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Departmental Accounting refers to maintaining accounts for one or more branches or departments of the company. Revenues and expenses of the department are recorded and reported separately. The departmental accounts are then consolidated into accounts of the head office to prepare financial statements of the company.
For example a textile mill which is having head office and factory. Separate accounts are maintained for production facilites and then the final results are sent to head office which are then incorporated by head office in their accounts.
Maintenance of separate accounts for each branch of a bank or financial instituion also falls under the category of departmental accounting. The bank then prepares its financial statement after consolidating accounts of all branches.
Departmental Accounting is a vital one for large prosperous business organizations. It controls wastage & misusing, compensates employee in terms of profit and commission, compares performance and progress of year to year or department to department or similar type of firm to firm.
Examples:
You want to monitor the costs (and possibly the revenue) associated with individual staff members
You are a builder who has a number of large projects per year, and need to track their expenses against budget
Thanks for inviting me.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. It is where departments within an entity have varying degrees of autonomy, but are not usually separated geographically from the rest of the business. They may be concerned with manufacturing or, in the case of a department store, with retailing. Departmental accounts usually include a trading account and may also include a profit and loss account to which overheads are allocated or imputed.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
A departmental accounting system is an accounting information system that records the activities and financial information about the department. Managers can use the financial information from the departmental accounting system to tell how profitable and efficient each department is.
Larger corporations can't be properly accounted for with one single, centralized accounting system. That is why the corporation is divided into many different departments like the shipping and receiving department, sales department, and manufacturing department. Many companies also departmentalize based on products. For instance, Microsoft has a Windows department, Xbox department, and Microsoft Office department.
Each one of these departments has its own accounting system to keep track of revenues and expenses. These accounting systems also provide useful efficiency ratios for management. Managers can use these ratios to evaluate the departments and consider merging departments or getting rid of some departments altogether.
Managers tend to look at whether the department is a cost center or profit center. Some departments that do not produce a profit are still worth keeping around because they share in the interdepartmental expenses like rent and utilities
Departmental Accounting
A business entity where diversified natures of economic activities are undertaken is split into number of departments for accounting purposes. Generally it is management who will decide the number of departments in which the whole business is to be divided, but the criteria for identifying the departments in an examination question is always the separate sales/work-done revenue.
Each department is considered as a profit centre, though none of the departments is separated geographically from the rest of the departments. This type of organizational subdivision creates a need for internal information about the operating results (profitability) of each department. Based upon the departmental knowledge of profitability and growth rate the management takes certain decisions e.g. pricing, costing,sales promotion, closure etc.
Larger corporations can't be properly accounted for with one single, centralized accounting system. That is why the corporation is divided into many different departments like the shipping and receiving department, sales department, and manufacturing department. Many companies also departmentalize based on products. For instance, Microsoft has a Windows department, Xbox department, and Microsoft Office department.
A departmental accounting system is an accounting information system that records the activities and financial information about the department.
Agrees with the mentioned answers
recording,reporting,analyzing
