Chapter # 6 Departmental Account

Advanced financial Accounting
B.Com 2
CHAPTER # 6
DEPARTMENTL
ACCOUNTS
Rooh Ullah (M.Com)

0333-87 86 389
THE STANDARD GIRLS COLLEGE

Advanced Financial Accounting Page |1
ILLUSTRATIONS
1. City Departmental store has three departments; Vegetables, Fruits and Flowers. Following
data is available with respect to each of the three departments.
Vegetables Fruits Deptt. Flowers

Particulars Deptt. Rs. Deptt.
Rs. Rs.
Sales 886,100 775,700 399,400
Purchases 599,900 549,600 280,500
Opening stock 41,800 38,000 19,200
Closing stock 35,400 40,900 20,500
Salaries 20,000 12,000 7,000
Depreciation of Fixtures 2,400 2,000 2,000
Unallocated Expenses:
Heating & Lighting Rs. 18,000; Rent Rs. 12,000; Rates Rs. 6,000; Advertising Rs.
6,000; General expenses Rs. 12,000.
Heating and lighting, rent and rates are to be allocated in the ratio of 2:2:1 and
advertising and general expenses are to be allocated equally among all three departments.
Required:
Prepare departmental trading and Profit and Loss Account of the three Departments
separately.
Solution
City Departmental Store
Departmental Trading & Profit & Loss A/c
Particulars Veget. Fruits Flowers Particulars Veget. Fruits Flowers
Deptt. Deptt. Deptt. Deptt. Deptt. Deptt.
Rs. Rs. Rs. Rs. Rs. Rs.
Opening stock 41,800 38,000 19,200 Sales 886,100 775,700 399,400
Purchases 599,900 549,600 280,500 Closing Stock 35,400 40,900 20,500
Gross profit c/d 279,800 229,000 120,200
921,500 816,600 419,900 921,500 816,600 419,900
Salaries 20,000 12,000 7,000 Gross profit b/d 279,800 229,000 120,200
Depreciation 2,400 2,000 2,000
Heat & Light 7,200 7,200 3,600
Rent 4,800 4,800 2,400
Rates 2,400 2,400 1,200
Advertisement 2,000 2,000 2,000
General exp. 4,000 4,000 4,000
Net profit 23,700 194,600 98,000
279,800 229,000 120,200 279,800 229,000 120,200
Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

2. The following balances as at 31-12-2010 have been extracted from the books of Salman &
Co. which has two departments.
Particulars Deptt. A Deptt. B

Rs. Rs.
Opening stock as on 1-1-2010 25,000 20,000
Purchases 230,000 190,000
Purchase Returns 2,000 1,000
Sales 633,000 492,000
Sales Returns 3,000 2,000
Wages 180,000 160,000
Miscellaneous Charges 35,000 32,000
General:
Sundry Debtors – Rs. 190,000; Sundry Creditors – Rs. 173,000, Plant and Machinery – Rs.
240,000, Leaseholds – Rs. 80,000, Buildings – Rs. 120,000, Furniture and Fittings – Rs.
48,000, Office and Selling Expenses – Rs. 128,000, Cash in hand on 31-12-2010 Rs. 8,000;
Cash at bank on 31-12-2010 Rs. 110,000 Capital – Rs. 500,000.
Plant and Machinery is to be depreciated by 10%, Building by 2%, Furniture and Fittings by
5%. Leaseholds are to be written-off by Rs. 8000. The Stock on hand as on 31-12-2010,
Department A – Rs. 26,000, Department B – Rs. 24,000. All unallocated expenditures are to
be apportioned in the ratio of the net sales of each department.
Prepare in columnar form, the Trading and Profit and Loss Account of two departments and
Balance Sheet of the combined business as a whole on 31-12-2010.
Solution
Salman & Co.
Departmental Trading & Profit & Loss Account
For the year ended 31st December 2010
Particulars Deptt. A Deptt. B Particulars Deptt. A Deptt. B
Rs. Rs. Rs. Rs.
Opening stock 25,000 20,000 Sales less return 630,000 490,000
Purchases less return 228,000 189,000 Closing stock 26,000 24,000
Wages 180,000 160,000
Gross profit c/d 223,000 145,000
656,000 514,000 656,000 514,000
Mis. Charges 35,000 32,000 Gross profit b/d 223,000 145,000
Depreciation on
Plant & Mach. 13,500 10,500
Furniture & Fitt. 1,350 1,050
Building 1,350 1,050
Leaseholds 4,500 3,500
Office & Selling Exp. 72,000 56,000
Net profit 95,300 40,900
223,000 145,000 223,000 145,000

Salman & Co.

Balance Sheet
As on 31st December 2010
Assets Rs. Liabilities Rs.
Current Assets Current Liabilities
Cash in hand 8,000 Sundry creditors 173,000
Cash at bank 110,000
Sundry Debtors 190,000 Owner’s equity
Closing Stock Capital 500,000
A 26,000 Add: Net profit A 95,300
B 24,000 50,000 Add: Net profit B 40,900 636,200
Fixed Assets
Plant & Mach. 240,000
Less: Dep. 24,000 216,000
Building 120,000
Less: Dep. 2,400 117,60
Furn. & Fit. 48,000
Less: Dep. 2,400 45,600
Leaseholds 80,000
Less: Writ. Off 8,000 72,000
809,200 809,200
3. From the following Trial Balance, prepare Departmental Trading and Profit and Loss
Account for the year ended 31-12-2010 and a Balance Sheet as on date in the books of P &
Co. (all figures in rupees).
Particulars Debit Credit

Rs. Rs.
Stock on 1-1-2010 Deptt. A 5,400
Deptt. B 4,900
Purchases Deptt. A 9,800
Deptt. B 7,350
Sales Deptt. A 16,900
Deptt. B 13,520
Wages Deptt. A 1,340
Deptt. B 240
Rent 1,870
Salaries 1,320
Lighting and Heating 420
Discount allowed 441
Discount received 133
Advertising 738
Carriage inward 469
Furniture and fittings 600
Plant and Machinery 4,200
Sundry Debtors 1,820
Sundry Creditors 3,737
Capital 9,530
Drawings 900
Cash in hand 32
Cash at bank 1,980

The following information is also provided:

a) Rent, lighting and heating, salaries and depreciation are to be apportioned to A and B
Departments as 2:1.
b) Other expenses and incomes are to be apportioned to A and B Departments on
suitable basis.
c) The following adjustments are to be made.
Rent prepaid Rs. 370; Lighting and heating outstanding Rs. 180; and Depreciation of
Furniture & Fittings and Plant & Machinery @ 10% p.a.
The stock at 31-12-2010; Department A – Rs. 2,748; Department B – Rs. 2,401.
Solution
P & Co.
For the period ended 31st December 2010
Particulars Dep. A Dep. B Particulars Dep. A Dep. B
Rs. Rs. Rs. Rs.
Opening stock 5,400 4,900 Sales 16,900 13,520
Purchases 9,800 7,350 Closing stock 2,748 2,401
Carriage inward 268 201
Wages 1,340 240
19,648 15,921 19,648 15,921
Rent 1,000 500 Gross profit b/d 2,840 3,230
Salaries 880 440 Discount received 76 57
Lighting and heating 400 200
Discount allowed 245 196
Advertisement 410 328
Depreciation 320 160
Net profit - 1,463 Net Loss 339 -
3,255 3,287 3,255 3,287
P & Co.
Balance Sheet
Cash in hand 32 Sundry creditors 3,737
Cash at bank 1,980 Outs. Exp. For lighting &
Sundry debtors 1,820 heating 180
Stock 5,149 Owner’s Equity
Prepaid rent 370 Capital 9,530
Fixed Assets Less: N.L – A 339
Plant & Mach. 4,200 Add: N.P – B 1,463
Less: Depreciation 420 3,780 10,654
Furniture & Fittings 600 Less: Drawings 900 9,754
Less: Depreciation 60 540
13,671 13,671

4. The following Trial Balance for the year ended 31st March 2002 was extracted from the
books of Salman & Co.

Rs. Rs.
Capital on 1-4-2009 50,000
Drawings Account 10,000
Stock on 1-4-2009
Radios 45,000
Watches 21,000
Sales:
Radios 2,94,000
Watches 1,46,000
Purchases:
Radios 225,000
Watches 1,15,000
Salaries 12,600
Publicity 8,900
Rent, Rates and taxes 3,200
Commission 10,600
Miscellaneous expenses 5,000
Furniture and Fixtures 12,400
4% Govt. Securities 10,000
Interest 400
Provision for Bad and Doubtful Debts 800
Cash Balance
4,500
Prepare the Departmental Trading and Profit and Loss Account for the year ended 31st
March, 2010 after taking into account the following.
(i) The stock as on 31st March 2010 was
Radios Rs. 30,000; Watches Rs. 24,000
(ii) An amount of Rs. 1,200 out of Sundry Debtors has to be written off as bad and the
provision for doubtful debts has to be increased thereafter to 10 percent of the debts
outstanding.
(iii) The following expenses are outstanding as on 31st March 2010;
Publicity Rs. 1,300; Salaries Rs. 1,200; Commission Rs. 1,700
(iv) Provide 10 Percent depreciation on Furniture and Fixtures.
(v) Revenue items to be allocated in the ratio of 2:1 as between Radios and Watches.
Ignore fractions of a Rupee in calculations.

Solution
Salman & Co.
For the year ended 31st March 2010
Particulars Radio Watches Particulars Radio Watches
Rs. Rs. Rs. Rs.
Purchases 225,000 115,000 Closing stock 30,000 24,000
324,000 170,000 324,000 170,000
Salaries 9,200 4,600 Gross profit b/d 54,000 34,000
Publicity 6,800 3,400 Interest 267 133
Rent, Rates & taxes 2,133 1,067 Provision for bad
Commission 8,200 4,100 debts 533 267
Depreciation on
furniture 827 413
Bad debts 800 400
New provision 1040 520
Mis. Expenses 3,333 1,667
Net profit 22,467 18,233
54,800 34,400 54,800 34,400
5. A departmental store carries on its business through three departments A, B and C.

(i) The following information for 2010 is now made available to you:
Salaries and commission Rs. 10,200, Rent and Rates Rs. 3,000, Insurance Rs. 1,260;
Miscellaneous Expenses Rs. 2,610.
All these expenses are chargeable to each department in proportion to the cost of the
articles sold in the respective departments.
(ii) The following balances as at 31-12-10 were ascertained:
Deptt. A Deptt. B Deptt. C

Opening Stock at cost 10,000 6,000 15,000
Purchases 100,000 60,000 20,000
Sales 96,000 62,000 19,000
Closing stock at cost 23,000 8,000 6,000
Prepare department trading and Profit and Loss Account to show the final result of each
department and also the combined result with respective percentage on sales.

Solution
For the year ended 31st Dec. 2010
Particulars Dep. A Dep. B Dep. C Total Particulars Dept. A Dept. Dept. C Total
Rs. Rs. Rs. Rs. Rs. B Rs. Rs.
Rs.
Opening Stock 10,000 6,000 15,000 31,000 Sales 96,000 62,000 19,000 177,000
Purchases 100,000 60,000 20,000 180,000 Closing stock 23,000 8,000 6,000 37,000
Gross profit c/d 9,000 4,000 13,000 Gross Loss c/d 10,000 10,000
119,000 70,000 35,000 224,000 119,000 70,000 35,000 224,000
Gross Loss b/d - - 10,000 10,000 Gross profit b/d 9,000 4,000 - 13,000
Salaries & Com. 5,100 3,400 1,700 10,200
Rent & Rates 1,500 1,000 500 3,000
Insurance 630 420 210 1,260
Mis. Expenses 1,305 870 435 2,610
Net profit 465 - - 465 Net Loss 1,690 12,845 14,535
9,000 5,690 12,845 27,535 9,000 5,690 12,845 27,535

0.48% - - - - 2.73% 67.61% -
Calculation of Cost of Goods Sold

A B C
Opening Stock 10,000 6,000 15,000
Add: Purchases 100,000 60,000 20,000
Cost of goods available for sale 110,000 66,000 35,000
Less: Closing Stock 23,000 8,000 6,000
Cost of goods sold 87,000 58,000 29,000
6. The Trading and Profit & Loss Account of M/s Modern Equipment Co., for the year ended
30th June, 2010, is presented to you in the following form:
Ms. Modern Equipment Co.

TRADING AND PROFIT & LOSS ACCOUNT
For the year ended 30th June, 2010
Particulars Rs. Particulars Rs.
Purchases Sales
Department X 147,850 Department X 137,500
Department Y 88,710 Department Y 96,250
Department Z 59,140 Department Z 41,250
Salaries & Wages 45,000 Closing Stocks
Rent 13,800 Department X 62,500
Sundry Expenses 16,000 Department Y 18,750
Profit 29,500 Department Z 43,750
400,000 400,000
The following further information is also provided:

a) Department Z was established on 1st January, 2010, while the other two departments
X and Y were in operation since 1st July 2009.
b) Sundry Expenses to be allocated on the basis of turnover of each department.

c) Department Z paid rent Rs. 600 per month and the other two department paid rent in
proportion to the area occupied as:
Department X = 2/5th
Department Y = 3/5th
d) Salaries wages comprise as follows:
Department X = 25/45
Department Y = 12/45
Department Z = 8/45
Required:
Prepare Departmental Account for each of the three Department X, Y and Z after
taking into consideration information given above.
Solution
M/s Modern Equipment Co.
For the period ended 30th June 2010
Particulars Dep. X Dep. Y Dep. Z Particulars Dep. X Dep. Y Dep. Z
Purchases 147,850 88,710 59,140 Sales 137,500 96,250 41,250
G.P c/d 52,150 26,290 25,860 Closing Stock 62,500 18,750 43,750
200,000 115,000 85,000 200,000 115,000 85,000
Salaries & wages 25,000 12,000 8,000 G.P b/d 52,150 26,290 104,300
Rent 4,080 6,120 3,600
Sundry exp. 8,000 5,600 2,400
Net profit 15,070 2,570 11,860
52,150 26,290 25,860 52,150 26,290 25,860
7. The Trading and Profit and Loss Account of Pak Electronics for the year ending March 31,
2010 is as under.
Purchases Sales
Transistors (X) 160,000 Transistors (X) 175,000
Tape Records (Y) 125,000 Tap Records (Y) 140,000
Spare parts for servicing & Servicing and Repair jobs (Z) 35,000
repairs jobs (Z) 80,000 Stock on 31-3-10
Wages 48,000 Transistors (X) 60,100
Rent 10,800 Tap Records (Y) 20,300
Sundry Expenses 11,000 Servicing and Repair jobs (Z) 44,600
Net Profit 40,200
475,000 475,000
Prepare Departmental Accounts for each of the three Department X, Y and Z mentioned
above after taking into consideration the following:
a) Transistors and tape Recorders are sold at the showroom. Servicing and repairs are
carries out at the workshop.
b) Wages comprise: Showroom ¾. Workshop ¼. The wages of showroom be divided
between department X & Y in the ratio of 1:2
c) The workshop rent is Rs. 500 per month. The rent of the showroom is to be divided
equally between Deptt. X & Y.
d) Sundry expenses are to be allocated on the bass of the turnover of each department.

Solution
Pak Electronics
Particulars Dept. X Dept. Y Dept. Z Particulars Dept. X Dept. Y Dept. Z
Purchases 160,000 125,000 80,000 Sales 175,000 140,000 35,000
Wages 12,000 24,000 12,000 Closing stock 60,100 20,300 44,600
G.P c/d 63,100 11,300 G.L c/d 12,400
235,100 160,300 92,000 235,100 160,300 92,000
G.L b/d - - 12,400 G.P b/d 63,100 11,300 -
Rent 2,400 2,400 6,000
Sundry Exp. 5,500 4,400 1,100
Net Profit 55,200 4,500 - Net Loss 19,500
63,100 11,300 19,500 63,100 11,300 19,500
Working
wages Rent Sundry Repairs

Wages of Showroom (X & Y) Workshop (Z) Rent Turnover Ration
Rs. 48,000 Rs. 500 × 12 = Rs. 6000 175:140:35 = 350
Showroom (X & Y) Rent Dep. X = Rs. 11000 × = Rs. 5,500

X = Rs. 36,000 ×
Rs. 10,800 – 6,000 = Rs. 4,800
Dep. Y = Rs. 11,000 × = Rs. 4,400
Y = Rs. 36,000 ×
X = Rs. 4,800 / 2 = Rs. 2,400
Y = Rs. 4,800 / 2 = Rs. 2,400 Dep. Z = Rs. 11,000 × = Rs. 1,100
Wages of Workshop (Z)
Z = Rs. 48,000
8. From the following particulars prepare a Departmental Trading and Profit and Loss
Account and a Balance Sheet as at 31st December 2010:
Capital Account 30,000 Travelling expenses 5,400
Sales – Department A 70,000 Office salaries 2,800
Department B 30,000 Commission 2,200
Sundry creditors 12,000 Advertisement 5,800
Bills payable 1,500 Bank charges 120
st
Stock 1 Jan. Dept A 3,400 Printing & Stationary 2,700
Dept B 1,100 Postage and telegram 600
General reserve 750 Exchange & discount (Dr.) 1,500
Sundry Debtors 23,000 Sundries 900
Bills Receivable 5,000 Investment 6,900
Furniture and fittings 1,080 Cash in hand 2,500
Rent, rates and insurance 1,800 Cash at bank 7,050
Marine insurance 2,400
Purchases, duty, etc.

Advanced Financial Accounting P a g e | 10
Department A 43,000
Department B 25,000
Closing stock; Dept A 4,000
Dept B 1,680
Provide: Depreciation on Furniture 10%; Apportion the expenses in proportion to the

turnover of each department.
Solution
Opening Stock 3,400 1,100 Sales 70,000 30,000
Purchases, duty etc. 43,000 25,000 Closing stock 4,000 1,680
Marine Insurance 1,680 720
G.P c/d 25,920 4,860
74,000 31,680 74,000 31,680
Travelling exp. 3,780 1,620 G.P b/d 25,920 4,860
Office Salaries 1,960 840
Commission 1,540 660
Advertisement 4,060 1,740
Bank Charges 84 36
Printing & St. 1,890 810
Postage & tel. 420 180
Exch. & Dis. 1,050 450
Sundries 630 270
Rent, rates & taxes 1,260 540
Depreciation on furniture 76 32
Net Profit 9,170 - Net Loss 2,318
25,920 7,178 25,920 7,178
Balance Sheet
As on Dec. 31st 2010
Cash in hand 7,050 Sundry Creditor 12,000
Cash at bank 2,500 Bills payable 1,500
Sundry Debtors 23,000 Long Term Liabilities
Bills receivable 5,000 General Reserve 750
Closing Stock Owner’s Equity
Deptt. A 4,000 Capital 30,000
Deptt. B 1,680 5,680 Add: Net Profit 9,170
Investment 6,900 Less: Net Loss 2,318 36,852
Fixed Assets
Furniture & Fitting 1,080
Less: Depreciation 108 972
51,102 51,102

Note # 1: There are some expenses and income which cannot be allocated on suitable basis
such as
1. Bank interest / Interest on bank loan
2. General Expenses
3. Loss on sale of asset
4. Loss on sale of investment
If no allocation base is given for these expenses then these will be recorded in General profit
and Loss A/c
Note # 2: If goods are transferred from one department to other on selling price or market
price or invoice price then General Profit and Loss will also be prepare to record Stock
Reserve
9. Following is the Trial Balance of the City Departmental Stores, which has two
Departments A and B.
Trial Balance as at 31st December, 2010

Debit Balance Rs.
Opening Stocks 7,500
A 10,000
B 1,500
Carriage in 2,500
Carriage out 5,000
Advertising
Salaries
A 3,000
B 3,500
General Salaries 6,000
Rent and rates 4,500
Lighting 450
Fixtures 7,500
Bad Debts 800
Purchases
A 30,000
B 20,000
Bank Balance 6,500
Bank Interest 1,250
120,000
Credit Balance Rs.

Sales
A 50,000
B 30,000
Capital 17,500
Loan 15,000
120,000

Area occupied by the two departments is in the ratio of 2:1. The closing stocks were; Deptt.
A, Rs. 7,000 and Deptt. B, Rs. 7,500. 10% Depreciation of fixtures is to be allocated in the
ratio of space occupied.
Required:
Prepare the Departmental trading and Profit & Loss Account for the year ended 31st
December 2010, and the Balance Sheet as at the date.
City Departmental Stores

Rs. Rs. Rs. Rs.
Opening Stock 7,500 10,000 Sales 50,000 30,000
Purchases 30,000 20,000 Closing Stock 7,000 7,500
Carriage in 900 600
G.P c/d 18,600 6,900
57,000 37,500 57,000 37,500
Carriage out 1,562 938 G.P b/d 18,600 6,900
Advertising 3,125 1,875
Salaries 3,000 3,500
Gen. Salaries 3,750 2,250
Rent & Rates 3,000 1,500
Lighting 300 150
Bad debts 500 300
Depreciation 500 250
Net Profit 2,863 - Net Loss 3,863
18,600 10,763 18,600 10,763
General Profit & Loss Account

Departmental Loss 3,863 Departmental Profit 2,863
Bank Interest 1,250 Net Loss transferred to
Balance sheet 2,250
5,113 5,113
Balance Sheet
Current Liabilities Current Liabilities
Bank Balance 6,500 Sundry creditors 7,500
Sundry Debtors 10,000 Loan 15,000
Closing Stock Owner’s Equity
A 7,000 Capital 17,500
B 7,500 14,500 Less: Net Loss 2,250 15,250
Fixed Assets
Fixtures 7,500
Less: Depreciation 750 6,750
37,750 37,750

10. The management of a departmental store decided to ascertain separate profits for two
departments X and Y for the month ending 31st January, 2010, stock on 31st January could
not be valued for certain unavailable reasons but the rates of gross profit (calculated without
reference to direct expenses) on sales for the two department are 40% and 30% respectively.
Particulars Deptt. X Deptt. Y

Rs. Rs.
Stock (1-1-2010) 18,000 16,800
Sales 84,000 72,000
Purchases 54,000 43,200
Direct Expenses 10,980 17,040
Indirect expenses for the whole business (containing five departments) are Rs. 21,600 which
is to be charged in proportion to departmental sales, except as to one sixth, which is to be
divided equally, total sales for the remaining three departments were Rs. 204,000.
Required:
Prepare a Statement showing profits for Departments X and Y respectively.
Solution
Departmental Stores
For the year period ended 31st January 2010
Particulars Dept. X Dept. Y Particulars Dept. X Dept. Y
Rs. Rs. Rs. Rs.
Purchases 54,000 43,200 Closing Stock 21,600 9,600
G.P c/d 33,600 21,600
105,600 81,600 105,600 81,600
Direct Exp. 10,980 17,040 G.P b/d 33,600 21,600
Indirect Exp. 4,920 4,320
Net Profit 17,700 240
33,600 21,600 33,600 21,600
Gross Profit
Dept. X = Rs. 84,000 × 40% = Rs. 33,600
Dept. Y = 72,000 × 30% = Rs. 21,600
Allocation of Indirect Expenses
1/6th portion = Rs. 21,600 × 1/6 = Rs. 3,600
Equal distribution for 5 dep. = Rs. 720
Remaining Indirect Expenses = Rs. 21,600 – Rs. 3,600 = Rs. 18,000

Sales Ratio
Dep. X Dep. Y Other Dep.
84,000 : 72,000 : 204,000
84 : 72 : 204
Dept. X = Rs. 18,000 + 720 = Rs. 4920
Dept. Y = Rs. 18,000 + 720 = Rs. 4320
11. The Directors of Departmental Store Ltd., wish to ascertain approximately the net profits
of the „A‟, „B‟ and „C‟ department separately for the quarter ended March 31, 2010. 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% on turnover respectively. Indirect expenses are charged in
portion to departmental turnover.
Following are figures for each department.
Particulars Deptt. A Deptt. B Deptt. C

Rs. Rs. Rs.
Stock on 1-1-2010 30,000 35,000 15,000
Purchases to March 31,2010 35,000 37,500 23,500
Sales 60,000 50,000 30,000
Direct expenses 10,100 7,250 3,550
Total indirect expenses for the period (including those relating to other departments) were Rs.
21,000 and total sales of Rs. 420,000.
Prepare a statement showing gross profit after making reserve for stock 10% in respect of
each department.
Solution
Departmental Trading and Profit & Loss Account
For the Period ended 31st March 2010
Particulars Dep. A Dep. B Dep. C Particulars Dep. A Dep. B Dep. C
Opening stock 30,000 35,000 15,000 Sales 60,000 50,000 30,000
Purchases 35,000 37,500 23,500 Closing stock 39,100 44,750 18,050
Direct exp. 10,100 7,250 3,550
G.P c/d 24,000 15,000 6,000
99,100 94,750 48,050 99,100 94,750 48,050
Indirect exp. 3,000 2,500 1,500 G.P b/d 24,000 15,000 6,000
Stock reserve 3,910 4,475 1,805
Net profit 17,090 8,025 2,695
24,000 15,000 6,000 24,000 15,000 6,000

12. You are given the following particulars of a business having three departments:
Particulars Purchases Opening Stock Closing stock

Department A 1,500 Units 200 Units 100 Units
Department B 1,000 Units 300 Units 160 Units
Department C 2,000 Units 150 Units 200 Units
Additional Information
(i) Purchases were made at a total cost of Rs. 92,000
(ii) The percentage of gross profit on turnover is the same in each case.
(iii) Purchases and sales price are constant for the last 2 years.
(iv) Selling price per unit: Department A Rs. 20; Department B Rs. 25; and Department C Rs.
30.
You are required to prepare Departmental Trading Account.
Departmental Trading Account

For the period ended
Particulars Dep. A Dep. B Dep. C Particulars Dep. A Dep. B Dep. C
Opening Stock Sales
A (200 × 16) 3,200 A (1600 × 20) 32,000
B (300 × 20) 6,000 B (1140 × 25) 28,500
C (150 × 24) 3,600 C (1950 × 30) 58,500
Purchases Closing Stock
A (1500 × 16) 24,000 A (100 × 16) 1,600
B (1000 × 20) 20,000 B (160 × 20) 3,200
C (2000 × 24) 48,000 C (200 × 24) 4,800
Gross Profit c/d 6,400 5,700 11,700
33,600 31,700 63,300 33,600 31,700 63,300
Working
W#1 W#3
Units Sold = Opening Units + Purchases – Closing units Gross Profit = Sales price × Gross profit ratio
Department A = 200 + 1500 – 100 = 1,600 units
Department B = 300 + 1000 – 160 = 1,140 units Department A = Rs. 20 × 20% = Rs. 4
Department C = 150 + 2000 – 200 = 1,950 units Department B = Rs. 25 × 20% = Rs. 5
W#2 Department C = Rs. 30 × 20% = Rs. 6
Cost price = Sale price – Gross profit
Gross profit ratio =
Department A = Rs. 20 – Rs. 4 = Rs. 16
Department B = Rs. 25 – Rs. 5 = Rs. 20
Department C = Rs. 30 – Rs. 6 = Rs. 24
Gross profit ratio = = 20%
W#4
Gross Profit = Sale price of Units Purchased – Cost price of Units purchased
= [ (1500 × 20) + (1000 × 25) + (2000 × 30) ] – 92,000
= [ 30,000 + 25,000 + 60,000 ] – 92,000
= Rs. 115,000 – 92,000 = Rs. 23,000
13. M/s Gujranwala Hosiery Mills produces three varieties of products. Sona, Mona and
Dona. The cost of production during 2010 of these varieties amounted to Rs. 800,000. Output
during the year were. Sona – 4,000 units, Mona – 8,000 units and Dona – 9,600 units.
Stock on 1st January 2010 were: Sona – 450 units, Mona – 300 units and Dona – 600 units.
Sales during the year were Sona – 4,100 units @ Rs. 48 each; Mona – 7,700 units @ Rs. 54
each and Dona – 10,000 units @ Rs. 60 each. The rate of gross profit is the same in each
case.
Solution
M/s Gujranwala Hosiery Mills
Departmental Trading Account
For the Period Ended 31st December 2010
Particulars Sona Mona Dona Particulars Sona Mona Dona
Opening stock Sales
Sona (450×32) 14,400 Sona (4100×48) 196,800
Mona (300×36) 10,800 Mona (7700×54) 415,800
Dona (600×40) 24,000 Dona (10000×60) 600,000
Cost of produc. Closing stock
Sona (4000×32) 128,000 Sona (350×32) 11,200
Mona (8000×36) 288,000 Mona (60×36) 21,600
Dona (9600×40) 384,000 Dona (200×40) 8,000
Gross profit c/d 65,600 138,600 200,000
208,000 437,400 608,000 208,000 437,400 608,000
Working
W#1 W#3
Units Sold = Opening Units + Production – Closing units Gross Profit = Sales price × Gross profit ratio
Sona = 450 + 4000 – 4100 = 350 units
Mona = 300 + 8000 – 7700 = 600 units Sona = Rs. 48 × 33.3333% = Rs. 16
Dona = 600 + 9600 – 10000 = 200 units Mona = Rs. 54 × 33.3333 % = Rs. 18
W#2 Dona = Rs. 60 × 33.3333% = Rs. 20
Cost price = Sale price – Gross profit
Sona = Rs. 48 – Rs. 16 = Rs. 32
Mona = Rs. 54 – Rs. 18 = Rs. 36
Dona = Rs. 60 – Rs. 20 = Rs. 40
Gross profit ratio = 33.3333%
W#4
Gross Profit = Sale price of Units Produced – Cost price of Units purchased
= [ (4000 × 48) + (8000 × 54) + (9600 × 60) ] – 800,000
= [ 192,000 + 432,000 + 576,000 ] – 92,000
= Rs. 1,200,000 – 800,000
= Rs. 400,000

14. From the following Trial Balance of Adeel, prepare Departmental Trading and profit &
Loss Account for the year ended 31st December 1996 and the Balance Sheet at that date:
Trial Balance as at 31st December 2010

Debit (Rs.) Credit
(Rs.)
Stock at 1st January 2010
Deptt. A 17,000
Deptt. B 14,500
Purchases
Deptt. A 35,400
Deptt. B 30,200
Sales
Deptt. A 60,800
Deptt. B 51,250
Wages
Deptt. A 8,200
Deptt. B 2,700
Rent, Rates, Taxes & Insurance 9,390
Sundry Expenses 3,600
Lighting and Heating 2,100
Discount Allowed 2,220
Discount Received 650
Advertising 3,680
Carriage Inward 2,340
Furniture and Fittings 3,000
Plant & Machinery 21,000
Adeel‟s Capital 47,660
Adeel‟s Drawings 4,500
Cash at Bank 9,900
Cash in hand 3,170
178,960 178,960
The following further information is also provided

1. Internal Transfer of goods from A department to B department Rs. 630
2. The items: Rent, Rates, Taxes and Insurance, Sundry Expenses, Lighting and Heating
and Carriage inward to be apportioned as:
Department A = 2/3
Department B = 1/3
3. Advertising to be calculated in the ratio of turnover.
4. Discount allowed and received are apportioned on the basis of Depatmnetal Sales and
Purchases (Excluding transfer).
5. Depreciation at 10% per annum on Furniture and Fittings and on Plant and Machinery
to be charged ¾ to Deptt. A and Deptt. B.
6. The stock at 31st December, 2010, Deptt. A, Rs, 16,470 and Deptt B Rs. 12,500.

Solution
Mr. Adeel
For the year Period ended 31st December 2010
Rs. Rs. Rs. Rs.
Purchases 35,400 30,200 Transfer to B 630 -
Transfer from A - 630 Closing stock 16,470 12,500
Wage 8,200 2,700
Carriage inward 1,560 780
Gross Profit c/d 15,740 14,940
77,900 63,750 77,900 63,750
Rent, Rates, Taxes Gross Profit b/d 15,740 14,940
& insurance 6,260 3,130 Discount allowed 351 299
Sundry Exp. 2,400 1,200
Light & Heating 1,400 700
Discount allowed 1,205 1,015
Advertising 1,997 1,683
Deprecation on
Furniture 225 75
Plant & Mach. 1,575 525
Net profit 1,029 6,911
16,091 15,239 16,091 15,239
Mr. Adeel
Balance Sheet
Cash in hand 3,170 Sundry creditors 18,600
Cash at bank 9,900
Sundry Debtors 6,060 Owner’s equity
Closing stock Capital 47,660
A 16,470 Add: Net profit 7,940
B 12,500 28,970 55,600
Fixed Assets Less: Drawing 4,500 51,100
Furniture & Fixture 3,000
Less: Depreciation 300 2,700
Less: Depreciation 2,100 18,900
69,700 69,700

15. A firm had two departments X and Y. Department X (which was a Manufacturing
Department) received goods from Department X as its raw materials. Department X supplied
the said goods to Y at cost price. From the following particulars you are required to prepare a
Department Trading and Profit and Loss Account for the year ended on 31st December 2010.
(all figures in rupees).
Particulars Dept. X Dept. Y

Opening stock (as on 1-1-2010) 2,50,000 75,000
Purchases (from outside suppliers) 10,00,000 20,000
Sales (to outside customers) 12,00,000 3,00,000
Closing stock (as on 31-12-2010) 1,50,000 50,000
The following information is to be taken into account:

a) Depreciation of Building to be provided at 20% p.a. The value of the Building
occupied by both the Departments was Rs. 1,05,000 (Department X occupying two-
third portion and Department Y occupying the rest)
b) Goods transferred from Department X to Department Y Rs. 2,50,000 at cost.
c) Manufacturing Expenses amounted to Rs. 10,000
d) Selling expenses amounted to Rs. 15,000 (to be apportioned on the basis of sales of
respective departments).
e) General expenses of the business as a whole amounted to Rs. 58,000.
Solution
Particulars Dep. X Dep. Y Particulars Dep. X Dep. Y
Rs. Rs. Rs. Rs.
Opening stock 250,000 75,000 Sales 1,200,000 300,000
Purchases 1000,000 20,000 Transfer to Y 250,000
Transfer from X - 250,000 Closing stock 150,000 50,000
Manuf. Exp. - 10,000 Gross Loss c/d - 5,000
Gross profit c/d 350,000 -
1,600,000 355,000 1,600,000 355,000
Gross Loss b/d - 5,000 Gross Profit b/d 350,000
Selling exp. 12,000 3,000
Depreciation 14,000 7,000
Net profit 324,000 Net Loss - 15,000
350,000 15,000 350,000 15,000

Departmental Loss 15,000 Departmental Profit 324,000
General Expenses 58,000
Net profit transfer to
Balance sheet 251,000
324,000 324,000

16. From the following data, prepare Departmental Trading and Profit and Loss Account
showing the true profit or loss for the year ended 31st December 2010:

Rs. Rs.
Stock (January 1) 40,000 -
Purchases from outsiders 2,00,000 20,000
Wages 10,000 1,000
Transfer of goods from Department A - 50,000
Stock (December 31) at cost 30,000 10,000
Sales to outsiders 200,000 71,000
B‟s entire stock represents goods from Department A which transfers them at 25% above its
cost. Administrative and selling expenses amount to Rs. 15,000 which is to be allocated
between departments A and B in the ratio of 4:1 respectively.
Solution
Rs. Rs. Rs. Rs.
Opening stock 40,000 - Sales 200,000 71,000
Purchases 200,000 20,000 Transfer to B 50,000 -
Transfer from A - 50,000 Closing Stock 30,000 10,000
Wages 10,000 1,000
Gross Profit c/d 30,000 10,000
280,000 81,000 280,000 81,000
Admin & Selling Exp. 12,000 3,000 Gross Profit b/d 30,000 10,000
Net Profit 18,000 7,000
30,000 10,000 30,000 10,000

Provision for unrealized Departmental profit 25,000
profit on closing stock Provision for unrealized
(10000 × 25/125) 2,000 profit on opening stock -
Net profit transfer to Balance
sheet 23,000
25,000 25,000

17. X Ltd. had two departments, cloth and readymade cloths. The cloths were made by the
firm itself out of cloth supplied by the cloth department at the usual selling price. From the
following figures prepare departmental trading and profit and loss account for the year 1994.
Particulars Cloth Readymade

Department Cloths
Rs. Rs.
Opening stock on 1-1-1994 90000 15000
Purchases 600000 4500
Sales 660000 135000
Transfer to Readymade cloths department 90000 -
Expenses-Manufacturing - 18000
Selling 12000 1800
Stock on 31st December, 1994 120000 18000
The stock in the readymade clothes department may be considered as consisting of 75% cloth
and 25% other expenses. The cloth department earned gross profit at the rate of 15% in 1993.
General expenses of the company as a whole came to Rs. 33000.
Solution
Departmental Trading and Profit & Loss Account
For the Period ended 31st December 2010
Particulars Cloth Readymade Particulars Cloth Readymade
Rs. Rs. Rs. Rs.
Purchases 600,000 4,500 Transfer 90,000 -
Transfer - 90,000 Closing stock 120,000 18,000
Manufac. exp. - 18,000
870,000 153,000 870,000 153,000
Selling expenses 12,000 1,800 Gross profit b/d 180,000 25,500
Net profit 168,000 23,700
180,000 25,500 180,000 25,500

General Reserve 33,000 Departmental profit 191,700
Stock Reserve (168,000 + 23,700)
3,240 Stock Reserve 1,688
193,388 193,388
Stock Reserve (Opening stock)
Opening stock = Rs. 15,000

Cloth in opening stock = 15,000
Stock Reserve = Rs. 11,250

Stock Reserve (Closing stock)
Closing stock = Rs. 18,000

Cloth in closing stock = 18,000
Stock Reserve = 13,500
Gross profit rate for cloth dep. In year 2009-10
18. German Tailor has two departments – first one is “cloth” and the second is “tailoring”.
Tailoring department gets all its requirements of cloth from the cloth department at the usual
selling price. From the following particulars prepare Departmental Trading and Profit and
Loss Account for the year ended 31st March 2010;
Particulars Cloth Deptt. Tailoring Deptt.
Rs. Rs.
Manufacturing expenses - 108,000
Selling expenses 45,000 18,000
Stock on 1-4-98 540,000 72,000
Sales 36,00,000 7,20,000
Transfer of Cloth to Tailoring Deptt. 450,000 -
Purchases 30,60,000 45,000
Stock on 31-3-99 9,00,000 1,35,000
The stock in Tailoring Department may be assumed to consist 80% cloth and 20% other
expenses. General expense of the business for the year came to Rs. 207,000. In 2008-09 the
Cloth Department earned a gross profit of 30% on sales.
Solution
German Tailors
For the Period Ended 31st March 2010
Particulars Cloth dep. Tailoring dep. Particulars Cloth dep. Tailoring dep.
Rs. Rs. Rs. Rs.
Opening Stock 540,000 72,000 Sales 3,600,000 720,000
Purchases 3,060,000 45,000 Transfer to Tailor 450,000
Transfer from Cloth - 450,000 Closing stock 900,000 135,000
Manuf. Exp. - 108,000
Gross Profit c/d 1,350,000 180,000
4,950,000 855,000 4,950,000 855,000
Selling Exp. 45,000 18,000 Gross Profit b/d 1,350,000 180,000
Net profit 1,305,000 162,000
1,350,000 180,000 1,350,000 180,000


General expenses 207,000 Net profit 1,467,000
Stock Reserve 36,000
Net profit transfer to capital 1,241,280
1,467,000 1,467,000
Stock Reserve (Opening stock)
Opening stock = Rs. 72,000

Cloth in opening stock = 72,000
Unrealized profit = Rs. 57,600
Stock Reserve (closing stock)
Closing stock = Rs. 135,000

Cloth in closing stock = 135,000
Unrealized profit = 108,000
Gross profit rate for cloth dep. In year 2009-10
19. O and K two departments of Red Company of Faisalabad. O Department sells goods to K
Department at normal market prices. From the following particulars, prepare a departmental
Trading and Profit and Loss Account of the two departments for the year ended 31 st March
2010.
Particulars Deptt. O Deptt. K General

Rs. Rs. Rs.
Stock on April 1, 2009 12,000 Nil
Purchases 276,000 24,000
Goods from O Deptt. - 84,000
Wages 12,000 19,200
Stock on March 31, 2010 a cost 60,000 21,600
Sales 276,000 174,000
Stationary and Printing 2,560 1,960
Salaries (General) 18,000
Miscellaneous Expenses 3,600
Advertisement 9,600
Bank charges 2,400
Depreciate Plant & Machinery by 10%. The general unallocated expenses are to be
apportioned in the ratio – O:3, K:2

Solution
Red Company
Particulars Dep. O Dep. K Particulars Dep. O Dep. K
Rs. Rs. Rs. Rs.
Opening stock 12,000 - Sales 276,000 174,000
Purchases 276,000 24,000 Transfer from O 84,000 -
Transfer to K - 84,000 Closing stock 60,000 21,600
Wages 12,000 19,200
420,000 195,600 420,000 195,600
Salaries 8,000 5,000 Gross profit b/d 120,000 68,400
Printing & St. 2,560 1,960
Salaries 10,800 7,200
Mis. Exp. 2,160 1,440
Advertisement 5,760 3,840
Bank charges 1,440 960
Depreciation - 1,440
Net profit 89,280 46,560
120,000 68,400 120,000 68,400

Stock Reserve Departmental profit 135,840
Net profit transfer to capital 5,600 Stock Reserve
130,200 -
125,840 125,840
Stock Reserve on closing stock of K Department
Closing stock of K from “O” Dep. = Closing Stock ×
= Rs. 21,600 ×
= Rs. 21,600 × = 16,800
Stock Reserve = Closing sock from “O” Dep. × G.P ratio of “O” Dep.
= Rs. 16,800 × 33.3333% = 5,600
G.P ratio of “O” Dep. =

PROBLEMS
1. City Departmental store has three departments; Vegetables, Fruits and Flowers. Following
data is available with respect to each of the three departments.
Vegetables Fruits Deptt. Flowers

Particulars Deptt. Rs. Deptt.
Rs. Rs.
Sales 443,050 387,850 199,700
Purchases 299,950 274,800 140,250
Opening stock 20,900 19,000 9,600
Closing stock 17,700 20,450 10,250
Salaries 10,000 6,000 3,500
Depreciation of Fixtures 1,200 1,000 1,000
Unallocated Expenses:
Heating & Lighting Rs. 9,000; Rent Rs. 6,000; Rates Rs. 3,000; Advertising Rs.
3,000; General expenses Rs. 6,000.
Heating and lighting, rent and rates are to be allocated in the ratio of 2:2:1 and
advertising and general expenses are to be allocated equally among all three departments.
Required:
Prepare departmental trading and Profit and Loss Account of the three Departments
separately.
2. The following balances as at 31-12-2010 have been extracted from the books of Salman &
Co. which has two departments.

Rs. Rs.
Opening stock as on 1-1-2010 12500 10,000
Purchases 115000 95,000
Purchase Returns 1000 500
Sales 316500 246,000
Sales Returns 1500 1,000
Wages 90000 80,000
Miscellaneous Charges 17500 16,000
General:
Sundry Debtors – Rs. 95,000; Sundry Creditors – Rs. 86,500, Plant and Machinery – Rs.
120,000, Leaseholds – Rs. 40,000, Buildings – Rs. 60,000, Furniture and Fittings – Rs.
24,000, Office and Selling Expenses – Rs. 64,000, Cash in hand on 31-12-2010 Rs. 4,000;
Cash at bank on 31-12-2010 Rs. 55,000 Capital – Rs. 250,000.
Plant and Machinery is to be depreciated by 10%, Building by 2%, Furniture and Fittings by
5%. Leaseholds are to be written-off by Rs. 4000. The Stock on hand as on 31-12-2010,
Department A – Rs. 13,000, Department B – Rs. 12,000. All unallocated expenditures are to
be apportioned in the ratio of the net sales of each department.

Prepare in columnar form, the Trading and Profit and Loss Account of two departments and
Balance Sheet of the combined business as a whole on 31-12-2010.
3. From the following Trial Balance, prepare Departmental Trading and Profit and Loss
Account for the year ended 31-12-2010 and a Balance Sheet as on date in the books of P &
Co. (all figures in rupees).

Rs. Rs.
Stock on 1-1-2010 Deptt. A 2700
Deptt. B 2450
Purchases Deptt. A 4900
Deptt. B 3675
Sales Deptt. A 8450
Deptt. B 6760
Wages Deptt. A 670
Deptt. B 120
Rent 935
Salaries 660
Lighting and Heating 210
Discount allowed 220
Discount received 66
Advertising 369
Carriage inward 234
Furniture and fittings 300
Plant and Machinery 2100
Sundry Debtors 910
Sundry Creditors 1868
Capital 4765
Drawings 450
Cash in hand 17
Cash at bank 990
The following information is also provided:

a) Rent, lighting and heating, salaries and depreciation are to be apportioned to A and B
Departments as 2:1.
b) Other expenses and incomes are to be apportioned to A and B Departments on
suitable basis.
c) The following adjustments are to be made.
Rent prepaid Rs. 185; Lighting and heating outstanding Rs. 90; and Depreciation of
Furniture & Fittings and Plant & Machinery @ 10% p.a.
The stock at 31-12-2010; Department A – Rs. 1,392; Department B – Rs. 1,200.

4. The following Trial Balance for the year ended 31st March 2002 was extracted from the
books of Salman & Co.

Rs. Rs.
Capital on 1-4-2009 25,000
Drawings Account 5,000
Stock on 1-4-2009
Radios 22,500
Watches 10,500
Sales:
Radios 147,000
Watches 73,000
Purchases:
Radios 112,500
Watches 57,500
Salaries 6,300
Publicity 4,450
Rent, Rates and taxes 1,600
Commission 5,300
Miscellaneous expenses 2,500
Furniture and Fixtures 6,200
4% Govt. Securities 5,000
Interest 200
Provision for Bad and Doubtful Debts 400
Cash Balance 2,250
Prepare the Departmental Trading and Profit and Loss Account for the year ended 31st
March, 2010 after taking into account the following.
(i) The stock as on 31st March 2010 was
Radios Rs. 15,000; Watches Rs. 12,000
(ii) An amount of Rs. 600 out of Sundry Debtors has to be written off as bad and the
provision for doubtful debts has to be increased thereafter to 10 percent of the debts
outstanding.
(iii) The following expenses are outstanding as on 31st March 2010;
Publicity Rs. 650; Salaries Rs. 600; Commission Rs. 850
(iv) Provide 10 Percent depreciation on Furniture and Fixtures.
(v) Revenue items to be allocated in the ratio of 2:1 as between Radios and Watches.
Ignore fractions of a Rupee in calculations.

5. A departmental store carries on its business through three departments A, B and C.

(i) The following information for 2010 is now made available to you:
Salaries and commission Rs. 10,200, Rent and Rates Rs. 3,000, Insurance Rs. 1,260;
Miscellaneous Expenses Rs. 2,610.
All these expenses are chargeable to each department in proportion to the cost of the
articles sold in the respective departments.
(ii) The following balances as at 31-12-10 were ascertained:
Deptt. A Deptt. B Deptt. C

Opening Stock at cost 5,000 3,000 7,500
Purchases 50,000 30,000 10,000
Sales 48,000 31,000 9,500
Closing stock at cost 11,500 4,000 3,000
Prepare department trading and Profit and Loss Account to show the final result of each
department and also the combined result with respective percentage on sales.
6. The Trading and Profit & Loss Account of M/s Modern Equipment Co., for the year ended
30th June, 2010, is presented to you in the following form:
Ms. Modern Equipment Co.

TRADING AND PROFIT & LOSS ACCOUNT
For the year ended 30th June, 2010
Purchases Sales
Department X 73925 Department X 68,750
Department Y 44355 Department Y 48,125
Department Z 29570 Department Z 20,625
Salaries & Wages 22500 Closing Stocks
Rent 6900 Department X 31,250
Sundry Expenses 8000 Department Y 9,375
Profit 14750 Department Z 21,875
200,000 400,000
The following further information is also provided:

a) Department Z was established on 1st January, 2010, while the other two departments
X and Y were in operation since 1st July 2009.
b) Sundry Expenses to be allocated on the basis of turnover of each department.
c) Department Z paid rent Rs. 300 per month and the other two department paid rent in
proportion to the area occupied as:
Department X = 2/5th
Department Y = 3/5th
d) Salaries wages comprise as follows:
Department X = 25/45
Department Y = 12/45
Department Z = 8/45
Required:
Prepare Departmental Account for each of the three Department X, Y and Z after taking into
consideration information given above.

7. The Trading and Profit and Loss Account of Pak Electronics for the year ending March 31,
2010 is as under.
Purchases Sales
Transistors (X) 80,000 Transistors (X) 87,500
Tape Records (Y) 62,500 Tap Records (Y) 70,000
Spare parts for servicing & Servicing and Repair jobs (Z) 17,500
repairs jobs (Z) 40,000 Stock on 31-3-10
Wages 24,000 Transistors (X) 30,050
Rent 5,400 Tap Records (Y) 10,150
Sundry Expenses 5,500 Servicing and Repair jobs (Z) 22,300
Net Profit 20,100
237,500 237,500
Prepare Departmental Accounts for each of the three Department X, Y and Z mentioned
above after taking into consideration the following:
a) Transistors and tape Recorders are sold at the showroom. Servicing and repairs are
carries out at the workshop.
b) Wages comprise: Showroom ¾. Workshop ¼. The wages of showroom be divided
between department X & Y in the ratio of 1:2
c) The workshop rent is Rs. 250 per month. The rent of the showroom is to be divided
equally between Deptt. X & Y.
d) Sundry expenses are to be allocated on the bass of the turnover of each department.
8. From the following particulars prepare a Departmental Trading and Profit and Loss
Account and a Balance Sheet as at 31st December 2010:
Capital Account 15,000 Travelling expenses 2,700
Sales – Department A 35,000 Office salaries 1,400
Department B 15,000 Commission 1,100
Sundry creditors 6,000 Advertisement 2,900
Bills payable 750 Bank charges 60
Stock 1st Jan. Dept A 1,700 Printing & Stationary 1,350
Dept B 550 Postage and telegram 300
General reserve 375 Exchange & discount (Dr.) 750
Sundry Debtors 11,500 Sundries 450
Bills Receivable 2,500 Investment 3,450
Furniture and fittings 540 Cash in hand 1,250
Rent, rates and insurance 900 Cash at bank 3,525
Marine insurance 1,200
Purchases, duty, etc.
Department A 21,500
Department B 12,500
Closing stock; Dept A 2,000
Dept B 840
Provide: Depreciation on Furniture 10%; Apportion the expenses in proportion to the

turnover of each department.

9. Following is the Trial Balance of the City Departmental Stores, which has two
Departments A and B.
Trial Balance as at 31st December, 2010

Debit Balance Rs.
Opening Stocks 3,750
A 5,000
B 750
Carriage in 1,250
Carriage out 2,500
Advertising
Salaries
A 1,500
B 1,750
General Expenses 3,000
Rent and rates 2,250
Lighting 225
Fixtures 3,750
Bad Debts 400
Purchases
A 15,000
B 10,000
Bank Balance 3,250
Bank Interest 625
60,000
Credit Balance Rs.

Sales
A 25,000
B 15,000
Capital 8,750
Loan 7,500
60,000
Area occupied by the two departments is in the ratio of 2:1. The closing stocks were; Deptt.
A, Rs. 3,500 and Deptt. B, Rs. 3,750. 10% Depreciation of fixtures is to be allocated in the
ratio of space occupied.
Required:
Prepare the Departmental trading and Profit & Loss Account for the year ended 31st
December 2010, and the Balance Sheet as at the date.

10. The management of a departmental store decided to ascertain separate profits for two
departments X and Y for the month ending 31st January, 2010, stock on 31st January could
not be valued for certain unavailable reasons but the rates of gross profit (calculated without
reference to direct expenses) on sales for the two department are 40% and 30% respectively.
Particulars Deptt. X Deptt. Y

Rs. Rs.
Stock (1-1-2010) 9,000 8,400
Sales 42,000 36,000
Purchases 27,000 21,600
Direct Expenses 5,490 8,520
Indirect expenses for the whole business (containing five departments) are Rs. 10,800 which
is to be charged in proportion to departmental sales, except as to one sixth, which is to be
divided equally, total sales for the remaining three departments were Rs. 102,000. Prepare a
Statement showing profits for Departments X and Y respectively.
11. The Directors of Departmental Store Ltd., wish to ascertain approximately the net profits
of the „A‟, „B‟ and „C‟ department separately for the quarter ended March 31, 2010. 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% on turnover respectively. Indirect expenses are charged in
portion to departmental turnover.
Following are figures for each department.
Particulars Deptt. A Deptt. B Deptt. C

Rs. Rs. Rs.
Stock on 1-1-2010 15,000 17,500 7,500
Purchases to March 31,2010 1,750 18,500 11,750
Sales 30,000 25,000 15,000
Direct expenses 5,050 3,625 1,750
Total indirect expenses for the period (including those relating to other departments) were Rs.
10,500 and total sales of Rs. 210,000.
Prepare a statement showing gross profit after making reserve for stock 10% in respect of
each department.
12. You are given the following particulars of a business having three departments:
Particulars Particulars Particulars Particulars
Department A 3,00 Units 400 Units 200 Units
Department B 2,000 Units 600 Units 320 Units
Department C 4,000 Units 300 Units 400 Units
Additional Information
(i) Purchases were made at a total cost of Rs. 184,000
(ii) The percentage of gross profit on turnover is the same in each case.
(iii) Purchases and sales price are constant for the last 2 years.
(iv) Selling price per unit: Department A Rs. 10; Department B Rs. 12; and Department C Rs.
15. You are required to prepare Departmental Trading Account.

13. M/s Gujranwala Hosiery Mills produces three varieties of products. Sona, Mona and
Dona. The cost of production during 2010 of these varieties amounted to Rs. 400,000. Output
during the year were. Sona – 2,000 units, Mona – 4,000 units and Dona – 4,800 units.
Stock on 1st January 2010 were: Sona – 225 units, Mona – 150 units and Dona – 300 units.
Sales during the year were Sona – 8,200 units @ Rs. 24 each; Mona – 3,850 units @ Rs. 27
each and Dona – 5,000 units @ Rs. 30 each. The rate of gross profit is the same in each case.
14. From the following Trial Balance of Adeel, prepare Departmental Trading and profit &
Loss Account for the year ended 31st December 1996 and the Balance Sheet at that date:
Trial Balance as at 31st December 2010

Debit (Rs.) Credit
(Rs.)
Stock at 1st January 2010
Deptt. A 8,500
Deptt. B 7,250
Purchases
Deptt. A 17,700
Deptt. B 15,100
Sales
Deptt. A 30,400
Deptt. B 25,625
Wages 4,100
Deptt. A 1,350
Deptt. B 4,695
Rent, Rates, Taxes & Insurance 1,800
Sundry Expenses 1,050
Lighting and Heating 1,110
Discount Allowed
Discount Received 1,840 325
Advertising 1,170
Carriage Inward 1,500
Furniture and Fittings 10,500
Sundry Debtors
Adeel‟s Capital 23,830
Adeel‟s Drawings 2,250
Cash at Bank 4,950
Cash in hand 1,585
89,480 89,480
The following further information is also provided

1. Internal Transfer of goods from A department to B department Rs. 315
2. The items: Rent, Rates, Taxes and Insurance, Sundry Expenses, Lighting and Heating
and Carriage inward to be apportioned as:
Department A = 2/3
Department B = 1/3
3. Advertising to be calculated in the ratio of turnover.

4. Discount allowed and received are apportioned on the basis of Departmental Sales
and Purchases (Excluding transfer).
5. Depreciation at 10% per annum on Furniture and Fittings and on Plant and Machinery
to be charged ¾ to Deptt. A and Deptt. B.
6. The stock at 31st December, 2010, Deptt. A, Rs, 8,235 and Deptt B Rs. 6,250.
15. A firm had two departments X and Y. Department X (which was a Manufacturing
Department) received goods from Department X as its raw materials. Department X supplied
the said goods to Y at cost price. From the following particulars you are required to prepare a
Department Trading and Profit and Loss Account for the year ended on 31st December 2010.
(all figures in rupees).
Particulars Dept. X Dept. Y

Opening stock (as on 1-1-2010) 125,000 37,500
Purchases (from outside suppliers) 500,000 10,000
Sales (to outside customers) 600,000 150,000
Closing stock (as on 31-12-2010) 75,000 25,000
The following information is to be taken into account:

a) Depreciation of Building to be provided at 20% p.a. The value of the Building
occupied by both the Departments was Rs. 52,500 (Department X occupying two-
third portion and Department Y occupying the rest)
b) Goods transferred from Department X to Department Y Rs. 125,000 at cost.
c) Manufacturing Expenses amounted to Rs. 5,000
d) Selling expenses amounted to Rs. 7,500 (to be apportioned on the basis of sales of
respective departments).
e) General expenses of the business as a whole amounted to Rs. 29,000.
16. From the following data, prepare Departmental Trading and Profit and Loss Account
showing the true profit or loss for the year ended 31st December 2010:

Rs. Rs.
Stock (January 1) 20,000
Purchases from outsiders 100,000 10,000
Wages 5,000 500
Transfer of goods from Department A 25,000
Stock (December 31) at cost 15,000 5,000
Sales to outsiders 100,000 35,500
B‟s entire stock represents goods from Department A which transfers them at 25% above its
cost. Administrative and selling expenses amount to Rs. 7,500 which is to be allocated
between departments A and B in the ratio of 4:1 respectively.

17. X Ltd. had two departments, cloth and readymade cloths. The cloths were made by the
firm itself out of cloth supplied by the cloth department at the usual selling price. From the
following figures prepare departmental trading and profit and loss account for the year 1994.
Particulars Cloth Readymade

Department Cloths
Rs. Rs.
Opening stock on 1-1-1994 45,000 7,500
Purchases 300,000 2,250
Sales 330,000 67,500
Transfer to Readymade cloths department 45,000
Expenses-Manufacturing 9,000
Selling 6,000 900
Stock on 31st December, 1994 60,000 9,000
The stock in the readymade clothes department may be considered as consisting of 75% cloth
and 25% other expenses. The cloth department earned gross profit at the rate of 15% in 1993.
General expenses of the company as a whole came to Rs. 16,500.
18. German Tailor has two departments – first one is “cloth” and the second is “tailoring”.
Tailoring department gets all its requirements of cloth from the cloth department at the usual
selling price. From the following particulars prepare Departmental Trading and Profit and
Loss Account for the year ended 31st March 2010;
Particulars Cloth Deptt. Tailoring Deptt.
Rs. Rs.
Manufacturing expenses 54,000
Selling expenses 22,500 9,000
Stock on 1-4-98 270,000 36,000
Sales 1,800,000 360,000
Transfer of Cloth to Tailoring Deptt. 225,000
Purchases 1,530,000 22,500
Stock on 31-3-99 450,000 67,500
The stock in Tailoring Department may be assumed to consist 80% cloth and 20% other
expenses. General expense of the business for the year came to Rs. 103,500. In 2008-09 the
Cloth Department earned a gross profit of 30% on sales.

19. O and K two departments of Red Company of Faisalabad. O Department sells goods to K
Department at normal market prices. From the following particulars, prepare a departmental
Trading and Profit and Loss Account of the two departments for the year ended 31st March
2010.
Particulars Deptt. O Deptt. K General

Rs. Rs. Rs.
Stock on April 1, 2009 6,000 Nil
Purchases 138,000 12,000
Goods from O Deptt. 42,000
Wages 6,000 9,600
Stock on March 31, 2010 a cost 30,000 10,800
Sales 138,000 87,000
Stationary and Printing 1,280 980
Salaries (General) 9,000
Miscellaneous Expenses 1,800
Advertisement 4,800
Bank charges 1,200
Depreciate Plant & Machinery by 10%. The general unallocated expenses are to be
apportioned in the ratio – O:3, K:2

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Advanced financial Accounting

Rooh Ullah (M.Com)

THE STANDARD GIRLS COLLEGE

Vegetables Fruits Deptt. Flowers

Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

Particulars Deptt. A Deptt. B

Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

Salman & Co.

Particulars Debit Credit

Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

The following information is also provided:

Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

Particulars Debit Credit

Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

5. A departmental store carries on its business through three departments A, B and C.

Deptt. A Deptt. B Deptt. C

Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

9,000 5,690 12,845 27,535 9,000 5,690 12,845 27,535

Calculation of Cost of Goods Sold

Ms. Modern Equipment Co.

The following further information is also provided:

Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

wages Rent Sundry Repairs

Rs. 48,000 Rs. 500 × 12 = Rs. 6000 175:140:35 = 350

Showroom (X & Y) Rent Dep. X = Rs. 11000 × = Rs. 5,500

Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

Provide: Depreciation on Furniture 10%; Apportion the expenses in proportion to the

Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

Trial Balance as at 31st December, 2010

Credit Balance Rs.

Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

City Departmental Stores

General Profit & Loss Account

Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

Particulars Deptt. X Deptt. Y

Allocation of Indirect Expenses

1/6th portion = Rs. 21,600 × 1/6 = Rs. 3,600

Equal distribution for 5 dep. = Rs. 720

Remaining Indirect Expenses = Rs. 21,600 – Rs. 3,600 = Rs. 18,000

Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

Dept. X = Rs. 18,000 + 720 = Rs. 4920

Dept. Y = Rs. 18,000 + 720 = Rs. 4320

Following are figures for each department.

Particulars Deptt. A Deptt. B Deptt. C

Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

Particulars Purchases Opening Stock Closing stock

You are required to prepare Departmental Trading Account.

Departmental Trading Account

Gross profit ratio = 33.3333%

Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

Trial Balance as at 31st December 2010

The following further information is also provided

Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

Particulars Dept. X Dept. Y

The following information is to be taken into account:

General Profit & Loss Account

Rooh Ullah (M.Com) 0333-87 86 389 Lecturer: The Standard College

Particulars Deptt. A Deptt. B