NAHATA PROFESSIONAL ACADEMY , Indore

Past Examination Questions of Accounting

CA Anil Nahata
CA INTERMEDIATE (NEW SYLLABUS)

Departmental Accounting
Question 1
FGH Ltd. has three departments I.J.K. The following information is provided for the year
ended 31.3.2004:
I J K
` ` `
Opening stock 5,000 8,000 19,000
Opening reserve for unrealised profit ― 2,000 3,000
Materials consumed 16,000 20,000 ―
Direct labour 9,000 10,000 ―
Closing stock 5,000 20,000 5,000
Sales ― ― 80,000
Area occupied (sq. mtr.) 2,500 1,500 1,000
No. of employees 30 20 10
Stocks of each department are valued at costs to the department concerned. Stocks of I are
transferred to J at cost plus 20% and stocks of J are transferred to K at a gross profit of 20%
on sales. Other common expenses are salaries and staff welfare ` 18,000, rent ` 6,000.
Prepare Departmental Trading, Profit and Loss Account for the year ending 31.3.2004.
(10 Marks, November 2004) (PE II)
Solution

FGH Ltd.

Departmental Trading and Profit and Loss Account for the year
ended 31st March, 2004

I J K Total I J K Total
` ` ` ` ` ` ` `
To Opening 5,000 8,000 19,000 32,000 By Sales 80,000 80,000
stock
To Material By Inter-
consumed 16,000 20,000 36,000 departmental
To Direct 9,000 10,000 19,000 transfer 30,000 60,000 90,000
labour Inter- Closing stock
To departmental By 5,000 20,000 5,000 30,000
transfer 30,000 60,000 90,000
To Gross profit 5,000 12,000 6,000 23,000 ______ ______ ______ _______
35,000 80,000 85,000 2,00,000 35,000 80,000 85,000 2,00,000
To Salaries and By Gross
staff welfare 9,000 6,000 3,000 18,000 profi 5,000 12,000 6,000 23,000
t b/d 7,000 7,000
To Rent 3,000 1,800 1,200 6,000 By Net loss
To Net profit _____ 4,200 1,800 6,000 _____ _____ _____ _____
12,000 12,000 6,000 30,000 12,000 12,000 6,000 30,000
7,000
To Net loss (I)
To Stock By Stock reserve
5,000
reserve b/d
(J+K) (J + K)
3,000 6,000
(Refer W.N.)
By Net profit
To Balance (J + K)
transferred to
profit and 1,000 _____
loss account 11,000 11,000

Working
Note:

Calculation of unrealized profit on closing stock

`
Stock reserve of J department
Cost 30,000
Transfer from I department 30,000
60,000
Stock of J department 20,000
 30000 = ` 10,000
Proportion of stock of I department = ` 20,000

` 60,000

20
Stock reserve =` 10,000
= ` 1,667 (approx.)
120

Stock reserve of K department

`
Stock transferred from J department 5,000
Less: Profit (stock reserve) 5,000 20% (1,000)
Cost to J department 4,000
 Proportion of stock of I department = ` 4,000 ` 30,000 ` 2,000

` 60,000

20
Stock reserve 2,000 ` 333 (approx.)
120

Total stock
reserve = ` 1,000
+ ` 333 = `
1,333
Question 2

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.
(2 Marks, November, 2009)(IPCC)
Answer
Calculation of Stock Reserve

`
Closing stock of Department Q 27,000
Goods sent by Department P to Department Q at a price 50% above cost
` 27, 000 50 9,000
Hence, profit of Department P included in the stock will be

150

Amount of stock reserve will be ` 9,000

Question 3

Department R sells goods to Department S at a profit of 25% on cost and Department T at 10%
profit on cost. Department S sells goods to R and T at a profit of 15% and 20% on sales
respectively. Department T charges 20% and 25% profit on cost to Department R and S
respectively.
Department managers are entitled to 10% commission on net profit subject to unrealized profit
on departmental sales being eliminated. Departmental profits after charging manager’s
commission, but before adjustment of unrealized profit are as under:
`

Department R 54,000
Department S 40,500
Department T 27,000
Stock lying at different departments at the end of the year are as under:
Deptt. R Deptt. S Deptt. T
` ` `
Transfer from Department R - 22,500 16,500
Transfer from Department S 21,000 - 18,000
Transfer from Department T 9,000 7,500 -
Find out the correct departmental profits after charging manager’s commission.
(8 Marks, November, 2010) (IPCC)
Answer
Departments
R S T
` ` `
Profit 54,000 40,500 27,000
Add : Managerial commission (1/9) 6,000 4,500 3,000
60,000 45,000 30,000
Less: Unrealised profit on stock (Refer W.N.) (6,000) (6,750) (3,000)
 54,000 38,250 27,000
Less: Managers’ commission @ 10% (5,400) (3,825) (2,700)
48,600 34,425 24,300
Working Notes:

Value of unrealised profit

`
Transfer by department R to
S department (22,500 25/125) = 4,500
T department (16,500 10/110) = 1,500 6,000
Transfer by department S to
R department (21,000 15/100) = 3,150
T department (18,000 20/100) = 3,600 6,750
Transfer by department T to
R department (9,000 20/120) = 1,500
S department (7,500 25/125) = 1,500 3,000
Question 4

Brahma Limited has three departments and submits the following information for the year
ending on 31st March, 2011:
Particulars A B C Total (`)
Purchases (units) Purchases 5,000 10,000 15,000
(Amount) 8,40,000
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. (5 Marks, May, 2011) (IPCC)
Answer
Departmental Trading Account for the year ended 31st March, 2011

Particulars A B C Particulars A B C
` ` ` ` ` `
To Opening Stock By Sales 2,08,000 4,41,000 7,65,000
(W.N.4) 14,400 10,800 30,000 By Closing stock 9,600 16,200 21,000
(W.N.4)
To Purchases 1,20,000 2,70,000 4,50,000
(W.N.2)
To Gross profit 83,200 1,76,400 3,06,000
2,17,600 4,57,200 7,86,000 2,17,600 4,57,200 7,86,000

Working Notes:

(1) Profit Margin Ratio

Selling price of units purchased: `
Department A (5,000 units х ` 40) 2,00,000
Department B (10,000 units х ` 45) 4,50,000
 Department C (15,000 units х ` 50) 7,50,000
Total selling price of purchased units 14,00,000
Less: Purchases (8,40,000)
Gross profit 5,60,000
Gross profit 5,60,000
Profit margin ratio = 100 = 100 = 40%

Selling price 14,00,000

(2) Statement showing department-wise per unit cost and purchase cost
Particulars A B C
Selling price per unit (`) 40 45 50
Less: Profit margin @ 40% (`) (16) (18) (20)
Purchase price per unit (`) 24 27 30
No. of units purchased 5,000 10,000 15,000
Purchases (purchase cost per unit x units 1,20,000 2,70,000 4,50,000
purchased)

(1) Statement showing calculation of department-wise Opening Stock (in units)

Particulars A B C
Sales (Units) 5,200 9,800 15,300
Add: Closing Stock (Units) 400 600 700
5,600 10,400 16,000
Less: Purchases (Units) (5,000) (10,000) (15,000)
Opening Stock (Units) 600 400 1,000
(2) Statement showing department-wise cost of Opening and Closing Stock
Particulars A B C
Cost of Opening Stock (` ) 600 х 24 400 х 27 1,000 х 30
14,400 10,800 30,000
Cost of Closing Stock (` ) 400 х 24 600 х 27 700 х 30
9,600 16,200 21,000
Question 5

M/s. AM Enterprise had two departments, Cloth and Readymade Clothes. The readymade
clothes were made by the firm itself out of the cloth supplied by the Cloth Department at its
usual selling price. From the following figures, prepare Departmental Trading and Profit &
Loss Account for the year ended 31st March, 2011:
Cloth Department Readymade Clothes
Department
` `
Opening stock on 1st April,
2010 31,50,000 5,32,000
Purchases 2,10,00,000 1,68,000
Sales 2,31,00,000 47,25,000
Transfer to Readymade Clothes Department 31,50,000 -
Manufacturing expenses - 6,30,000
Selling expenses 2,10,000 73,500
Rent & warehousing 8,40,000 5,60,000
Stock on 31 st March, 2011 21,00,000 6,72,000
 In addition to the above, the following information is made available for necessary consideration:
The stock in the Readymade Clothes Department may be considered as consisting of 75%
cloth and 25% other expenses. The Cloth Department earned a gross profit at the rate of 15%
in 2009-10. General expenses of the business as a whole amount to ` 10,85,000.
(8 Marks, November, 2011) (IPCC)
Solution

Departmental Trading and Profit and Loss Account for the year ended 31st March, 2011

Particulars Cloth Ready- Total Particulars Cloth Ready- Total

(`) made (`) (`) made (`)
Clothes (`) Clothes
( `)
To Opening 31,50,000 5,32,000 36,82,000 By Sales 2,31,00,000 47,25,000 2,78,25,000
stock
To Purchases 2,10,00,000 1,68,000 2,11,68,000 By Transfer
to
Ready-
made
Clothes 31,50,000 - 31,50,000
Deptt.
To Transfer By Closing
from Cloth stock 21,00,000 6,72,000 27,72,000
Department - 31,50,000 31,50,000

To
Manufacturing
- 6,30,000 6,30,000
expenses
To Gross 42,00,000 9,17,000 51,17,000
profit c/d
2,83,50,000 53,97,000 3,37,47,000 2,83,50,000 53,97,000 3,37,47,000
To Selling By Gross
expenses 2,10,000 73,500 2,83,500 profit 42,00,000 9,17,000 51,17,000
b/d
To Rent &
warehousing 8,40,000 5,60,000 14,00,000
To Net profit 31,50,000 2,83,500 34,33,500
42,00,000 9,17,000 51,17,000
42,00,000 9,17,000 51,17,000

General Profit and Loss Account

Particulars Amount (` ) Particulars Amount (` )

To General expenses 10,85,000 By Net profit 34,33,500
To Unrealized profit (Refer 20,790
W.N.) 23,27,710
To General net profit (Bal.fig.)
34,33,500 34,33,500

Working Note:

Calculation of Stock Reserve

 Gross Pr ofit
Rate of Gross Profit of Cloth Department, for the year 2010-11 = x 100

Total Sales

` 42,00,000 100
100 = 16%
` 2,31,00,000
31,50,000
Closing Stock of cloth in Readymade Clothes Department = 75%

i.e. ` 6,72,000 x 75% = ` 5,04,000

Stock Reserve required for unrealized profit @ 16% on closing stock

` 5,04,000 x 16% = ` 80,640

Stock reserve for unrealized profit included in opening stock of readymade clothes
@ 15% i.e.

(` 5,32,000 x 75% x 15%) = ` 59,850

Additional Stock Reserve required during the year = ` 80,640 – ` 59,850 = ` 20,790.

Question 6

Department A sells goods to Department B at a profit of 20% on cost and Department C at

15% profit on cost. Department B sells goods to A and C at a profit of 10% and 20% on sales
respectively. Department C sells goods to A and B at 15% and 10% profit on cost respectively.
Departmental managers are entitled to 10% commission on net profit subject to unrealized
profit on departmental sales being eliminated. Departmental profits after charging manager's
commission, but before adjustment of unrealized profit are as under:
`

Department A 36,000
Department B 27,000
Department C 18,000
Stock lying at different departments at the end of the year are as below:
Department A Department B Department C
` ` `
Transfer from Department A - 7,200 5,750
Transfer from Department B 19,000 - 15,000
Transfer from Department C 4,600 3,300 -
Find out correct departmental profits after charging manager's commission.
(8 Marks, November 2012) (IPCC)

Answer

Calculation of correct Departmental Profit

Department Department Department

A B C
` ` `
Profit after charging managers’ commission 36,000 27,000 18,000
but before adjustment for unrealized profit
Add back : Managers’ commission (1/9) 4,000 3,000 2,000
40,000 30,000 20,000
Less: Unrealised profit on stock (Working (1,950) (4,900) (900)
Note)
38,050 25,100 19,100
 Profit before Manager’s commission (3,805) (2,510) (1,910)
Less: Commission for Department
Manager @10%
Correct profit after charging manager 34,245 22,590 17,190
commission
Working Note :

Department A Department B Department C Total

` ` `. `
Unrealised Profit on transfer to:
Department A 7,200 x 20/120 = 5,750 x 15/115= 750 1,950
1,200
Department B 19,000 x 10% = 1,900 15,000 x 20% = 4,900
3,000
Department C 4,600 x 15/115= 600 3,300 x 10/110= 300 900

Question 7

Department A sells goods to Department B at a profit of 50% on cost and to Department C

at 20% on cost. Department B sells goods to A and C at a profit of 25% and 15% respectively
on sales. Department C charges 30% and 40% profit on cost to Department A and B
respectively.
Stock lying at different departments at the end of the year are as under:
Department A Department B Department C
` ` `
Transfer from Department A - 45,000 42,000
Transfer from Department B 40,000 - 72,000
Transfer from Department C 39,000 42,000 -
Calculate the unrealized profit of each department and also total unrealized profit.
(4 Marks, May 2013) (IPCC)
Answer
Calculation of unrealized profit of each department and total unrealized profit

Dept. A Dept. B Dept. C Total

` ` ` `
Unrealized Profit of:
Department A 45,000 x 42,000 x 20/120
50/150 = = 7,000 22,000
15,000
Department B 40,000 x .25 = 72,000 x .15=
10,000 10,800 20,800
Department C 39,000 x 30/130 = 42,000 x
9,000 40/140 = 21,000
12,000
63,800
Question 8
 Martis Ltd. has several departments. Goods supplied to each department are debited to a
Memorandum Departmental Stock Account at cost, plus a fixed percentage (mark-up) to give
the normal selling price. The mark-up is credited to a memorandum departmental 'Mark-up
account', any reduction in selling prices (mark-down) will require adjustment in the stock
account and in mark-up account. The mark up for Department A for the last three years has
been 25%. Figures relevant to Department A for the year ended 31st March, 2013 were as
follows:
Opening stock as on 1st April, 2012, at cost ` 65,000
Purchase at cost ` 2,00,000
Sales ` 3,00,000
It is further ascertained that :
(1) Shortage of stock found in the year ending 31.03.2013, costing ` 1,000 were written off.
(2) Opening stock on 01.04.12 including goods costing ` 6,000 had been sold during the
year and bad been marked down in the selling price by ` 600. The remaining stock had
been sold during the year.
(3) Goods purchased during the year were marked down by ` 1,200 from a cost of
` 15,000. Marked-down stock costing ` 5,000 remained unsold on 31.03.13.
The departmental closing stock is to be valued at cost subject to adjustment for mark-up

and mark-down.
You are required to prepare :
(i) A Departmental Trading Account for Department A for the year ended 31st March,
2013 in the books of Head Office.
(ii) A Memorandum Stock Account for the year.
(iii) A Memorandum Mark-up Account for the year. (12 Marks, November 2013) (IPCC)
Answer
(i) Department Trading
Account For the year ending
on 31.03.2013
In the books of Head Office

Particulars ` Particulars `
To Opening Stock 65,000 By Sales 3,00,000
To Purchases 2,00,000 By Shortage 1,000
To Gross Profit c/d 58,880 By Closing Stock 22,880
3,23,880 3,23,880
(ii) Memorandum stock account (for Department A) (at selling price)
Particulars ` Particulars `
To Balance b/d 81,250 By Profit & Loss A/c 1,000
(` 65,000+25% of ` 65,000) (Cost of Shortage)
To Purchases 2,50,000 By Memorandum Departmental 250
(` 2,00,000 + 25% of Mark up A/c (Load on Shortage)
` 2,00,000) (` 1,000 x 25%)
By Memorandum Departmental 1,200
Mark-up A/c (Mark-down on
Current Purchases)
3,00,000
 By Debtors A/c (Sales) 600
By Memorandum Departmental
Mark-up A/c
(Mark Down on Opening 28,200
3,31,250 Stock) By Balance c/d 3,31,250

(iii) Memorandum Departmental Mark-up Account

Particulars ` Particulars `
To Memorandum Departmental 250 By Balance b/d 16,250
Stock A/c (` 81,250 x 25/125)
(` 1,000 × 25/100)
To Memorandum Departmental 1,200 By Memorandum Departmental 50,000
Stock A/c Stock A/c
To Memorandum Departmental 600 (` 2,50,000 x 25/125)
Stock A/c
To Gross Profit transferred to 58,880
Profit & Loss A/c
To Balance c/d [(` 28,200 +
400* ) x 25/125 - ` 400] 5,320
66,250 66,250
*[` 1,200 ×5,000/15,000] = ` 400
Working Notes:

(i) Calculation of Cost of Sales

`
A Sales as per Books 3,00,000
B Add: Mark-down in opening stock (given) 600
C Add: mark-down in sales out of current Purchases (`
1,200 x 10,000 /15,000) 800
D Value of sales if there was no mark-down (A+B+C) 3,01,400
E Less: Gross Profit (25/125 of ` 3,01,400) subject to Mark Down
(` 600 + ` 800) (60,280)
F Cost of sales (D-E) 2,41,120
(ii) Calculation of Closing Stock
`
A Opening Stock 65,000
B Add: Purchases 2,00,000
C Less: Cost of Sales (2,41,120)
D Less: Shortage (1,000)
E Closing Stock (A+B-C-D) 22,880
Question 9

State the basis on which the following common expenses, the benefit of which is shared by all
the departments is distributed among the departments:
(i) Rent, rates and taxes, insurance of building;
(ii) Selling expenses such as discount, bad debts, selling commission and other such selling
 expenses; Carriage Inward;
(iii) Depreciation;
(iv) Interest on loan;
(v) Profit or loss on sale of investment;
(vi) Wages;
(vii) Lighting and Heating Expenses. (4 Marks, November 2013) (IPCC)
Answer
Allocation of Expenses

S.No. Expenses Basis

1. Rent, rates and taxes, repairs, Floor area occupied by each department
insurance of building (if given) other wise on time basis.
2. Selling expenses, e.g., discount, bad Sales of each department.
debts, selling commission, and other
such selling expenses
3. Carriage inward Purchases of each department.
4. Depreciation Value of assets of each department
otherwise on time basis.
5 Interest on loan Utilisation of loan amount in each
department (if can be identified),
otherwise in combined P& L A/c.
6 Profit & loss on sale of investment Value of investments sold in each
department (if value can be identified),
otherwise in combined P& L A/c.
7 Wages Time devoted to each department
8. Lighting and Heating expenses Consumption of energy by each
(eg. energy expenses) department.
Question 10

Department P sells goods to Department S at a profit of 25% on cost and to Department Q at

a profit of 15% on cost. Department S sells goods to P and Q at a profit of 20% and 30%
on sales respectively. Department Q sells goods to P and S at 20% and 10% profit on
cost respectively.
Departmental Managers are entitled to 10% commission on net profit subject to unrealized profit
on departmental sales being eliminated. Departmental profits after charging Manager's commission, but
before adjustment of unrealized profits are as below:

`
Department P 90,000
Department S 60,000
Department Q 45,000
Stock lying at different Departments at the end of the year are as below:
Figures in `
DEPARTMENTS
P S Q
Transfer from P - 18,000 14,000
Transfer from S 48,000 - 38,000
 Transfer from Q 12,000 8,000 -
Find out correct Departmental Profits after charging Managers' Commission.
(8 Marks, May, 2014)
(IPCC)
Answer
Calculation of correct Departmental Profits

Department P Department S Department Q

(`) (`) (`)
Profit after charging Manager’s 90,000 60,000 45,000
Commission
Add: Manager’s Commission (1/9) 10,000 6,667 5,000
1,00,000 66,667 50,000
Less: Unrealised profit on Stock (WN) (5,426) (21,000) (2,727)
Profit Before Manager’s Commission 94,574 45,667 47,273
Less: Manager’s Commission 10% (9,457) (4,567) (4,727)
Correct Profit after Manager’s 85,117 41,100 42,546
Commission
Working Notes:

Department P Department S Department Q Total

(`) (`) (`) (`)
Unrealized Profit of:
Department P - 25/125X18,000 15/115X14,000 5,426
=3,600 =1,826
Department S 20/100X48,000 - 30/100X38,000 21,000
=9,600 =11,400
Department Q 20/120X12,000 10/110X8,000 2,727
=2,000 =727
Question 11

Mega Ltd. has two departments, A and B. From the following particulars, prepare departmental
Trading A/c and General Profit & Loss Account for the year ended 31 st March, 2014.
Particulars Amount (`)
Department A Department B
Opening stock as on 01.04.2013 (at cost) 70,000 54,000
Purchases 3,92,000 2,98,000
Carriage Inward 6,000 9,000
Wages 54,000 36,000
Sales 5,72,000 4,60,000
Purchased Goods Transferred:
By Department B to A 50,000
By Department A to B 36,000
Finished Goods Transferred:
By Department B to A 1,50,000
 By Department A to B 1,75,000
Return of Finished Goods:
By Department B to A 45,000
By Department A to B 32,000
Closing Stock:
Purchased Goods 24,000 30,000
Finished Goods 1,02,000 62,000
Purchased goods have been transferred mutually at their respective departmental purchase
cost and finished goods at departmental market price and that 30% of the closing finished
stock with each department represents finished goods received from the other department.
(8 Marks, November, 2014) ( IPCC)

Answer

Departmental Trading Account in the books of

Mega Ltd. for the year ended 31 st March,
2014

Particulars Department Department Particulars Department Department

A B A B
(` ) (` ) (` ) (` )
To Opening Stock 70,000 54,000 By Sales 5,72,000 4,60,000
To Purchase 3,92,000 2,98,000 By Transfer:
To Carriage Inward 6,000 9,000 Purchased 36,000 50,000
Goods
To Wages 54,000 36,000 Finished 1,30,000 1,18,000
Goods
To Transfers: By Closing Stock:
Purchased 50,000 36,000 Purchased 24,000 30,000
Goods Goods
Finished** 1,18,000 1,30,000 1,02,000 62,000
Finished*
Goods
Goods
To Gross Profit c/d 1,74,000 1,57,000
8,64,000 7,20,000 8,64,000 7,20,000
* Finished goods from other department included in closing stock

Particulars Department A (`) Department B (`)

Stock of Finished Goods 1,02,000 62,000
Stock related to other department 30,600 18,600
(30% of Finished Goods)
** Net transfer of Finished Goods by

Department A to B = ` (1,75,000 – 45,000) =

`1,30,000 Department B to A = ` (1,50,000 –
32,000) = `1,18,000

General Profit and Loss A/c

For the year ended 31st March, 2014

 Particulars Amount (`) Particulars Amount
(`)
To Provision for unrealised profit By Gross Profit b/d:
included in closing stock: Department A 1,74,000
Department A 8,311 Department B 1,57,000
(W.N.2) Department 4,611
B (W.N.2) 3,18,078
To Net Profit 3,31,000 3,31,000
Working Notes

1. Calculation of ratio of gross profit margin on sales

Particulars Department A (`) Department B (`)
Sales 5,72,000 4,60,000
Add: Transfer of Finished
Goods 1,75,000 1,50,000
7,47,000 6,10,000
Less: Return of Finished
Goods (45,000) (32,000)
7,02,000 5,78,000
Gross Profit 1,74,000 1,57,000
Gross Profit margin = 1,74,000 1,57,000
x100 24.79% x100 27.16%
7,02,000 5,78,000

2. Unrealised profit included in the closing stock

Department A = 27.16% of ` 30,600 (30% of Stock of Finished Goods ` 1,02,000) =

` 8311.00

Department B = 24.79% of `18,600 (30% of Stock of Finished Goods ` 62,000) =

` 4611.00

Question 12

(a) M/s. Suman Enterprises has two Departments, Finished Leather and Shoes. Shoes are
made by the Firm itself out of leather supplied by Leather Department at its usual selling
price. From the following figures, prepare Departmental Trading and Profit & Loss
Account for the year ended 31st March, 2014:

Finished Leather Shoes Department

Department ( `)
( `)
Opening Stock (As on 01.04.2013) 30,20,000 4,30,000
Purchases 1,50,00,000 2,60,000
Sales 1,80,00,000 45,20,000
Transfer to Shoes Department 30,00,000 -
Manufacturing Expenses - 5,00,000
Selling Expenses 1,50,000 60,000
 Rent and Warehousing 5,00,000 3,00,000
Stock on 31.03.2014 12,20,000 5,00,000
The following further information are available for necessary consideration:
(i) The stock in Shoes Department may be considered as consisting of 75% of Leather
and 25% of other expenses.
(ii) The Finished Leather Department earned a Gross Profit @ 15% in 2012-13.
General expenses of the business as a whole amount to ` 8,50,000. (8 Marks IPCC MAY 15)

Solution :- Departmental Trading and Profit and Loss Account for the year ended 31st
March, 2014

Particulars Finished Shoes TotalParticulars Finished Shoes Total

leather (` ) (`) leather (`) (` ) (` )
(` )
To Opening 30,20,000 4,30,000 34,50,000By Sales 1,80,00,000 45,20,000 2,25,20,000
stock To 1,50,00,000 2,60,000 1,52,60,000By Transfer
to shoes -
Purchases
Deptt. 30,00,000 30,00,000
To Transfer from 30,00,000 30,00,000By Closing
Leather Stock 12,20,000 5,00,000 17,20,000
Department
To Manufacturing 5,00,000 5,00,000
expenses
To Gross profit c/d 42,00,000 8,30,000 50,30,000
2,22,20,000 50,20,000 2,72,40,000 2,22,20,000 50,20,000 2,72,40,000
To Selling 1,50,000 60,000 2,10,000By 42,00,000 8,30,000 50,30,000
expenses Gross
5,00,000 3,00,000 profit b/d
To Rent & 35,50,000 4,70,000 8,00,000
warehousing To Net 42,00,000 8,30,000 40,20,000 42,00,000 8,30,000 50,30,000
profit 50,30,000

General Profit and Loss Account

Particulars Amount (`) Particulars Amount (`)

To General expenses 8,50,000 By Net profit 40,20,000
To Unrealized profit (Refer W.N.) 26,625
To General net profit (Bal.fig.) 31,43,375
40,20,000 40,20,000
Working Note:
Calculation of Stock Reserve

Rate of Gross Profit of Finished leather Department, for the year 2013-14

Gross Pr ofit
= x 100 = [(42,00,000)/ (1,80,00,000 + 30,00,000)] x100 = 20%
Total Sales

Closing Stock of Finished leather in Shoes Department = 75% i.e. `

5,00,000 x 75% = ` 3,75,000
 Stock Reserve required for unrealized profit @ 20% on closing stock

` 3,75,000 x 20% = ` 75,000

Stock reserve for unrealized profit included in opening stock of Shoes dept. @ 15% i.e. (`
4,30,000 x 75% x 15%) = ` 48,375

Additional Stock Reserve required during the year = ` 75,000 – ` 48,375 = ` 26,625

Question 13

(a) Sona Ltd. has three departments – P, Q and R. From the following particulars
given below, compute:
(i) The departmental results;
(ii) The value of stock as on 31 st December, 2014:
Particula P Q R
rs
Stock as on 01.01.2014 30,000 45,000 15,000
Purchases 1,60,000 1,30,000 60,000
Actual Sales 1,88,000 1,66,000 93,000
Gross Profit on normal sales price 25% 33⅓% 40%
During the year 2014 some items were sold at discount and these
discounts were reflected in the above sales value. The details are given
below:

Particulars P Q R
Sales at normal price 15,000 8,000 6,000
Sales at actual price 11,000 6,,00 4,000
0
( 4 Marks Nov 15 IPCC)

(a) Calculation of Departmental Results:

P ( `) Q ( `) R (`)
Actual Sales 1,88,000 1,66,000 93,000
Add: Discount (Refer W.N.) 4,000 2,000 2,000
Normal sale 1,92,000 1,68,000 95,000
Gross profit % on normal sales 25% 33.33% 40%
Normal gross profit 48,000 56,000 38,000
Less: Discount (4,000) (2,000) (2,000)
Actual gross profit 44,000 54,000 36,000
Computation of value of stock as on 31st Dec. 2014

Departments P Q R
` ` `
Stock (on 1.1. 2014) 30,000 45,000 15,000
 Add: Purchases 1,60,000 1,30,000 60,000
1,90,000 1,75,000 75,000
Add: Actual gross profit 44,000 54,000 36,000
2,34,000 2,29,000 1,11,000
Less: Actual Sales (1,88,000) (1,66,000) (93,000)
Closing stock as on 31.12.2014 46,000 63,000 18,000
(bal.fig.)
Working Note:

Calculation of discount on sales

Departments P Q R
` ` `
Sales at normal price 15,000 8,000 6,000
Less: Sales at actual price (11,000) (6,000) (4,000)
4,000 2,000 2,000

Question 14

(a) There is transfer/sale among the three departments as below:

Department X sells goods to Department Y at a profit of 25% on cost and
to Department Z at 20% profit on cost.

Department Y sells goods to X and Z at a profit of 15% and 20% on sales

respectively. Department Z charges 20% and 25% profit on cost to
Departments X and Y respectively.

Department Managers are entitled to 10% commission on net profit subject

to urealised profit on departmental sales being eliminated.

Departmental profits after charging Managers' commission, but before

adjustment of unrealised profit are as under:

`
Department X 1,80,00
Departmen 0
tY 1,35,00
0
Departmen
tZ 90,00
0
Stocks lying at different Departments at the end of the year are as under:

Dept. X Dept. Y Dept. Z

Transfer from Department X - 75,000 57,000
Transfer from Department Y 70,000 - 60,000
Transfer from Department Z 30,000 25,000 -
 Find out the correct departmental profits after charging Managers' commission.

(8 marks IPCC MAY 16)

Solutions :-

(a) Calculation of Correct Profit

Department Department Department
X Y Z
` ` `
Profit after charging managers‘ 1,80,000 1,35,000 90,000
commission
Add back : Managers‘ commission (1/9) 20,000 15,000 10,000
2,00,000 1,50,000 1,00,000
Less: Unrealized profit on stock (W.N.) (24,500) (22,500) (10,000)
Profit before Manager‘s commission 1,75,500 1,27,500 90,000
Less : Commission for Department
Manager @ 10% (17,550) (12,750) (9,000)
Departmental Profits after manager‘s
commission 1,57,950 1,14,750 81,000
Working Note:
Stock lying with

Dept. Dept. Dept. Total

X Y Z
` ` ` `
Unrealized
Profit of:
Department X 1/5×75,000=15,000 20/120×57,000=9,500 24,500
Department Y 0.15×70,000=10,500 0.20×60,000=12,000 22,500
Department Z 20/120×30,000=5,000 25/125×25,000=5,000 10,000

Question 15

(a) M/s Shyam Udyog, a retail store, has two departments, Department X and
Department Y for each of which stock account and memorandum 'mark-up'
account are kept. All the goods supplied to each department are debited to
the stock account at cost plus a 'mark - up', which together make up the selling
price of the goods and in the a ccount the sale proceeds of the goods are
credited. The amount of 'mark -up' is credited to the Departmental Mark-up
Account. If the selling price of any goods is reduced below its normal selling
price, the reduction 'marked down' is adjusted both in the Stock Account and
the Departmental Mark-up Account. The rate of 'Mark up' for X Department
is 33-1/3% of the cost and for Y Department it is 50% of the cost.
The following figures have been taken from the books for the year ended
March, 2016 :
 X Y
Department Department
Amount (`) Amount (`)
Stock as on April 1st at 3,15,000 5,58,000
cost
Purchases 22,77,000 28,02,000
Sales 28,68,000 37,50,000
(1) The stock of Department X on April 1, 2015 included goods the selling
price of which had been marked down by ` 37,800. These goods were
sold during the year at the reduced prices.
(2) Certain stock of the value of ` 2,07,000 purchased from the Department
X was later in the year transferred to the Department Y and sold for `
3,10,5000. As a result though cost of the goods is included in the
Department X the sale proceeds have been credited to the Department
Y.
(3) During the year 2015-16 to promote the goods, they were marked down
as follows:
Cost (`) Marked down (`)
Department X 1,68,000 10,800
Department Y 3,00,000 60,000
All the goods marked down, were sold except of Department Y of the
(1) ` of marked down by ` 30,000. At the time of stock taking on 31 st
1,50,000
value
March, 2016, it was discovered that cloth of Department X of the cost of

You are required to prepare for both the departments for the year ended 31 st
` 11,700
March, 2016: was missing and it was decided that the amount be written-off.
(a) The Memorandum Stock Account; and
(b) The Memorandum Mark-up Account. (8
Marks)
Marks NOV 16 IPCC)

Solutions

(a) Department X Memorandum Stock Account

2015- ` ` 2015- ` `
16 16
T Balance By Sales 28,68,00
o b/d 0
(3,15,000 3,82,200 X Deptt. 2,07,00
+ 0
1,05,000 –
37,800)
T Purchases 22,77,000 Mark- 69,000 2,76,000
o up A/c
Markup 7,59,000 30,36,00 By Loss 11,700
0 o
 f stock
A/c
Mark- 3,900 15,600
up A/c
By Mark-up 10,800
A/c
By Balance 2,47,800
c/d
34,18,20 34,18,200
0
Department X Memorandum Mark-up Account

2015-16 ` 2015-16 `
T Stock A/c (transfer) 69,000 By Balance b/d
o
T Stock A/c (re-sale) 3,900 (1,05,000-37,800) 67,200
o
T Stock A/c (mark down) 10,800 By Stock A/c 7,59,000
o
T Profit & Loss A/c 6,80,55
o 0
T Balance (1/4 of ` 61,950
o 2,47,800)
8,26,20 8,26,200
0
Working Note:
Verification of Profit `
Sales as per books 28,68,0
00
Add: Mark-down (37,800+10,800) 48,600
29,16,60
0
Gross Profit on fixed selling price @ 25% on ` 7,29,150
29,16,600
Less: Mark down (48,600)
6,80,55
0
Department Y Memorandum Stock
Account

2015-16 ` 2015-16 `
To Balance By Sales A/c 37,50,000
b/d
To Cost 5,58,000 By Mark-up A/c 60,000
Mark-up 2,79,000 8,37,000 By Balance c/d 15,40,500
To Purchases 28,02,000
Mark-up 14,01,000 42,03,000
To X Deptt. 2,07,000
 A/c
Mark-up 1,03,500 3,10,500
53,50,500 53,50,500

Department Y Memorandum Mark Up Account

2015-16 ` 2015-16 `
To Stock A/c 60,000 By Balance b/d 2,79,000
To Profit & Loss A/c 12,30,00 By Stock 14,01,000
0 A/c
(28,02,000 x
50%)
To Balance c/d: 4,93,500 By Stock A/c 1,03,500
[1/3(15,40,500+30,000)- `
30,000]
17,83,50 17,83,500
0

Working Notes:
Verification of Profit `
Sales 37,50,00
0
Add: Mark down in goods sold
30,000
37,80,00
0
Gross Profit 1/3 12,60,00
0
Less: Mark down
(30,000)
Gross profit as per books
12,30,000

Question 16

(a) The following balances were extracted from the books of Beta. You are
required to prepare Departmental Trading Account and general Profit & Loss
Account for the year ended 31st December, 2016:

Particula Deptt. A Deptt. B

rs ` `
Opening Stock 3,00,000 2,40,000
Purchases 39,00,000 54,60,000
Sales 60,00,000 90,00,000
General expenses incurred for both the Departments were ` 7,50,000 and
you are also supplied with the following information:
 (i) Closing stock of Department A ` 6,00,000 including goods from
Department B for
` 1,20,000 at cost to Department A.
(ii) Closing stock of Department B ` 12,00,000 including goods from
Department A for
` 1,80,000 at cost to Department B.
(iii) Opening stock of Department A and Department B include goods of
the value of
` 60,000 and ` 90,000 taken from Department B and Department A
respectively at cost to transferee departments.
The gross profit is uniform from year to year. (8 marks may 2017 ipcc)

SOLUTIONS:- Departmental Trading Account for the year ended on 31st December,
2016

Particulars A B Particulars A B
` ` ` `
To Opening Stock 3,00,000 2,40,000 By Sales 60,00,00 90,00,000
0
To Purchases 39,00,00 54,60,000 By Closing 6,00,000 12,00,000
0 Stock
To Gross Profit 24,00,00 45,00,000
0
66,00,00 1,02,00,00 66,00,00 1,02,00,00
0 0 0 0
General profit and loss account of Beta for the year ended on 31 st December,
2016

Particulars Amount Particulars Amount

` `
To General expenses 7,50,000 By Stock reserve (opening
stock)
To Stock Dept. A 30,000
reserv
e (Closing Stock) 60,000 Dept. B 36,000
Dept. 72,000 By Gross Profit
A 60,84,000 Dept. A 24,00,000
Dept. ____ Dept. B 45,00,000
B 69,66,000 69,66,000
To Net Profit
Working Notes:
Dept. A Dept. B
1. Percentage of 24,00,000/60,00,000 x 45,00,000/90,00,000 x
Profit 100 100
40% 50%
2. Opening Stock 60,000 x 50% = 90,000 X 40% =
30,000 36,000
 reserve
3. Closing Stock 1,20,000 x 1,80,000 x 40% =
50%=60,000 72,000
reserve

General expenses have not been allocated to individual department and are charged to
General Profit and Loss Account

Question17 .

Department X sells goods to Department Y at a profit of 50% on cost and to

Department Z at 20% on cost. Department Y sells goods to Department X and Z at a
profit of 25% and 15% respectively on sales. Department Z charges 30% profit on
cost to Department X and 40 profit on sale to Y.

Stocks lying at different departments at the end of the year are as under:
Dept. X Dept. Y Dept. Z
` ` `
Transfer from Department X 75,000 48,000
Transfer from Department Y 50,000 82,000
Transfer from Department Z 52,000 56,000

Calculate the unrealized profit of each department and also total unrealized
profit.
(4 Marks NOV 17 IPCC)

Solution

Calculation of unrealized profit of each department and total unrealized profit

Dept. X Dept. Y Dept. Z Total

` ` ` `
Unrealized Profit of:
Department X 75,000 x 48,000 x
50/150 = 20/120 33,000
25,00 =
0 8,000
Department Y 50,000 x .25 82,000 x .15
= = 24,800
12,50 12,30
0 0
Department Z 52,000 x 56,000 x
30/130 40/100 = 34,400
= 22,40
12,000 0
92,200
Question 18

M/s. Delta is a Departmental Store having three departments X, Y and Z. The

information regarding three departments for the year ended 31 st March, 2018 are
given below:

Particulars Dept. X Dept. Y Dept. Z

Opening Stock 18,000 12,000 10,000
Purchases 66,000 44,000 22,000
Debtors at end 7,500 5,000 5,000
Sales 90,000 67,500 45,000
Closing Stock 22,500 8,750 10,500
Value of furniture in each Department 10,000 10,000 5,000
Floor space occupied by each Dept. (in sq. 1,500 1,250 1,000
ft.)
Number of employees in each Department 25 20 15
Electricity consumed by each Department
300 200 100
(in units)

Additional Information:
Amount (`)
Carriage inwards 1,500
Carriage outwards 2,700
Salaries 24,000
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
Prepare Departmental Trading ND Profit & Loss Account for the year ended on 31-03-
2018 after providing provision for baddebts @ 5%.

(10 marks in May 18 Inter)

Solutions:-

In the Books of M/s Delta

Departmental Trading and Profit and Loss Account for the year ended 31st March, 2018

Particulars Deptt.X Deptt.Y Deptt.Z Particulars Deptt.X Deptt.Y Deptt.Z

` ` ` ` ` `
 To Stock (opening) 18,000 12,000 10,000 By Sales 90,000 67,500 45,000
To Purchases 66,000 44,000 22,000 By Stock (closing) 22,500 8,750 10,500
To Carriage Inwards 750 500 250
To Gross Profit c/d 27,750 19,750 23,250
(b.f.)
1,12,500 76,250 55,500 1,12,500 76,250 55,500
To Carriage Outwards 1,200 900 600 By Gross Profit 27,750 19,750 23,250
b/d
To Electricity 1,500 1,000 500 By Discount 900 600 300
received
To Salaries 10,000 8,000 6,000
To Advertisement 1,200 900 600
To Discount allowed 1,000 750 500
To Rent, Rates and 3,000 2,500 2,000
Taxes
To Depreciation 400 400 200
To Provision for Bad 375 250 250
Debts @ 5% of
debtors
To Labour welfare 1,000 800 600
expenses
To Net Profit (b.f.) 8,975 4,850 12,300
28,650 20,350 23,550 28,650 20,350 23,550

Working Note:

Basis of allocation of expenses

Carriage inwards Purchases (3:2:1)
Carriage outwards Turnover (4:3:2)
Salaries No. of Employees (5:4:3)
Advertisement Turnover (4:3:2)
Discount allowed Turnover (4:3:2)
Discount received Purchases (3:2:1)
Rent, Rates and Taxes Floor Space occupied (6:5:4)
Depreciation on furniture Value of furniture (2:2:1)
Labour welfare expenses No. of Employees (5:4:3)
Electricity expense Units consumed (3:2:1)
Provision for bad debts Debtors balances (3:2:2)
Question 19

(a) Axe Limited has four departments, A, B, C and D. Department A sells goods to
other departments at a profit of 25% on cost. Department B sells goods
to other department at a profit of 30% on sales. Department C sells goods
to other departments at a profit of 10% on cost, Department D sells goods
to other departments at a profit of 15% on sales.
Stock lying at different departments at the year-end was as follows:

Departmen Departmen Departmen Departmen

t t t t
 A B C D

Transfer from - 45,000 50,000 60,000

Department A
Transfer from 50,000 - - 75,000
Department B
Transfer from 33,000 22,000 - -
Department C
Transfer from 40,000 10,000 65,000 -
Department D
Departmental managers are entitled to 10% commission on net profit
subject to unrealized profit on departmental sales being eliminated.
Departmental profits after charging manager's commission, but before
adjustment of unrealized profit are as under:

`
Department A 2,25,000
Department B 3,37,500
Department C 1,80,000
Department D 4,50,000
Calculate the correct departmental profits after charging Manager's commission.
(5 Marks NOV 18 Inter)

Solutions :-

(a) Calculation of correct departmental Profits

Departmen Departmen Departmen Department

t t t D
A B C
` ` ` `
Profit after charging 2,25,000 3,37,500 1,80,000 4,50,000
managers’ commission
Add back: 25,000 37,500 20,000 50,000
Managers’
commission (1/9)
2,50,000 3,75,000 2,00,000 5,00,000
Less: Unrealized profit 31,000 37,500 5,000 17,250
on stock (Working
Note)
Profit before 2,19,000 3,37,500 1,95,000 4,82,750
Manager’s
commission
Less: Commission for
Department Manager 21,900 33,750 19,500 48,275
@ 10%
 Correct Departmental
Profits after manager’s
commission 1,97,100 3,03,750 1,75,500 4,34,475
Working Note :

Stock lying with

Dept. A Dept. B Dept. C Dept. Total

D
` ` ` `
Unrealized
Profit of:
Department 45,000 x 50,000 60,000 x 31,000
A 25/125 x 25/125
= 25/12 =
9,000 5 12,000
50,000 x
=10,0
Department B 0.3 75,000 x 37,500
00
= 0.3
15,000 =
22,500
5,000
Department
C
17,250
Department
D

Question 20

ABC Ltd. has several departments. Goods supplied to each department are
debited to a Memorandum Departmental Stock Account at cost plus a fixed
percentage (mark-up) to give the normal selling price. The amount of mark-
up is credited to a Memorandum Departmental Markup account. If the selling
price of goods is reduced below its normal selling prices, the reduction (mark-
down) will require adjustment both in the stock account and the mark-up
account. The mark-up for department X for the last three years has been 20%.
Figures relevant to department X for the year ended 31 st March, 2019 were
as follows:
Stock as on 1 st April, 2018, at cost ` 1,50,000
Purchases at cost ` 4,30,000
Sales ` 6,50,000
It is further ascertained that:
(1) Shortage of stock found in the year ending 31.3.2019, costing ` 4,000
were written off.
(2) Opening stock on 1.4.2018 including goods costing ` 12,000 had been
sold during the year and had been marked-down in the selling price by
` 1,600. The remaining stock had been sold during the year.
 (3) Goods purchased during the year were marked down by ` 3,600 from a
cost of
` 30,000. Marked-down stock costing ` 10,000 remained unsold on
31.3.2019.
(4) The departmental closing stock is to be valued at cost subject to
adjustment for mark- up and mark-down.
You are required to prepare for the year ended 31 st March, 2019 :
(i) Departmental Trading Account for department X for the year ended 31 st
March, 2019 in the books of head office.
(ii) Memorandum Stock Account for the year ended 31 st March, 2019.
(iii) Memorandum Mark-Up account for the year ended 31 st March, 2019.
(10 Marks NOV 19 INTER)

Solutions :-

(a) Department Trading Account for Department X For the

year ending on 31.03.2019
In the books of Head Office

Particulars ` Particulars `
To Opening Stock 1,50,000 By Sales 6,50,000
To Purchases 4,30,000 By Shortage 4,000
To Gross Profit 1,05,000 By Closing Stock 31,000
c/d
6,85,000 6,85,000

(ii) Memorandum Stock Account (for Department X) (at selling price)

Particulars ` Particulars `
To Balance b/d 1,80,00 By Profit & Loss 4,000
(` 1,50,000+20% 0 A/c (Cost of
of Shortage)
` 1,50,000)
To Purchases 5,16,00 By Memorandum 800
(` 4,30,000 + 0 Departmental Mark up A/c
20% of (Load on Shortage) (`
` 4,30,000) 4,000 x 20%)
By Memorandum 3,600
Departmental Mark-up A/c
(Mark-down on Current
Purchases)
By Debtors A/c (Sales) 6,50,00
0
By Memorandum 1,600
Departmental Mark-up
A/c
 (Mark Down on Opening
Stock)

By Balance c/d 36,000

6,96,00 6,96,00
0 0
(iii) Memorandum Departmental Mark-up Account
Particulars ` Particulars `
To Memorandum 800 By Balance b/d 30,000
Departmental Stock (` 1,80,000 x
A/c (` 4,000 × 20/120)
20/100)
To Memorandum 3,600 By Memorandum 86,000
Departmental Stock A/c Departmental Stock
A/c
To Memorandum 1,600 (` 5,16,000 x
Departmental Stock 20/120)
A/c
To Gross Profit 1,05,00
transferred to 0
Profit & Loss A/c
To Balance c/d [(` 36,000
+ 1,200*) x 20/120 - ` 5,000
1,200]
1,16,00 1,16,00
0 0
*[` 3,600 ×10,000/30,000] = ` 1,200. Alternatively, this adjustment of `
1,200 may be routed through Memorandum Stock Account.
Working Notes:
(i) Calculation of Cost of Sales

`
A Sales as per Books 6,50,000
B Add: Mark-down in opening stock (given) 1,600
C Add: mark-down in sales out of current
Purchases (` 3,600 x 20,000 2,400
/30,000)
D Value of sales if there was no mark-down (A+B+C) 6,54,000
E Less: Gross Profit (20/120 of ` 6,54,000) subject to (1,09,000
Mark Down )
F Cost of sales (D-E) 5,45,000

(ii) Calculation of Closing Stock

`
 A Opening Stock 1,50,000
B Add: Purchases 4,30,000
C Less: Cost of Sales (5,45,000
)
D Less: Shortage (4,000)
E Closing Stock (A+B-C-D) 31,000

Question 21

Department A sells goods to Department B at a profit of 20% on cost and

to Department C at 50% on cost. Department B sells goods to Department
A and Department C at a profit of 15% and 10% on sales respectively.
Department C sells goods to Department A and Department B at a profit of
10% and 5% on cost respectively.
Stock lying at different departments at the end of the year are as follows:

Department A Department B Department

( `) (`) C
(`)
Transfer from Department A 1,14,000 60,000
Transfer from Department B 55,000 15,200
Transfer from Department C 52,800 1,11,300
Calculate Department wise unrealized profit on Stock. (5 marks Nov 20 Inter)
SOLUTIONS :-

Calculation of unrealized profit of each department

Dept. A Dept. B Dept. C Total

` ` ` `
Unrealized
Prof
it of:
Department A 1,14,000 x 60,000 x 39,000
20/120 = 50/150
19,000 = 20,000
Department B 55,000 x .15 15,200 x.10 9,770
= 8,250 = 1,520
Department C 52,800 x 1,11,300 x 5/105
10/110
= 4,800 5,300 10,100
Question 22

XYZ Garage consists of 3 departments: Spares, Service and Re pairs, each department
being managed by a departmental manager whose commission was respectively 5%,
10% and 10% of the respective departmental profit subject to a minimum of `5,000
in each case.
Inter departmental transfers take place at a “loaded” price as
follows: From Spares to Service 5% above
cost
From Spares to Repairs 10% above cost
From Spares to Service 10% above cost
In respect of the year ended March 31st 2019 the firm had already prepared
and closed the departmental trading and profit and loss account.
Subsequently it was discovered that the closing stocks of department had
included inter-departmentally transferred goods at “loaded” price instead of
the correct cost price.
From the following information, you are required to prepare a statement re-
computing the departmental profit or loss:

Spares Service Repairs

` ` `
Final Net Profit/Loss 38,000 50,400 72,0
(after charging (Loss) (Profit) 00
commission) (Prof
it)
Inter-departmental transfers 65,000 4,202
Included at “loaded” price (21,000 from (from
in Spares)
the departmental stocks Spares and 44,000
from Repairs)

(10 marks Jan 2021 Inter)

Solutions :- Calculation of correct Departmental Profits or Losses

Departme Departme Departme

nt Spares nt nt
(`) Service Repair
(`) (`)
Profit after charging (38,000) 50,400 72,000
Manager’s Commission
Add: Manager’s Commission (1/9) 5,000(Minimu 5,600 8,000
m)
 (33,000) 56,000 80,000
Less: Unrealized profit on Stock (1,382) (4,000)
(WN)
Profit Before Manager’s (34,382) 56,000 76,000
Commission
Less: Manager’s Commission 10% (5,000) (5,600) (7,600)
Correct Profit after Manager’s (39,382) 50,400 68,400
Commission

Working Note:

Departme Departme Department Repair Tot

nt Spares nt (`) al
(`) Service (`
(`) )
Unrealized Profit
of:
Department 21,000X5/105 4202X10/110 = 1,382
Spares 382
= 1,000
Department 44000X10/11 4,000
Repair 0
= 4000