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 1,450Purchase A Department 3,540

B Department 3,020Sales A Department 6,080

B Department 5,125Wages A Department 820

B Department 270Rent, Rates, taxes and insurance 939Sundry expenses 360Salaries 300Lighting and heating 210Discount Allowed 222Discounts received 65Advertising 368Carriage inward 300Furniture and Fitting 234Machinery 2,100Sundry Debtors 606Sundry Creditors 1,860Capital Account 4,766Drawings 450Cash 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-3Prepare 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 1,50,000B: Taperecorders 90,000 B: Taperecorders 1,00,000C: Servicing & Repairs Job 65,000 C: Servicing & Repairs Job 25,000Salary and Wages 48,000 Stock (31/12/97)Rent 12,000 A: Television 60,000Other Expenses 11,000 B: Taperecorders 20,000Profit 27,000 C: Servicing & Repairs Job

4,00,000 4,00,000

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

Particulars Television Taperecorder Servicing & Reparis Jobs

Total Particular Television Taperecorder Servicing & Reparis Jobs

Total

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 2,75,000To 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 4,00,000To Salaries 8,000 24,000 16,000 48,000 By gross profit b/d 63,000 30,000 5,000 98,000To rent 4,500 4,500 3,000 12,000 By Net Loss 2,500 15,000To Sundry Expenses 6,0002 4,0002 1,0002 11,000To 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. 4,5002. 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. KRs. Rs. Rs. Rs.

Stock (01/12/96) 9,000 8,400 Purchases 27,000 21,600Sales 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. KRs. Rs. Rs. Rs.

To Stock 9,000 8,400 By Sales 42,000 36,000To 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 40,800To Operating Expenses 5,490 8,520 By Gross Profit c/d 16,800 10,800To indirect Expenses 2,4604 2,1604

To Net Profit 8,850 12016,800 10,800 16,800 10,800

1. 2.

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.

42,000 x 400 100 = Rs. 16,800

36,000 x 400 100

= Rs. 10,800

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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 5,000B 15,000Raw material Consumed in A Dept. 3,400Stores Consumed 9,000Wages: A 3,000 B 6,000Advertisement 1,500Packing Expenses 600Office Expenses 4,800Depreciation:

Factory Machinery 3,200Building 1,600

Sales: A 90,000B 18,000

Closing Stock: Department A 6,000Department 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 BRs. Rs. Rs. Rs.

To Opening Stock 5,000 15,000 By Sales 90,000 18,000To Raw materials 3,400 2,000 By Closing Stock 6,000 12,000To Wages 3,000 6,000To Dep. On Factory Machinery

3,200To Stores 5,667 3,333To Gross Profit c/d 75,733 3,667

96,000 30,000 96,000 30,000To Dep. On Building 1,400 200 By Gross Profit b/d 75,733 3,667To Advertisement 1,250 250To Office Exps. 4,000 800To Packings 600To 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 RsOpening Stock: Transfer to ‘X’ 5,000‘X’ 15,000 Sale:‘Y’ 20,000 ‘X’ 1,00,000Carriage: ‘Y’ 60,000Inwards 3,000 Creditors 15,000Outwards 5,000 Capital 30,000Advertising 10,000 Loan 30,000

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

SolutionDepartmental trading and profit & Loss Account

(for the year ended………)

Particulars X Y Particulars X YRs. Rs. Rs. Rs.

To Opening Stock 15,000 20,000 By Interest Trans. 5,000To Purchases 60,000 40,000 By Sales 1,00,000 60,000To Carriage Inward 1,8001 1,2002 By Closing stock 14,000 15,000To Internal Transfer 5,000To Gross Profit c/d 32,200 18,800

Rs. 1,14,000 80,000 Rs. 1,14,000 80,000To Carriage Outward 3,1253 1,8754 By Gross Profit b/d 32,200 18,800To Advertisement 6,2505 3,7506 By Net Loss 1,775 4,225To Salaries 6,000 7,000To General Exp. 7,5007 4,5008

To Rent and Taxes 6,0009 3,00010

To Lighting 60011 30012

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To Bad Debts 1,00013 60014

To Bank Interest 2,50015 1,50016

To Depreciation on Furniture1,00017 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 6,500Loan 30,00 Closing Stock 29,000Capital 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 13,50069,000 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 30 th 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 CRs. Rs. Rs

Stock 01/01/1997 6,000 7,000 3,000Purchases 7,000 6,500 4,700Sales 12,000 10,000 6,000Direct 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 CRs. Rs. Rs

Stock 01/01/1997 6,000 7,000 3,000Purchases 7,000 6,500 4,700Estimated Gross Profit 4,800 3,000 1,200

17,800 16,500 8,900Less : Sales 12,000 10,000 6,000Estimated Stock on 30/04/1997 5,800 6,500 2,900

Profit & Loss Account

A B CRs. Rs. Rs. Rs. Rs. Rs.

Estimated Gross Profit 4,800 3,000 1,200Less: Stock Reserve 10% 580 650 290Direct Expenses 2,020 1,450 710Indirect 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

84,000 of Rs. 4,200 = Rs. 1,400.

(3)

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