Departmental Accounts: Calculation of Stock Reserve

The video tutorial explains the preparation of departmental trading and profit and loss accounts for a firm with two departments: cloth and dress. It covers the transfer of goods between departments at selling price, the calculation of stock reserve, and the allocation of general expenses. The tutorial emphasizes the importance of calculating gross profit ratios and adjusting for unrealized profits in stock reserves to ensure accurate financial reporting.

What is the primary relationship between the cloth and dress departments in the firm?

• The dress department supplies cloth to the cloth department.

• The cloth department supplies cloth to the dress department at cost price.

• The cloth department supplies cloth to the dress department at selling price.

• The dress department supplies finished goods to the cloth department.

Which of the following is NOT included in the preparation of the departmental trading account?

• Opening stock

• General expenses

• Sales

• Purchases

Why is the calculation of stock reserve necessary?

• To account for goods transferred at selling price that remain unsold.

• To determine the manufacturing expenses.

• To calculate the total sales of the department.

• To adjust for goods transferred at cost price.

What is the gross profit ratio formula used in the video?

• Gross Profit / Net Sales x 100

• Gross Profit / Total Purchases x 100

• Net Profit / Net Sales x 100

• Net Profit / Total Purchases x 100

How is the profit margin for the cloth department determined for the current year?

• It is assumed to be the same as the previous year.

• It is calculated using the gross profit ratio from the trading account.

• It is given directly in the question.

• It is based on the net profit ratio.

What percentage of the dress department's stock is assumed to be cloth?

• 100%

• 50%

• 25%

• 75%

What is the significance of the 15% profit margin mentioned for the cloth department?

• It is used to allocate general expenses.

• It is used to determine the net profit for the dress department.

• It is used to calculate the stock reserve for the previous year's closing stock.

• It is used to calculate the selling price for the current year.

How is the unrealized profit in the closing stock of the dress department treated?

• It is credited in the departmental trading account.

• It is ignored in the calculations.

• It is debited in the general profit and loss account.

• It is added to the net profit.

What is the final step in the stock reserve calculation process?

• Allocating the general expenses to each department.

• Determining the total sales for the cloth department.

• Adjusting the general profit and loss account for unrealized profit.

• Calculating the gross profit for each department.

What is the net profit transferred to the balance sheet after adjustments?

• 1,69,713

• 2,00,000

• 1,85,000

• 42,500