Transcript
00:10 Hello viewers, you're welcome to Financial Accounts class, and Mrs. Oyiniloye.
00:16 The topic we're taking today is departmental accounts.
00:19 At the end of the lesson, learners should be able to want to define departmental accounts,
00:25 so list the reasons for preparing departmental accounts, three.
00:30 Solve a simple exercise involving departmental accounts.
00:35 What is departmental accounts?
00:37 Departmental accounts are accounts relating to the departments or divisions of a business.
00:43 It is an account prepared to show the performance and results of each department separately.
00:50 Now, what this means is that on a normal day,
00:53 we prepare accounts for organizations,
00:56 but there are some organizations that have different departments working on that then.
01:01 And so it's important to be able to prepare the accounts of those departments.
01:06 We have examples of such organizations like Shoprides, Spa, AdiDe,
01:13 where you go there, you discover that there's a department maybe for clothing,
01:18 you have another department for beverages,
01:20 you have another department for other items.
01:23 So the organization wants to know how to monitor the activities of these departments.
01:32 And so, as they account, you expect to prepare the accounts of each of the departments.
01:42 Now, let's look at the advantages of departmental accounts.
01:45 One, it helps in the comparison of results of different departments.
01:50 If we have up to four or five departments in an organization,
01:54 wants to look at which departments gives more results or what are the results of the various departments.
02:01 Two, it helps us detect errors easily.
02:04 If there's an error from the particular department,
02:07 in preparing the departmental accounts, we'll be able to discover it.
02:11 Three, it provides information for remuneration of departmental managers.
02:17 What this means is that for each department, there's a departmental manager.
02:21 And we want to see how effective the manager is.
02:25 So if at the end of the day, it brings in more returns on investments
02:30 than the other, the commission it receives will be more than others.
02:35 Therefore, it helps in monitoring the progress of each department.
02:39 Five, the growth profits of each department can easily be ascertained.
02:44 Now, what happens is that when we are preparing the departmental accounts of the departments,
02:49 you are preparing like normal accounts.
02:51 If you are preparing the trading profits and loss accounts,
02:54 you are preparing it like normal accounts of an organization,
02:58 whether it's a sole trader business or a partnership business.
03:01 Whatever business it is.
03:03 But at the end of the day, you'll be able to ascertain
03:07 the growth profits of that particular department
03:10 because you are preparing the accounts solely for that particular department.
03:14 And then, policies can be formulated for each department
03:18 based on their trading results, allocation of expenses.
03:23 Now, there's need for you to pay close attention to this.
03:26 The reason is because the major area that we are concerned with
03:31 when preparing departmental accounts
03:34 is the allocation of expenses or the apportionment of expenses.
03:39 Now, in preparing our final accounts,
03:43 we have to follow the normal procedure.
03:45 But when we are apportioning the expenses,
03:48 there are two ways of apportioning expenses.
03:51 One is that expenses incurred for one department,
03:56 specifically on that department,
03:59 is prepared or charged to that department solely.
04:03 For instance, if we purchase items for a particular department solely,
04:09 the value of the expenses will accrue to that department alone.
04:14 But there are some expenses that are common to all departments
04:18 that are incurred on behalf of all the departments.
04:22 And so, how do we do this?
04:24 There's need for us to find a basis for apportionment.
04:29 Now, this includes sharing the expenses among the departments.
04:35 We are able to 10 departments under a single roof.
04:38 There are some expenses that are accrued to each department,
04:42 but we are incurred it on behalf of all the departments.
04:45 For instance, if we have all the departments in a particular location,
04:50 we have to look at what expense are accrued to department A
04:56 that is located in this corner.
04:58 Department B that is located in another corner.
05:01 If we are paying rent, how much rent will department A pay?
05:06 How much rent will department B pay?
05:09 How much rent will department C pay?
05:11 So, that's where we really need to pay close attention to
05:15 when preparing departmental accounts.
05:18 That is the apportionment of expenses.
05:21 Now, the various basis for apportionments are one turnover.
05:26 Turnover, of course, you know means sales.
05:29 It can be a basis for apportionment.
05:31 The floor area can be a basis for apportionment.
05:35 Like I said, if we have various departments in a particular location,
05:39 we have to apportion rent today.
05:41 We have to apportion lighting expenses today.
05:44 And all those who follow the floor area.
05:47 Then we also have the cubic content of each department.
05:52 And then the average stock that each department holds.
05:56 The following basis of allocation are suggested.
05:59 It should be noted that the basis of allocation
06:02 will depend on the method specified by the examiner.
06:06 And so, when you are solving questions related to departmental accounts,
06:10 you will be giving the basis for apportionment.
06:14 We are going to look at the various basis for apportionment,
06:18 which you need to understand.
06:21 It's not something you need to cram.
06:22 It's okay, this one is for this note.
06:24 You need to understand this by studying it closely.
06:29 Looking at why is this expense made?
06:32 And for whom is the expense made?
06:34 Once you understand those two things,
06:36 you will be able to ascertain the basis for apportionment for that particular department.
06:42 And like I said, in questions or in examinations,
06:45 you will be told specifically the basis for apportionment.
06:49 By the time we solve a question or more, you will understand better.
06:53 But let's look at the various suggestions.
06:55 Suggested basis of allocation or apportionment.
06:59 For rents and rates, floor area is the basis.
07:02 You know, I told you that if those departments are in a particular place,
07:07 the rents and rates for each department will be determined by the floor area
07:15 occupied by that department.
07:18 Then it's in a lighting.
07:19 The basis for allocation is also floor area.
07:23 For part that is being used by that department,
07:26 the OSPAR is the suggested basis of allocation.
07:30 And then deprecation.
07:32 The assets employed by each department,
07:35 and what are the assets that these departments is making use of?
07:38 It's to determine the value of deprecation that are accrued to that department.
07:43 Then insurance of premises, the floor area is also the basis for apportionment.
07:48 Printing and stationery.
07:50 This is a form of direct analysis.
07:54 The number of stationery that goes to each department will be taking care of the apportionment.
08:00 Then selling expenses such as bad debts, discounts, allowed, carried out words advertising
08:07 will also floor area is also the basis for apportionment.
08:12 Then salaries and wages, the number of staff employed
08:15 or the basis giving to you based on the question.
08:19 Then carriage inwards will be purchases.
08:22 Why? Because when you purchase goods,
08:24 the cost of carrying the goods to the organization
08:28 is what we call carriage inwards.
08:30 And so the basis for apportionment is purchases.
08:33 Then income also apart from expenses you know that we have income.
08:38 So what are the basis of apportionment of income?
08:40 The discounts received.
08:42 The basis for apportionment is purchases.
08:45 Why? Because when you buy goods from customers,
08:48 you receive discounts from them.
08:50 And so the basis for allocation of such expense is the purchases.
08:57 And then rental income.
08:59 The basis for apportionment is the floor area.
09:02 I want you to sit down and you know meditate on this.
09:06 Think on it so that you can understand it deeply.
09:10 You cannot crown.
09:11 But one good thing is that any question
09:14 you are being given on departmental accounts
09:17 you will be told the basis for apportionment.
09:21 And so once you are giving that,
09:22 you use it to calculate whatever expense or income
09:26 you are meant to calculate.
09:28 But it's just important that you understand this.
09:31 Some questions even ask for all these things.
09:34 So you need to sit down and study closely.
09:37 Let's look at the formats of a departmental accounts.
09:41 The departmental accounts is usually prepared in a columnar form
09:45 with separate columns for totals of all the departments.
09:50 Now the way the departmental accounts is prepared
09:52 that I told you is like a normal trading profit and loss account.
09:57 But the difference is that you need to prepare it in a columnar form.
10:03 The normal trading profits and loss accounts you prepare it.
10:07 Normally the opening stock at purchases and all that.
10:10 But because we are dealing with more than one department,
10:14 we want to look at, okay, what is the opening stock of departments A,
10:18 department B, department C, department D at the same time.
10:22 What are the values of purchases of these different departments
10:25 at the same time?
10:27 So our trading profits and loss accounts will be prepared in a columnar form.
10:32 So we have our opening stock and we have departments A,
10:36 and look at what I'm talking about.
10:38 Look at it.
10:38 We have the opening stock, we have departments A,
10:41 ordinarily, if you are preparing your normal trading profits and loss account,
10:44 there won't be need for this.
10:46 You just have your opening stock at your purchases and so on.
10:50 But because there's a trading profit and loss account,
10:52 you have the opening stock, okay, you're looking at the opening stock for departments A,
10:57 for department B, and then the total column.
11:02 Then you have the purchases for departments A, department B.
11:05 If there are up to five departments,
11:07 you need to create columns for each of the five departments.
11:11 Because you want to compare and contrast these departments.
11:15 Now, we also look at the courage involved.
11:17 What's the cost of carrying goods into the organization?
11:21 Then if there's interdepartmental transfer,
11:24 you also need to take care of it.
11:27 I'll explain that later, okay, let's close in stock.
11:31 Then at the end of the day, your sales,
11:34 that's the sales of departments A, sales of department B,
11:38 less returns inwards, will give you your net sales.
11:41 And so for departments A, now the net sales,
11:45 less the closing stock will give us the gross profit for departments A,
11:50 the same thing for department B.
11:52 The net sales, less the closing stock,
11:55 will give us the gross profit for departments B.
11:58 And then you now look at the expenses.
12:01 And this is where I want us to pay close attention, like I said.
12:04 We have a discount allowed insurance, rents, and rates and so on.
12:09 But at these points,
12:11 we will need to apportion the various expenses like I've told you earlier.
12:17 The basis for apportionment will be given.
12:19 So when we saw the question,
12:21 you will understand what I'm talking about.
12:23 So the gross profit brought down here,
12:25 the discount received and other income.
12:29 Commission will also be deducted as talking about the various expenses.
12:34 But that's if we have one depreciation,
12:37 more to expenses, salary expenses, lightning and eats, advertising.
12:41 So all these expenses will be deducted from the gross profits and other income.
12:49 And at the end of the day,
12:51 what you will have is a net profits.
12:54 So what you have done is that you have calculated a net profit of departments A,
12:59 departments B, and then the total column.
13:02 Now there's need for you to take notes that the total column is prepared
13:07 one, when you are asked to prepare it,
13:10 or the question might be silent on preparing it.
13:12 But if you are asked to prepare a balance sheet,
13:15 there's need for you to prepare the total column.
13:18 But if the question does not ask for a total column,
13:22 there might not be need to prepare it.
13:24 Now let's look at the balance sheet.
13:26 The balance sheet of the departmental accounts is similar
13:30 to that of the normal trading profits and loss accounts.
13:34 The only difference is that when we are bringing in the net profits of the two departments,
13:39 you have your capital, that's the joint capital of the company,
13:42 and then the net profits of departments A,
13:45 which we calculated here,
13:47 and the net profits of department B, which we calculated.
13:51 And then you have less drawings, if there's drawings,
13:54 and then you deduct the various current liabilities,
13:57 you deduct the drawings, you add the various current liabilities.
14:02 And then you have your fixed assets, land and building, machinery.
14:06 You have your current assets.
14:08 Remember that under your current assets,
14:11 we usually have our stock.
14:13 Our stock is the closing stock of the business.
14:16 So because we have different departments,
14:18 you have stock of departments A and stock of department B,
14:21 that's talking about the closing stock,
14:24 and the various other assets for that department.
14:28 And you balance your account.
14:29 So you see that the two major differences,
14:31 they are one, the net profits of the two departments,
14:34 and they closing stock.
14:37 And at this point, we're going to be making use of the calculators.
14:40 So get your calculators ready.
14:42 The following balances have been extracted
14:44 from the books of our day and surprises for the year they ended.
14:47 That's the first match, 1999.
14:50 Sales department, department A, 25,000,
14:54 department B, 12,500,
14:57 department C, 17,000, giving a total of 54,500.
15:01 Purchases department, department A, 12,000,
15:04 B, 8,000, C, 10,000, total 30,000.
15:08 Delivery expenses, 1,800, 9,000.
15:12 Insurance, 2,500, 9,000.
15:15 Solarism, wages, 4,000, 9,000, rents, 4,200.
15:20 Administrative and general expenses, 3,000, 9,000,
15:23 advertisements, 4,000, 5.
15:26 Discount received, 5,000, 9,000.
15:28 Opened stock, department A, 2100,
15:31 B, 450, C, 600.
15:34 Closing stock, department A, 500,
15:37 B, 9, 40, C, 680.
15:40 Additional information.
15:42 Expenses are to be apportioned as follows.
15:45 Delivery expenses, proportionates to sales.
15:48 Salaries, insurance, and rents.
15:51 Ratio seats to 6 to 3.
15:54 Other expenses are to be apportioned equally.
15:58 Discount received are to be apportioned according to purchases.
16:03 So this is the first thing you need to take care of
16:05 before you start preparing your department
16:07 of trading profits and loss accounts.
16:10 The various expenses should first and foremost be apportioned.
16:14 So let's take the first one.
16:16 Delivery expenses, proportionates to sales.
16:19 Let's look at the value of sales from the question.
16:22 We are told that the sales department,
16:30 the sales department,
16:34 hard for department A, sales of $65,000,
16:38 NIRA, department B, sales of $12,500, NIRA.
16:47 And sales of department C, $17,000, NIRA.
17:02 And the total is $54,500, NIRA.
17:08 So this is the basis for apportionment of the expenses.
17:13 The value of delivery expenses.
17:14 That is the amount that we are sharing among the three departments
17:18 is what we are sharing among the three departments
17:23 is $1,800, NIRA.
17:26 So the delivery expenses are we sharing is $1,800, NIRA.
17:33 So out of this $1,800, NIRA,
17:36 how much will department A take care of?
17:42 How much will department B take care of?
17:44 And how much will department C take care of?
17:47 So to calculate the one for department A,
17:49 does it expenses apportion to department A?
17:53 It will be this amount of sales made by department A
17:57 divided by the total sales multiplied by the amount
18:02 we are sharing among the three of them.
18:07 So let's look at it for department A.
18:09 What you will have is $25,000 divided
18:14 by $54,500 multiplied by $1,800, NIRA.
18:21 That's the amount that we are sharing.
18:23 So let's use the calculation to take care of that.
18:27 So $25,000 divided by $54,500.
18:35 That will give us how much?
18:36 $0.458 multiplied by $1,800.
18:46 That will give us $825.6.
18:48 Of course, we are going to round this off
18:50 because this amounts are not allowed.
18:53 So you round it off, which means that department A,
18:56 we are rounding this off.
18:57 What we are going to have is $826, NIRA.
19:00 So out of the $1,800, NIRA,
19:03 department A will collect $826, NIRA
19:08 as zone share of delivery expenses.
19:13 Then, department B will take care of $25,500
19:21 divided by the same total, $54,500 multiplied by $1,800, NIRA.
19:32 So let's do that now quickly.
19:34 $12,500 divided by the total, which is $54,500,
19:44 multiplied by $1,800.
19:49 So it will be taking care of $400, 13, $400, 13, NIRA.
19:59 Okay, so we are $400, 13, NIRA, okay?
20:05 So for department C, $17,000 is a total cost of his own sales
20:11 divided by the total sales.
20:14 So we have $17,000, NIRA, over $54,500, NIRA,
20:22 multiplied by $1,800.
20:26 Remember, we are sharing $1,800 among three departments.
20:31 The first department is collecting $826, NIRA.
20:35 The second department is collecting $413, NIRA.
20:38 And then, this third department, which is department C,
20:42 how much will department C collect?
20:45 That's $17,000 divided by $54,500,
20:53 times $1,800, NIRA.
20:57 That will give you a total of $561, NIRA.
21:01 So for department C, he's going to take $561, NIRA
21:07 as part of his own share of the expenses.
21:11 department A, $826, NIRA, department B, $413, NIRA,
21:16 department C, $561, NIRA.
21:19 By the time you add the three together,
21:20 which will give you $1,800, NIRA, $1,800.
21:25 So we are sharing the delivery expenses among the three departments.
21:32 The next expense we want to share is the salaries.
21:35 Remember that the salaries, I told you one way,
21:40 talking about departmental expenses that some expenses
21:44 that are crude to all of them together, okay?
21:49 And it is those expenses that we want to
21:51 apportion and share.
21:53 The expenses that are crude to each individual department,
21:56 we don't share, we just take you straight to that department.
21:59 But the expenses that you are told are crude to all the departments together,
22:03 we need to now apportion to the different departments on a particular basis.
22:08 So we are told that now salaries, insurance and rents
22:13 will be apportioned on the ratio 6, 6, 3.
22:17 So now let's look at the value of our salaries
22:20 and then see how we're going to apportion it.
22:22 Salaries and wages, the amount of salaries is...
22:26 We have been told it is how much?
22:30 Salaries and wages.
22:35 This is $4,000.
22:38 NIRA, okay?
22:39 And we are told that to share salaries and wages
22:43 among the three departments to make use of
22:45 ratio 6, ratio 6, ratio 3.
22:51 And what does that mean?
22:53 It means that the departments A would take ratio 6.
22:57 The department B would take ratio 6 and the department C would take ratio 6.
23:02 So for salaries and wages, the departments A would take 6 divided by
23:07 when we add this together to give us 15,
23:10 6 over 15 times 4,000 NIRA, okay?
23:17 And that would give us, let's make use of our calculator,
23:21 that would give us 6 divided by 15 times 4,000 NIRA.
23:30 That is 1,600.
23:32 So the department A would take 1,600 NIRA out of the various
23:38 expenses for salaries and wages.
23:41 Department B, of course, because it's taking equal and equal amount,
23:45 it's also going to the 6 over 15 times 4,000 NIRA.
23:52 And for what we calculated for the department A,
23:54 it's going to have the same value for the department B.
23:58 Then for the department C, it's out for what these two departments
24:01 are collected as 3 over 15 times 4,000 NIRA, okay?
24:10 So that is 3 divided by 15, 3 divided by 15 times 4,000 NIRA.
24:19 And that would give us its own red NIRA.
24:22 If we add these three together, it should give us 4,000 NIRA.
24:26 So we are taking equal salaries and wages.
24:28 Then we are also told that insurance and rent will also take ratio
24:34 6, 6, 3.
24:36 So we are going to prepare the apportionment for insurance and rents.
24:44 For insurance, we have 2,500 NIRA.
24:46 Let's move this off.
24:48 So for insurance, now we're allocating 2,500 NIRA.
24:58 The department A is taking ratio 6, the department B is taking ratio 6.
25:13 The department C is taking ratio 3, okay?
25:18 Remember that when we add these three together, it should give us 15.
25:21 So to calculate the amount that the department A would take
25:24 out of the insurance expense, it will be 6 over the total, 6 plus 6 plus 3, which is 15.
25:32 6 over 15 times 2,500 NIRA.
25:38 For department B, 6 over 16 times 2,500 NIRA.
25:44 For department C, 3 over 15 times 2,500 NIRA.
25:53 So let's calculate this.
25:56 So we are 6 divided by 15 times 2,500.
26:02 That will give us 1,000 to Thera.
26:05 So the department A would take his own share, which is 1,000 NIRA.
26:10 So this department A, 1,000 NIRA.
26:14 Of course, they are taking equal portion.
26:17 The department A, 1,000 NIRA, the department B, 1,000 NIRA.
26:21 And the department C, of course, will take the balance, which is alpha, what we have here.
26:26 Which is 500 NIRA.
26:29 Okay, so we are taking care.
26:30 Remember that we told that there are three departments that will share this ratio.
26:35 Salaries, insurance, and rent.
26:37 We are taking care of salaries.
26:39 We are shared insurance expense.
26:41 Now we need to share the rent expense.
26:44 Now to do that, we need to find out how much is our rent.
26:48 The rent is 4,200 NIRA.
26:51 We want to share the rent of 4,200 NIRA among the three departments.
26:56 So let's move this up.
27:00 Okay, so for rent, remember we are sharing 4,200 NIRA among the three departments.
27:11 And what is the ratio? We are giving ratio, department A, and department B, and department C, and department C, and department C, and three.
27:26 And we have done that before, so you should understand what we are doing here.
27:29 So 6 over 15, that's 6 divided by 15, 4,200 NIRA.
27:37 Now for department B, 6 over 15 times 4,200, for department C, 3 over 15 times 4,200.
27:49 So let's calculate.
27:52 So for department A, we have 6 divided by 15 times 4,200.
28:01 That will give us 1,068. So department A will take 1,068 of the rent expense.
28:11 Department B will take the same 1,068 of the rent expense.
28:18 Remember they are sharing the same rent.
28:20 And we are questioning the rent that belongs, which means that department A and department B have a larger share of the rents than department C.
28:30 So department C will take 3 over 15, or 4,200.
28:35 Because we will quickly calculate that 3 divided by 15 times 4,200.
28:42 And that will give us 840 NIRA.
28:46 So we are taking care of the insurance expense, salaries, and wages, rents.
28:51 We are also taking care of delivery expenses.
28:54 Now about the admit and general expenses, what is the basis for apportionment? Advertisement, what is the basis for apportionment?
29:02 Discount received, what is the basis for apportionment? Let's check the instruction.
29:07 Other expenses are to be apportioned equally.
29:11 We have been told the basis for apportionment for delivery expenses.
29:15 We are taking care of which is proportionate to sales.
29:18 We have been told the basis for apportionment for salaries, insurance, and rents, which we have done.
29:25 Now we are told that other expenses are to be apportioned equally.
29:29 What are the other expenses? Admin and general expenses, advertisements.
29:36 Those are the two other expenses we have.
29:38 So for admin and general expenses, how are we sharing 3,000 NIRA among the 3 departments equally?
29:46 So for departments A, B, and C, for departments A, B, and C, for admin and general expenses.
30:01 Okay, department A, department B and department C.
30:09 We are sharing 3,000 NIRA. Remember, that is the value of the expenses.
30:16 What you can see on the board there. So we are sharing 3,000 NIRA into 3 places.
30:21 And that will give us 3,000 divided by 3. That will give us 1,000 NIRA.
30:27 So for department A, we have 1,000 NIRA, department B, 1,000 NIRA, and department C, 1,000 NIRA.
30:35 And we are taking care of that. Advertisements were told that we are to share 4,500 NIRA among the 3 departments.
30:45 So for advertisements now. Advertisements, we have 4,500 NIRA to be shared among the 3 departments.
30:59 So for departments A, department B, and department C. So departments A would say,
31:10 we are dividing 4,000 5 by 3. It will give you 1,000 5.
31:14 So for departments A, we have 1,000 5. For department B, 1,000, department C, 1,000.
31:21 So we are taking care of all the expenses. But we still have an income discount received.
31:27 And we're told the basis for apportionment for the discount received.
31:32 We are told that discount received has to be apportioned according to purchases.
31:38 And how do we do that? We follow the same way we are apportioned using the value of sales.
31:46 I'm sure you remember what we did. So that's all we are going to do now.
31:50 The value of our discount received, 5,000 NIRA. So we want to share the discount received which is an income.
31:58 Remember that discount received is an income that the organization receives when they buy items or they buy goods from people.
32:07 It's a discount on goods or cheeses. So it goes more way for cheeses.
32:12 But it all depends on the instruction you are giving.
32:16 And the instruction we are giving here, that discount received is to be shared on the basis of purchases.
32:23 And the value of discount received is almost 5,000 NIRA.
32:28 So let's look at the purchases, the value of purchases for the 3 departments.
32:35 So for departments A, the value of purchases for departments A is 12,000 NIRA.
32:43 Department B is 8,000 NIRA and department C is 10,000 NIRA.
32:47 Remember that we are sharing when using this total as the basis for apportionment.
32:53 90,000 which is the total. Okay. So, right.
33:01 Okay. So let's share the 5,000 NIRA using sales as purchases as the basis.
33:11 So for departments A, what you have is 12,000 NIRA divided by the total which is 30,000 NIRA.
33:23 Times the amount we are sharing among the 3 of them which is 5,000 NIRA.
33:30 Okay. Now for departments B, how much was the purchases for department B, 8,000 NIRA?
33:40 Divided by the total purchases multiplied by the amount we are sharing among the 3 departments.
33:50 And then for departments C was the value of their purchases, 10,000 NIRA.
33:58 Divided by the total purchases times the amount of discounts that was given to the 3 of them.
34:09 So, let's look at the amount that departments A will collect.
34:14 That will be 12,000 divided by 30,000 multiplied by 5,000.
34:26 So, departments A would take 2,000 NIRA as part of the zone discount receipt.
34:33 For department B, what will have is 8,000 NIRA divided by 30,000 NIRA.
34:47 Let's just divide it by 30,000 NIRA.
34:54 Okay. Multiply by 5,000 NIRA. That will give us 1,333 NIRA.
35:05 Okay. Now for departments C, what will have is 10,000 NIRA divided by 30,000 NIRA.
35:18 Multiply by 5,000 NIRA. And that will give us 1,6667.
35:30 So, this is the discount receipt and it has been apportioned among the 3 departments.
35:37 So, once you are taking care of the apportionment, all you need to do is to prepare your trading profit and loss account.
35:44 And then you will set the various apportionments where necessary.
35:51 Now, let's look at what we have as the solution.
35:54 We are taking care of the various expenses and the income that we need to take care of.
36:00 So, in preparing our trading profit and loss account is straight followed.
36:03 You have your opening stock for departments A looking at the question.
36:08 2100 won, then for department B 450 for department C 600.
36:15 You have the various purchases, which is in the question which we will still have here.
36:19 Okay. So, you add the purchases and then that gives you the cost of goods available for sales.
36:25 You deduct the closing stock, which is 500 NIRA for department A, 940 for department B and 680 for department C.
36:34 When you deduct that, you are the cost of goods sold. So, you are cost of goods sold deducting from our net sales.
36:41 We have our gross profits carried down.
36:44 Now, the gross profits will now be transferred to the opposite side.
36:48 And that is 11400, 490 and 780 NIRA.
36:53 Then, these are the various expenses which you deduct from the gross profits.
36:59 We are looking at the gross profits we have other income.
37:02 Now, the other income that we have for the gross profits are one, the discount receipts which we share using our purchases as the basis for a portion met.
37:11 For department A, the discount receipts is 2000 NIRA.
37:15 For department B, the discount receipts is 1300 and 33 NIRA.
37:20 For department C, the discount receipts is 1000, 600 and 67 NIRA.
37:25 So, we have that as our gross profits and for that income.
37:30 Then, all these are the various expenses.
37:33 The first one is delivery expenses.
37:36 Remember that we calculated our delivery expenses.
37:42 From the beginning, we had delivery expenses.
37:53 OK, these are salaries and wages to have.
37:58 These are delivery expenses that we shared among the three departments.
38:03 Department A was allotted 826 NIRA, which is what we calculated here.
38:09 Department B, 413 NIRA, which is what we calculated.
38:13 And department C, 561 NIRA.
38:16 You see that we are taking care of that.
38:18 We have our portioned.
38:19 That's 1800 NIRA among the three departments.
38:22 Then insurance, too, was also a portion.
38:27 OK, was the value of insurance 2500 NIRA.
38:31 And we are portioned using ratio 663, too.
38:37 OK, this is our insurance.
38:39 Let's look at it.
38:40 Department A was a portioned 1000 NIRA.
38:44 Let's check.
38:45 OK, we have it there.
38:46 Department B was a portioned 1000 NIRA.
38:49 And department C was a portioned 500 NIRA.
38:53 We are taking care of that.
38:54 Then rent, too, was shared among the three of them.
38:58 Now, let's look at rent.
39:00 Rent for department A, 4200, 4200, shared among the three of them.
39:08 Department A, at 1,060, department B, 1,060, and department C, 840.
39:16 OK, salaries and wages.
39:18 Was shared also among the three departments.
39:21 That was the first one we did.
39:23 OK, and then we shared also in the ratio 663.
39:27 Department A, 1,600, department B, 1,6, and department C, 840.
39:34 So once you know the basis of a portion, and you are portioned among the three departments,
39:39 you have solved the question.
39:41 Then advertisement was shared equally.
39:44 Remember that other expenses were told to share equally.
39:49 Advertisement, Admin and general expenses, we shared equally.
39:53 And the partners received 1000 NIRA each.
39:56 Ah, the departments received 1000 NIRA each.
39:59 And then for advertisements, 1500 NIRA each.
40:03 So the next thing is we want to calculate what departments actually made a profit.
40:07 And what department made a loss if there was any.
40:10 And to do that, you calculate the total that's right from your gross profits at the other income.
40:17 That is the discount received, the level 1000 4 plus 2000, which gave 10,400.
40:23 By the time you add all these items together, these various items, 1,2,3,4,5,6,
40:30 to advertisement, you add everything together, and you deduct from 10,400.
40:35 It should give you either a net profit or a net loss.
40:40 Now let's quickly add them together.
40:42 Let's do those items, delivery expenses, 8,26, plus insurance, 1000 NIRA, plus rent, 1,680.
40:57 Plus salaries are wages, 1,600.
41:03 Plus admit and general expenses, 1,000 NIRA, plus advertisement, 1,500.
41:15 So for departments A, the total of the expenses gave us 7,600 and 6 NIRA.
41:24 We now deduct from our total gross profits plus other income, which gave us 13,400.
41:31 So let's deduct 13,400.
41:37 That would give us 5,794.
41:41 So that means departments A add a profit, the net profit.
41:45 For department B, where you add all the expenses starting from delivery expenses down to advertisement.
41:51 And then you add your income, that's gross profit, plus the discount received.
41:57 And you find the difference.
41:59 Now in this case, you discover that a department B adds a loss instead of a profit.
42:06 So that department is not viable.
42:09 Then for department C, department C also adds a profit.
42:14 Where you add all these expenses together, you add the income together.
42:18 And you deduct the expenses from the income.
42:21 If the income is higher than the expenses, what you will have is a net profit.
42:26 So department A and department B both add net profits while department C adds a net loss.
42:34 Which tells us that department B is not a profitable department.
42:40 I expect that by now you should be able to define departmental accounts.
42:45 And then you should be able to give reasons for preparing departmental accounts.
42:49 And you should be able to solve a simple exercise involving departmental accounts.
42:54 So the next class, thank you for watching, I'm Mrs. O'Enoemi.