Question 5 OR (b)
Departmental Trading and Profit and Loss Account
12 marks
- Time to write
- About 24 minutes
- Notes
- Crux notes
Question
Question 5 OR (b) · 12 marksA company has two departments, X and Y. From the particulars given below, prepare the Departmental Trading and Profit and Loss Account for the year that ended 31st March 2024.
| Particulars | Department X ₹ | Department Y ₹ |
|---|---|---|
| Opening Stock | 60,000 | Nil |
| Purchases | 13,44,000 | 5,76,000 |
| Wages | 60,000 | 96,000 |
| Carriage Out ward | 6,000 | 84,000 |
| Closing Stock | 7,20,000 | 1,08,000 |
| Printing and Stationery | 12,000 | 9,600 |
| Sales | 13,80,000 | 9,00,000 |
Additional Information:
| (i) Carriage inwards | ₹36,000 |
|---|---|
| (ii) Salaries | ₹1,62,000 |
| (iii) Advertisement | ₹54,000 |
| (iv) General Expenses | ₹4,80,000 |
| (v) Depreciation @ 25% on the Plant value of ₹28,800 |
Advertisement is to be apportioned in the Turnover ratio, Salaries in the ratio 2:1 and Depreciation in the ratio 1:3 between Department X and Y. The General Expenses are to be apportioned in the ratio 3:1.
Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- prepare … AccountProper formats (heading, date, both sides): post the plain items, then each adjustment, and balance last.
What the paper leaves open
Carriage inwards (₹36,000 in our version) is given without a basis; it is apportioned in the ratio of purchases, since it is part of the cost of the goods bought. Printing and stationery and carriage outward are given for each department.
Write it in this order
Workings as you go: each statement feeds the next.
- Read the data; tick every adjustment as you plan it 2 min
- 1 Apportionment of the common expenses 3 marks 5 min
- 2 Departmental Trading Account gross profit X and Y 4 marks 7 min
- 3 Departmental Profit and Loss Account net profit X and Y 5 marks 8 min
- Check: every adjustment used, both sides agree, dates in 2 min
Final answer
Check your own figures against these.
- Gross profit X
- ₹6,10,800, Y ₹3,25,200
- Net profit X
- ₹90,315.79, Y ₹30,884.21
- The business as a whole earns
- ₹1,21,200, which agrees with the undivided figures (gross profit ₹9,36,000 less all expenses ₹8,14,800)
Try it first. About 24 minutes for 12 marks. Write it out, then open the solution and check your figures against the final answer.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
Basis of the answer
- Joint accounts. Under this method one Trading and Profit and Loss Account is prepared to show each department's result, the method the DU text describes as suitable for small organisations. Common expenses are allocated on some common basis; there is no universally acceptable basis of allocation.
- Printed bases are used as given: advertisement on turnover (sales), salaries 2: 1, depreciation 1: 3 and general expenses 3: 1. The DU text's Illustration 8 gives its combined expenses the same way: salaries in a 2: 1 ratio, advertisement in the sale ratio and depreciation in a 1: 3 ratio.
- Carriage inwards has no printed basis. It is part of the cost of the goods bought, so it follows purchases: 13,44,000: 5,76,000 = 7: 3. Carriage outward and printing and stationery are given for each department.
- Depreciation = 25% × ₹28,800 = ₹7,200.
Working notes
Working notes
| Expense | Basis | Total ₹ | X ₹ | Y ₹ |
|---|---|---|---|---|
| Carriage inwards | Purchases, 7: 3 | 36,000 | 25,200 | 10,800 |
| Salaries | 2: 1 | 1,62,000 | 1,08,000 | 54,000 |
| Advertisement | Turnover, 13,80,000: 9,00,000 = 23: 15 | 54,000 | 32,684.21 | 21,315.79 |
| Depreciation (25% of 28,800) | 1: 3 | 7,200 | 1,800 | 5,400 |
| General expenses | 3: 1 | 4,80,000 | 3,60,000 | 1,20,000 |
Departmental Trading Account for the year ended 31 March 2024
| Dr | X ₹ | Y ₹ | Cr | X ₹ | Y ₹ |
|---|---|---|---|---|---|
| To Opening Stock | 60,000 | Nil | By Sales | 13,80,000 | 9,00,000 |
| To Purchases | 13,44,000 | 5,76,000 | By Closing Stock | 7,20,000 | 1,08,000 |
| To Wages | 60,000 | 96,000 | |||
| To Carriage inwards | 25,200 | 10,800 | |||
| To Gross Profit c/d | 6,10,800 | 3,25,200 | |||
| 21,00,000 | 10,08,000 | 21,00,000 | 10,08,000 |
Departmental Profit and Loss Account for the year ended 31 March 2024
| Dr | X ₹ | Y ₹ | Cr | X ₹ | Y ₹ |
|---|---|---|---|---|---|
| To Salaries | 1,08,000 | 54,000 | By Gross Profit b/d | 6,10,800 | 3,25,200 |
| To Advertisement | 32,684.21 | 21,315.79 | |||
| To Depreciation on plant | 1,800 | 5,400 | |||
| To General Expenses | 3,60,000 | 1,20,000 | |||
| To Carriage outward | 6,000 | 84,000 | |||
| To Printing and Stationery | 12,000 | 9,600 | |||
| To Net Profit | 90,315.79 | 30,884.21 | |||
| 6,10,800 | 3,25,200 | 6,10,800 | 3,25,200 |
Result: gross profit X ₹6,10,800, Y ₹3,25,200; net profit X ₹90,315.79, Y ₹30,884.21; the business as a whole earns ₹1,21,200, which agrees with the undivided figures (gross profit ₹9,36,000 less all expenses ₹8,14,800).
The other base for carriage inwards. If carriage inwards were split on sales (23: 15, the text's base for "carriage" in general), X would bear ₹21,789.47 and Y ₹14,210.53: net profit X ₹93,726.32, Y ₹27,473.68, the same ₹1,21,200 in total.
Where the 12 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Apportionment of the common expenses | 3 |
| 2 | Departmental Trading Account (gross profit X and Y) | 4 |
| 3 | Departmental Profit and Loss Account (net profit X and Y) | 5 |
| Total | 12 |
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