# Lesson Notes By Weeks and Term - Senior Secondary 3

Departmental account II

Term: 1st Term

Week: 10

Class: Senior Secondary School 3

Age: 17 years

Duration: 40 minutes of 2 periods each

Date:

Subject:      Financial accounting

Topic:-       Departmental account II

SPECIFIC OBJECTIVES: At the end of the lesson, pupils should be able to

1. Describe the format of departmental account
2. Solve exercises on departmental accounts

INSTRUCTIONAL TECHNIQUES: Identification, explanation, questions and answers, demonstration, videos from source

INSTRUCTIONAL MATERIALS: Videos, loud speaker, textbook, pictures

INSTRUCTIONAL PROCEDURES

PERIOD 1-2

 PRESENTATION TEACHER’S ACTIVITY STUDENT’S ACTIVITY STEP 1 INTRODUCTION The teacher reviews the previous lesson on departmental account Students pay attention STEP 2 EXPLANATION She describes the format of the departmental account Students pay attention and participates STEP 3 DEMONSTRATION She solves exercises on departmental account Students pay attention and participate STEP 4 NOTE TAKING The teacher writes a summarized note on the board The students copy the note in their books

NOTE

DEPARTMENTAL ACCOUNT

EXAMPLES

Goods are transferred from Department P to Department Q at a price 50% above cost. If closing stock of Department Q is ` 27,000, compute the amount of stock reserve.

### Solution

 ` Closing Stock of Department Q Goods send by Department P to Department Q at a price 50% above cost Hence profit of Department P included in the stock will be - 27,000´50 = 150 Amount of the Stock Reserve will be ` 9,000. 27,000     9,000

#### Working Note:

Dept P transfers goods to Dept Q at a profit of 50% of cost. Hence, if cost is ` 100/- the profit = ` 50 and Transfer Price = ` 150. Therefore, the profit of Dept P included in the stock value of Dept Q is one – third of the sale value

EXAMPLE 2

Z Ltd. has three departments and submits the following information for the year ending on 31st March, 20X1:

 A B C Total (`) Purchases (units) 6,000 12,000 14,400 Purchases (Amount) 6,00,000 Sales (Units) 6,120 11,520 14,976 Selling Price (per unit) ` 40 45 50 Closing Stock (Units) 600 960 36

You are required to prepare departmental trading account of Z Ltd., assuming that the rate of profit on sales is uniform in each case.

Solution

Departmental Trading Account for the year ended on 31st March, 20X1

 Particulars A B C Particulars A B C ` ` ` ` ` ` To Opening Stock (W.N.4) 11,520 8,640 12,240 By Sales A- 6120 x 40 B- 11,520 x 45 C- 14,976 x 50 Closing Stock (W.N.4) 2,44,800 5,18,400 7,48,800 To Purchases (W.N.2) 96,000 2,16,000 2,88,000 By 9,600 17,280 720 To Gross Profit (b.f.) 1,46,880 3,11,040 4,49,280 2,54,400 5,35,680 7,49,520 2,54,400 5,35,680 7,49,520

### Profit Margin Ratio

 Selling price of unit purchased: ` Department A                 6,000 x 40 2,40,000 Department B                 12,000 x 45 5,40,000 Department C                 14,400 x 50 7,20,000 Total Selling Price 15,00,000 Less:           Purchase (Cost) Value (6,00,000) Gross Profit 9,00,000 Profit Margin Ratio = 9,00,000 ´100 = 60% 15,00,000

Statement showing department-wise per unit Cost and Purchase Cost

 A B C ` ` ` Selling Price (Per unit) (`) 40 45 50 Less:Profit Margin @ 60% (`) Profit Margin is uniform for all depts at 60% (24) (27) (30) Purchase price per unit (`) 16 18 20 Number of units purchased 6,000 12,000 14,400 (Purchase     cost     per     unit     x    Units purchased) 96,000 2,16,000 2,88,000

#### Opening Stock (in Units)

 A B C Sales (Units) 6,120 11,520 14,976 Add:Closing Stock (Units) 600 960 36 6,720 12,480 15,012 Less:Purchases (units) (6,000) (12,000) (14,400) Opening Stock (Units) 720 480 612

Statement showing department-wise cost of Opening Stock and Closing Stock

 A B C Cost of Opening Stock (`) 720 x 16 480 x 18 612 x 20 ` 11,520 8,640 12,240 Cost of Closing Stock 600 x 16 960 x 18 36 x 20 ` 9,600 17,280 720

EVALUATION:

1. Brahma Limited has three departments and submits the following

information for the year ending on 31st March, 20X1:

 Particulars A B C Total (`) Purchases (units) 5,000 10,000 15,000 8,40,000 Purchases (Amount) Sales (units) 5,200 9,800 15,300 Selling price (` per unit) 40 45 50 Closing Stock (Units) 400 600 700

You are required to prepare departmental trading account of Brahma Limited assuming that the rate of profit on sales is uniform in each case.

1. M/s Omega is a departmental store having three departments X, Y and
2. The information regarding three departments for the year ended 31st

March, 20X1 are given below:

 X Y Z ` ` ` Opening Stock 36,000 24,000 20,000 Purchases 1,32,000 88,000 44,000 Debtors at end 15,000 10,000 10,000 Sales 1,80,000 1,35,000 90,000 Closing stock 45,000 17,500 21,000 Value of furniture in each department 20,000 20,000 10,000 Floor space occupied by each department (in sq. ft.) 3,000 2,500 2,000 Number of employees in each Department 25 20 15 Electricity consumed by each department (in units) 300 200 100

The balances of other revenue items in the books for the year are given below:

 Amount (`) Carriage inwards 3,000 Carriage outwards 2,700 Salaries 48,000 Advertisement 2,700 Discount allowed 2,250 Discount received 1,800 Rent, Rates and Taxes 7,500 Depreciation on furniture 1,000 Electricity expenses 3,000 Labour welfare expenses 2,400

You are required to prepare Departmental Trading and Profit and Loss Account for the year ended 31st March, 20X1 after providing provision for Bad Debts at 5%.

CLASSWORK: As in evaluation

CONCLUSION: The teacher commends the students positively