Departmental Accounts: Interdepartmental Transfers and Balance Sheet Preparation

The video tutorial covers the preparation of departmental accounts, including trading and profit and loss accounts, and the balance sheet for a company with three departments. It explains the allocation of expenses, interdepartmental transfers, and adjustments. The tutorial emphasizes the importance of reading the entire question carefully to avoid mistakes in allocation and provides a step-by-step guide to finalizing accounts.

What is the primary focus of departmental accounts?

• To manage inventory levels

• To allocate resources efficiently

• To prepare final accounts for each department

• To calculate tax liabilities

How are salaries allocated between the showroom and workshop?

• Based on the number of employees

• Equally between all departments

• In the ratio of 2:3

• Showroom gets 2/3 and workshop gets 1/3

What is the basis for allocating rent expenses?

• Based on the number of employees

• According to floor space occupied

• Equally among all departments

• Based on sales revenue

How should inter-department transfers be recorded?

• Ignore as they are internal transactions

• Record only in the general ledger

• Credit the giver and debit the receiver

• Debit the giver and credit the receiver

What is the effect of inter-department transfers on the company's overall accounts?

• They decrease the company's total liabilities

• They have no effect on the company's overall accounts

• They affect the company's cash flow

• They increase the company's total assets

How is depreciation allocated among departments?

• Equally among all departments

• Based on the number of employees

• In the ratio of 1:2:2

• According to sales revenue

What happens to the net profit or loss of each department?

• It is transferred to the general profit and loss account

• It is retained within the department

• It is distributed as dividends

• It is used to pay off liabilities

What is the final step in preparing departmental accounts?

• Preparing the balance sheet

• Distributing profits to shareholders

• Revising the trial balance

• Calculating tax liabilities

Why is it important to read the entire question carefully?

• To save time

• To ensure all information is considered

• To find hidden errors

• To avoid unnecessary calculations

What is a common feature in many departmental accounting questions?

• Extensive use of technology

• Detailed inventory management

• Inter-department transfers

• Complex tax calculations