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 assumptions can be made regarding the profit margin for the current year if not specified?

What is the formula for calculating gross profit ratio?

How is the net profit transferred to the balance sheet calculated?

What adjustments are necessary when preparing the general profit and loss account?