m. and rent of showroom is allocated equally in both the
Departments.
(c) Miscellaneous expenses are allocated on the basis of sales.

Prepare Profit and Loss Account and Balance Sheet for the half-year ending on December, 31 st, 1997 so
that departmental profit and loss of this period may be found out with the following:

Purchases; Rs. Sales Rs.

A: Television 1,47,000 A: Television 1,50,000
B: Taperecorders 90,000 B: Taperecorders 1,00,000
C: Servicing & Repairs Job 65,000 C: Servicing & Repairs Job 25,000
Salary and Wages 48,000 Stock (31/12/97)
Rent 12,000 A: Television 60,000
Other Expenses 11,000 B: Taperecorders 20,000
Profit 27,000 C: Servicing & Repairs Job
4,00,000 4,00,000

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3
 Departmental trading and profit & Loss Account
(For the year ended 31st December, 1994)

Particulars Television Taperecorder Servicing & Total Particular Television Taperecorder Servicing & Total
Reparis Jobs Reparis Jobs
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
To Purchase 1,47,000 90,000 65,000 3,02,000 By Sales 1,50,000 1,00,000 25,000 2,75,000
To Gross Profit C/d 63,000 30,000 5,000 98,000 By Stock 60,000 20,000 45,000 1,25,000
2,10,000 1,20,000 70,000 4,00,000 2,10,000 1,20,000 70,000 4,00,000
To Salaries 8,000 24,000 16,000 48,000 By gross profit b/d 63,000 30,000 5,000 98,000
To rent 4,500 4,500 3,000 12,000 By Net Loss 2,500 15,000
To Sundry Expenses 6,0002 4,0002 1,0002 11,000
To Net profit 44,500 27,000
63,000 32,500 20,000 98,000 63,000 32,.500 20,000

1. Rs. 500 x 6 = Rs. 3,000 Rent Rs. 12,000 – 3,000 = 9,000; 9,000/2 = Rs. 4,500
2. Sundry Exp. Rs. 11,000, Proportion of Sales 1,50,000 : 1,00,000 : 25,000 or 6:4:1

11,000 x 6/11 = Rs. 6,000; 11,000x4/11 = Rs. 4,000; 11,000x1/11 = Rs. 1,000

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Problem – 3
Raman, the proprietor of a departmental store, decided to calculate separates profit for his first two
department J and K for the month ending 31st December, 1996. Stock on 31st December, count not be
valued for certain unavoidable reasons, but his rates of gross profit (calculated without reference to direct
expenses) on sale for the two departments are 40% and 30%. The following figures are given:

Dept. J Dept. K Dept. J Dept. K

Rs. Rs. Rs. Rs.
Stock (01/12/96) 9,000 8,400 Purchases 27,000 21,600
Sales 42,000 36,000 Operating Expenses 5,490 8,520

Indirect expenses for the whole business (containing five departments) are rs. 10,800, which are to be
charged in proportion to departmental sales, except as to one-sixth, which is to be divided equally. Sales for
remaining three departments were Rs. 1,02,000. prepare a statement showing profile for the two
departments.

Solution

Department trading and profit & Loss Account

(for the year ended 31st December, 1996)
Particulars Dept. J Dept. K Particulars Dept. J Dept. K
Rs. Rs. Rs. Rs.
To Stock 9,000 8,400 By Sales 42,000 36,000
To Purchases 27,000 21,600 By Stock 10,8002 4,8003
To gross profit c/d 16,8001 10,8002
52,800 40.800 52,800 40,800
To Operating Expenses 5,490 8,520 By Gross Profit c/d 16,800 10,800
To indirect Expenses 2,4604 2,1604
To Net Profit 8,850 120
16,800 10,800 16,800 10,800

42,000 x 400 36,000 x 400

1. = Rs. 16,800 2. = Rs. 10,800
100
100
3. Balancing figures

4. Indirect Expenses 10,800 x 1/6 =Rs. 10,800-1,800=Rs. 9,000. Rs. 9,000 is to be divided in the
sales ration i.e., 42:36:102 or 7:6:17; 9,000 x 7 / 30 = Rs. 2,100J, 9,000 x 6 / 30 = Rs. 1,800K,
9,000x17/30= Rs. 5,100 for other departments.

Rs. 1,800 will be divided equally to all dept. i.e 1,800/5=Rs. 360 will be divided respectively to all
depts Hence total Indirect Expenses in dept. J = Rs. 2,100 + 360 = Rs. 2,460, dept. K 1,800 + 360
= Rs. 2,160.

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Problem-4
Prepare departmental Trading and Profit & Loss Account of two departments A and B Ltd. From the
following particulars:

Opening Stock Rs.

A 5,000
B 15,000
Raw material Consumed in A Dept. 3,400
Stores Consumed 9,000
Wages: A 3,000
B 6,000
Advertisement 1,500
Packing Expenses 600
Office Expenses 4,800
Depreciation:
Factory Machinery 3,200
Building 1,600
Sales: A 90,000
B 18,000
Closing Stock: Department A 6,000
Department B 12,000

You are given following information also:

B Department used raw materials Rs. 2,000. B Departments does not need any machinery. Only 1/8 of the
total area of building is occupied by B department.

Solution:
Trading and profit & Loss Account
(for the year ended on……..)

Particulars A B Particulars A B
Rs. Rs. Rs. Rs.
To Opening Stock 5,000 15,000 By Sales 90,000 18,000
To Raw materials 3,400 2,000 By Closing Stock 6,000 12,000
To Wages 3,000 6,000
To Dep. On Factory Machinery
3,200
To Stores 5,667 3,333
To Gross Profit c/d 75,733 3,667
96,000 30,000 96,000 30,000
To Dep. On Building 1,400 200 By Gross Profit b/d 75,733 3,667
To Advertisement 1,250 250
To Office Exps. 4,000 800
To Packings 600
To net Profit to Capital A/cs 69,083 1,817
75,733 3,667 75,733 3,667

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Problem:5
A firm has two departments ‘X’ and ‘Y’ From the following figures, prepare Departmental Trading and
profit & Loss Account and Balance Sheet:

Debit Rs. Credit Rs

Opening Stock: Transfer to ‘X’ 5,000
‘X’ 15,000 Sale:
‘Y’ 20,000 ‘X’ 1,00,000
Carriage: ‘Y’ 60,000
Inwards 3,000 Creditors 15,000
Outwards 5,000 Capital 30,000
Advertising 10,000 Loan 30,000

Salaries
‘X’ 6,000
‘Y’ 7,000
General Expenses 12,000
Rent and Rates 9,000
Lighting 900
Furniture 15,000
Debtors 20,000
Bad Debts 1,600
Purchase:
‘X’ 60,000
‘Y’ 40,000
Bank Balance 6,500
Bank Interest 4,000
Transfer from ‘Y’ 5,000
Rs. 2,40,000 Rs. 2,40,000

Area occupied by the two departments is in the ration 2:1. General expenses are to be divided in the ration
5 : 3. The closing stocks were ; ‘X’ Rs. 14,000 and ‘Y’ Rs. 15,000. depreciation of Furniture 10% to be
allocated in the ration of space occupied.

Solution
Departmental trading and profit & Loss Account
(for the year ended………)
Particulars X Y Particulars X Y
Rs. Rs. Rs. Rs.
To Opening Stock 15,000 20,000 By Interest Trans. 5,000
To Purchases 60,000 40,000 By Sales 1,00,000 60,000
To Carriage Inward 1,8001 1,2002 By Closing stock 14,000 15,000
To Internal Transfer 5,000
To Gross Profit c/d 32,200 18,800
Rs. 1,14,00 80,000 Rs. 1,14,000 80,000
0
To Carriage Outward 3,1253 1,8754 By Gross Profit b/d 32,200 18,800
To Advertisement 6,2505 3,7506 By Net Loss 1,775 4,225
To Salaries 6,000 7,000
To General Exp. 7,5007 4,5008
To Rent and Taxes 6,0009 3,00010
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To Lighting 60011 30012
To Bad Debts 1,00013 60014
To Bank Interest 2,50015 1,50016
To Depreciation on Furniture
1,00017 50018
Rs. 33,975 23,025 Rs. 33,975 23,025

(A) Carriage Inward distributed on Purchase basis : 60,000 : 40,000 = 6 : 4 = 3 : 2

1 3,000 X 3/5 = Rs. 1,800 2 3,000 X 2/5 = Rs. 1,200

(B) Carriage Outward distributed on sales basis : 1,00,000 : 60,000 = 10 : 6 = 5 : 3

3 5,000 X 5/8 = Rs. 3,125 4 5,000 X 3/8 = Rs. 1,875

(C) Advertising on basis of Sales i.e. 5 : 3

5 10,000 X 5/8 = Rs. 6,250 6 10,000 X 3/8 = Rs. 3,750

(D) General Expenses in 5 : 3

7 12,000 X 5/8 = Rs. 7,500 8 12,00 X 3/8 = Rs. 4,500

(E) Rent & Taxes & Lighting distributed on the basis of floor Area i.e. 2 : 1

9 9,000 X 2/3 = Rs. 6,000 10 9,000 X 1/3 = Rs. 3,000

11 900 X 2/3 = Rs. 600 12 900 X 1/3 = Rs. 300

(F) Bad Debts & bank Interest is distributed on Sales basis i.e. 5 : 3

13 1,600 X 5/8 = Rs. 1,000 14 1,600 X 3/8 = Rs. 600

15 4,000 X 5/8 = Rs. 2,500 16 4,000 X 3/8 = Rs. 1,500

(G) Dep. On Furniture : 15,000 X 10/100 = Rs. 1,500

Rs. 1,500 distributed on the basis of space occupied.

17 1,500 X 2/3 = Rs. 1,000 18 1,500 X 1/3 = Rs. 500

Balance Sheet
Rs. Rs.
Creditors 15,000 Bank Balance 6,500
Loan 30,00 Closing Stock 29,000
Capital 30,000 (14,000 + 15,000)
Less : Net Loss Debtors 20,000
(1,775 + 4,225) 6,000 24,000 Furniture 15,000
Less: Dep. 1,500 13,500
69,000 69,000

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Problem 6

The directors of Departmental Stores Ltd. Wish to ascertain approximately, the net profit of the
A,B and C departments separately for the four months ended 30th April, 1997. It is found
impracticable actually to take stock on that date but an adequate system of departmental
accounting is in use and the normal rates of gross profit for the departments concerned are 40%,
30% and 20% (before charging direct expenses) on turnover, respectively. Indirect expenses are
charged in proportion to departmental turnover. The following are the figures for each
departments:

A B C
Rs. Rs. Rs
Stock 01/01/1997 6,000 7,000 3,000
Purchases 7,000 6,500 4,700
Sales 12,000 10,000 6,000
Direct Expenses 2,020 1,450 710

The total indirect expenses for the period (including those relating to other departments were Rs.
4,200 on total sales of Rs. 84,000. prepare a statement for the directors making a stock reserve of
10 per cent for each departments, on the estimated value on 30th April, 1997.

A B C
Rs. Rs. Rs
Stock 01/01/1997 6,000 7,000 3,000
Purchases 7,000 6,500 4,700
Estimated Gross Profit 4,800 3,000 1,200
17,800 16,500 8,900
Less : Sales 12,000 10,000 6,000
Estimated Stock on 30/04/1997 5,800 6,500 2,900

Profit & Loss Account

A B C
Rs. Rs. Rs. Rs. Rs. Rs.
Estimated Gross Profit 4,800 3,000 1,200
Less: Stock Reserve 10% 580 650 290
Direct Expenses 2,020 1,450 710
Indirect Expenses
(5% of Turnover) 600 3,200 500 2,600 300 1,300
Net profit 1,600 400 Loss 100

Notes:
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(1) It has assumed that the Direct Expenses have been charged after arriving at the given
percentage of Gross profit.
(2) The Indirect Expenses applicable to the three departments are:
28,000
of Rs. 4,200 = Rs. 1,400.
84,000
(3)

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