CA NITIN GOEL DEPARTMENTAL ACCOUNTS

CH
DEPARTMENTAL ACCOUNTS 3

“If People are not Laughing at your Goals, your Goals are too Small.”
-Azim Premji

WEIGHTAGE IN PAST YEAR EXAMS

10 10 10 10 10
5 8
5 0
MAY 18 NOV 18 MAY 19 NOV 19 NOV 20 JAN 21 JULY 21 DEC 21 MAY 22

INTRODUCTION

Departmental Accounts helps in identifying the performance of each department. Each

department is considered to be an Activity Centre. It is a tool which helps management
in decision-making.

Advantages of Departmental Accounting

Performance The performance of each department can be evaluated separately

Evaluation on the basis of trading results. An endeavor may be made to push
up the sales of that department which is earning maximum profit.
Growth The growth of a potential department as compared to others can be
potential evaluated.
Judgement of It helps to calculate stock turnover ratio of each department
efficiency separately, and thus the efficiency of each department can be
revealed.
Planning and Availability of separate cost and profit figures for each department
control facilitates better control.
Justification It helps the management to determine the justification of capital
of capital outlay in each department.
outlay

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Basis of Allocation of Expenditure among different Departments

Expenses should be allocated among different departments on a rational basis:
A. INDIVIDUAL IDENTIFIABLE EXPENSES:
Expenses incurred specially for a particular department are charged directly thereto,
e.g., insurance charges of stock held by a department.

B. COMMON EXPENDITURE:
Common expenses, the benefit of which is shared by all the departments and which are
capable of precise allocation are distributed among the departments concerned on some
equitable basis considered suitable in the circumstances of the case.
Expenses Basis
Rent, rates & taxes, repairs & Floor area occupied by each department
maintenance, insurance of building
Lighting and Heating expenses Consumption of energy by each department

Selling expenses, e.g., discount Sales (net) of each department

allowed, bad debts, selling commission,
freight outward, advertisement etc.
Carriage inward/ Discount received Purchases (net) of each department
Wages/Salaries Time devoted to each department
Depreciation, insurance, repairs & Value of assets of each department
maintenance of capital assets otherwise on time basis
Labour welfare expenses Number of employees in each department
PF/ESI contributions Wages and salaries of each department
Administrative Expenses Time basis or equally among all
departments
Interest on loan Utilization of loan amount in each
department (if can be identified), otherwise
in combined P& L A/c
Profit or loss on sale of investment Value of investments sold in each
department (if value can be identified),
otherwise in combined P& L A/c

Note: There are certain expenses and income, most being of financial nature, which
cannot be apportioned on a suitable basis; therefore, they are recognized in the
Combined/ General Profit and Loss Account.
Example- Interest on loan, profit/loss on sale of investment etc. (if cannot be allocated)

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ASSIGNMENT QUESTIONS

TOPIC 1: BASIC QUESTIONS

Question 1 Pg no._____
Mr. Shahrukh is running a departmental store having three departments X, Y and Z. The
manager of each department is entitled to a commission of 10% of the net profit of the
department besides their annual salary of ₹ 3,000 each. The information regarding three
departments for the year ended 30th June, 2021, are given below:
X (₹) Y (₹) Z (₹)
Opening Stock 72,000 48,000 40,000
Purchases 2,64,000 1,76,000 88,000
Debtors at end 15,000 10,000 10,000
Sales 3,60,000 2,70,000 1,80,000
Closing stock 90,000 35,000 42,000
Value of Furniture 5,000 5,000 5,000
Floor space occupied by each 3,000 2,500 2,000
department (in sq. ft.)
Number of employees in each Deptt. 25 20 15
The balance of other revenue items in the books for the year are given below:
Items Amount
Carriage Inwards 6,000
Carriage Outwards 4,500
Salaries including Manager’s salaries 81,000
Advertisement 5,400
Discount allowed 2,250
Discount received 1,800
Rent, Rates and Taxes 7,500
Depreciation on furniture 1,500
You are required to prepare Trading and Profit and Loss Account for the year ended 30th
June, 2021 (after providing for provision for Bad Debts at 5%).

Question 2 Pg no._____
From the following information, prepare Departmental Trading and Profit & Loss Account
for the year ended 31.12.2021 and Balance Sheet as at that date in books of Sri S. Dhawan:
Dept. A Dept. B
Opening Stock (1.1.21) 5,400 4,900
Purchases 9,800 7,350
Sales 16,900 13,520
Wages 1,340 240
Closing stock (31.12.21) 2,748 2,401
Rent 1,870
Salaries 1,320
Lighting and Heating 420
Discount Allowed 441
Discount Received 133

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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: Rent and Lighting and Heating are to be
allocated between Factory and Office in the ratio of 3:2. Rent, Lighting and Heating,
Salaries and Depreciation are to be apportioned to A and B Depts. as 2:1. Other expenses
and incomes are to be apportioned to A and B Depts. on suitable basis.
The following adjustments are to be made: Rent Prepaid ₹ 370; Lighting and Heating
outstanding ₹ 180; Depreciation of Furniture and Fittings @ 10% p.a. and Plant and
Machinery @ 10% p.a.

Question 3 Pg no._____
Trading and Profit and Loss Account of Umeed Equipment Co. for the six months ended
at 31.3.2021 is presented to you in the following form:
Particulars ₹ Particulars ₹
Purchases: Sales:
Dry cleaners (Dept. X) 70,350 Dry cleaners (Dept. X) 75,000
Dumpsters (Dept. Y) 45,300 Dumpsters (Dept. Y) 50,000
Spares Parts (Dept. Z) 32,200 Spares Parts (Dept. Z) 12,500
Salaries and wages 24,000 Stock as on 31.3.2021:
Rent 10,900 Dry cleaners (Dept. X) 30,050
Profit 17,250 Dumpsters (Dept. Y) 10,150
Spares Parts (Dept. Z) 22,300
2,00,000 2,00,000
Other information’s are as follows:
(i) Department ‘X’ and Department ‘Y’ represents the show room and Department Z
represents the work shop.
(ii) Dry cleaners and Dumpsters are sold at show room and spare parts at work shop.
(iii) Salaries & wages were allocated between show room & work shop in the ratio of 3:1.
It was decided to allocate the show room salaries & wages in the ratio of 1 :2 between
the departments X and Y.
(iv) The work shop rent is ₹ 250 per month. The rent of show room is to be divided
equally between the departments X and Y.
You are required to prepare Departmental Accounts for each of 3 departments X, Y & Z.

Question 4 (RTP May 2018) Pg no._____

Following is the trial balance of Mr. Mohan as on 31.12.2021
Particulars Debit ₹ Credit ₹
Capital Account 40,000
Drawing Account 1,500
Opening Stock:
Department A 8,500

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Department B 5,700
Department C 1,200
Purchases:
Department A 22,000
Department B 17,000
Department C 8,000
Sales:
Department A 54,000
Department B 33,000
Department C 21,000
Sales Return:
Department A 4,000
Department B 3,000
Department C 1,000
Freight and Carriage:
Department A 1,400
Department B 800
Department C 200
Furniture and Fixtures 4,600
Plant and machinery 20,000
Motor Vehicles 40,000
Sundry Debtors 12,200
Sundry Creditors 15,000
Salaries 4,500
Power and water 1,200
Telephone charges 2,100
Bad debts 750
Rent and taxes 6,000
Insurance 1,500
Wages:
Department A 800
Department B 550
Department C 150
Printing and Stationeries 2,000
Advertising 3,500
Bank Overdraft 12,000
Cash in hand 850
1,75,000 1,75,000
Required: Prepare Department Trading, Profit and Loss Account and the Balance Sheet
taking into account the following adjustments:
(a) Outstanding wages:
Department B – ₹ 150
Department C – ₹ 50
(b) Depreciate plant and machinery and motor vehicles at the rate of 10%
(c) Each department shall share the expenses in proportion to their sales.
(d) Closing stock:
Department A – ₹ 3,500
Department B – ₹ 2,000
Department C – ₹ 1,500

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Question 5 Pg no._____
A Ltd has 3 departments and submits following information for year ending 31st March,21
A B C Total (₹)
Opening Stock (Units) 200 300 150
Purchases (units) 1,500 1,000 2,000
Purchases (Amount) 92,000
Selling Price (per unit) 20 25 30
Closing Stock (units) 100 160 200

You are required to prepare departmental trading account of A Ltd assuming that the
percentage of gross profit on turnover is the same in each case and Purchases and Sales
price are constant for the last 2 years.

Question 6 Pg no._____
X Ltd has three departments A, B and C. From the particulars given below compute:
(a) the values of stock as on 31st Dec. 2021 and
(b) the departmental results
(i)
A B C
Stock (on 1.1.2021) 24,000 36,000 12,000
Purchases 1,46,000 1,24,000 48,000
Actual sales 1,72,500 1,59,400 74,600
Gross Profit on normal selling 20% 25% 33 /3%
price

(ii) During the year certain items were sold at discount and these discounts were
reflected in the value of sales shown above. The items sold at discount were:
A B C
Sales at normal price 10,000 3,000 1,000
Sales at actual price 7,500 2,400 600

TOPIC 2: STOCK RESERVE / UNREALISED PROFIT

Question 7 Pg no._____
Prepare Departmental Trading, Profit & Loss Account and thereafter combined Profit &
Loss Account revealing the concern’s true result for year ended on 31st December 2021:

Dept. A Dept. B
Stock (January) 40,000 -
Purchase from outside 2,00,000 20,000
Wages 10,000 1,000
Transfer of goods from Dept. A - 50,000
Stock (December 31st) at cost to the Department 30,000 10,000
Sale to outside 2,00,000 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 ₹ 15,000 which are to be
allocated between departments A and B in the ratio 4:1 respectively.

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Question 8 (RTP Nov 2018) / (RTP May 2019) Pg no._____

The following balances were extracted from the books of M/s Division. You are required
to prepare Departmental Trading Account and Profit and Loss account for the year ended
31st December, 2021 after adjusting the unrealized department profits if any
Dept. A (₹) Dept. B (₹)
Opening Stock 50,000 40,000
Purchases 6,50,000 9,10,000
Sales 10,00,000 15,00,000
General expenses incurred for both the departments were ₹ 1,25,000 and you are also
supplied with the following information:
a) Closing stock of Department A ₹ 1,00,000 including goods from Department B for ₹
20,000 at cost of Department A.
b) Closing stock of Department B ₹ 2,00,000 including goods from Department A for ₹
30,000 at cost to Department B.
c) Opening stock of Department A and Department B include goods of the value of ₹
10,000 and ₹ 15,000 taken from Department B and Department A respectively at cost
to transferee departments.
d) The rate of gross profit is uniform from year to year.

Question 9 (RTP May 2021) Pg no._____

Below balances are taken from records of M/s Big Shopping Complex for year ended 31st
March, 2021
Dept. P Dept. Q
Opening Stock 1,00,000 80,000
Purchases 13,00,000 18,20,000
Sales 20,00,000 30,00,000

• Closing stock of Department P was ₹ 2,00,000 including goods transferred from

Department Q for ₹ 40,000.
• Closing stock of Department Q was ₹ 4,00,000 including goods transferred from
Department P for ₹ 60,000.
• Opening stock of Department P included goods for ₹ 20,000 transferred from
Department Q and Opening stock of Department Q included goods for ₹ 30,000
transferred from Department P.
• Assume that above transfer amounts are cost to the transferee departments and the
rate of gross profit is uniform from year to year.
• Total selling expenses incurred were ₹ 2,50,000 for both the departments.
From the above information, prepare Departmental Trading Account and Profit & Loss
Account for the year ended 31st March 2021, after adjusting the unrealized departmental
profits, if any.

Question 10 Pg no._____
M/s. Y Enterprise had 2 departments, Cloth & Readymade Clothes. The readymade
clothes were made by firm itself out of the cloth supplied by Cloth Department at its usual
selling price.
From the following figures, prepare Departmental Trading and Profit & Loss Account for
the year ended 31st March, 2021:

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Cloth Department Readymade Clothes

Department
Opening stock on 1st April, 2020 31,50,000 5,32,000
Purchases 2,10,00,000 1,68,000
Sales 2,31,00,000 47,25,000
Transfer to Readymade Clothes Department 31,50,000 -
Manufacturing expenses - 6,30,000
Selling expenses 2,10,000 73,500
Rent & warehousing 8,40,000 5,60,000
Stock on 31st March, 2021 21,00,000 6,72,000
In addition to above, following information is made available for necessary consideration:
The stock in the Readymade Clothes Department may be considered as consisting of 75%
cloth and 25% other expenses. The Cloth Department earned a gross profit at the rate of
15% in 2019 - 20. General expenses of the business as a whole amount to ₹ 10,85,000.

Question 11 (ICAI Study Material) Pg no._____

M/s X has two departments, A and B. From the following particulars prepare consolidated
Trading Account and Departmental Trading Account for year ending 31st December, 2021:
A (₹) B (₹)
Opening Stock (consisting of Purchased goods - at cost) 20,000 12,000
Purchases 92,000 68,000
Sales 1,40,000 1,12,000
Wages 12,000 8,000
Carriage Inward 2,000 2,000
Closing Stock:
Purchased goods 4,500 6,000
Finished goods 24,000 14,000
Purchased goods transferred:
by B to A 10,000
by A to B 8,000
Finished goods transferred:
by A to B 35,000
by B to A 40,000
Return of finished goods:
by A to B 10,000
by B to A 7,000
You are informed that purchased goods have been transferred mutually at their
respective departmental purchase cost and finished goods at departmental market price
and that 20% of the finished stock (closing) at each department represented finished
goods received from the other department.

Question 12 Pg no._____
Messrs D, B and R carried on a business of Drapers and Tailors in Delhi; D was incharge
of Department “A” dealing in cloth, B of department “B” for selling garments and R of
Department “C” the tailoring section. It had been agreed that each of the 3 partners would
receive 75% of the profits disclosed by the accounts of the department of which he was
incharge and the balance of the combined profits would be shared in the proportion: D
1/2, B 1/4, and R 1/4.
Following is Trading and Profit & Loss Acc of firm for the 6 months ended March 31, 2021.

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₹ ₹ ₹ ₹
To Opening Stock: By Sales:
Cloth (A) 37,890 Cloth (A) 1,80,000
Ready-made 24,000 Ready-made 1,30,000
Garments (B) Garments (B)
Tailoring Jobs (C) 20,000 81,890 Tailoring Jobs (C) 90,000 4,00,000
To Purchases: By Discount received 800
Cloth (A) 1,40,700 By Closing Stock:
Ready-made 80,600 Cloth (A) 45,100
Garments (B)
Tailoring Jobs (C) 44,400 2,65,700 Ready-made 22,300
Garments (B)
To Salaries & Wages 48,000 Tailoring Jobs (C) 21,600 89,000
To Advertising 2,400 (Incl. ₹ 5,700 for
To Rent 10,800 goods transferred
To Discount allowed 1,200 from Dept. A)
To Sundry Exp. 12,000
To Depreciation on 750
Furniture & Fittings
To Net Profit 67,060
4,89,800 4,89,800
After consideration of the following, prepare
1. Departmental Trading and Profit and Loss Account and
2. Profit and Loss Appropriation Account:
a) Cloth of the value of ₹ 10,700 and other goods of the value of ₹ 600 were transferred
at selling price by Departments A and B respectively to Department C.
b) Cloth and garments are sold in the show-room. Tailoring work is carried out in the
workshop.
c) The details of salaries and wages were as follows:
(i) General Office 50%, show-room 25% and 25% for workshop, which is for tailoring.
(ii) Allocate General Office Expenses, in the proportion of 3:2:1 among the
Departments A, B, C.
(iii) Distribute show-room expenses in the proportion of 1:2 between Departments A
and B.
d) The workshop rent is ₹ 1,000 per month. The rent of the General Office and Show room
is to be divided equally between Departments A and B.
e) Depreciation charges are to be allocated equally amongst the three Departments.
f) All other expenses are to be allocated on the basis of turnover.
g) Discounts received are to be credited to 3 Departments as follows: A-₹ 400 B-₹ 250
C-₹ 150.
h) The opening stock of Department C does not include any goods transferred from
Department A.

Question 13 Pg no._____
Khushi & Co has 2 departments A & B. Department B sells goods to Department A at
normal selling prices.
From the following particulars prepare Departmental Trading & Profit & Loss Account for
the year ended 31st March, 2021 & also ascertain the Net Profit to be transferred to
Balance Sheet.

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Particulars A B
Opening stock - 1,00,000
Purchases 2,00,000 23,00,000
Goods from Department B 7,00,000 -
Wages 1,60,000 1,00,000
Travelling Expenses 1,40,000 10,000
Closing stock at cost to the Department 1,80,000 5,00,000
Sales 15,00,000 23,00,000
Printing & Stationery 16,000 20,000

The following expenses incurred for both departments were not apportioned between the
departments:
Salaries 2,70,000
Advertisement Expenses 90,000
General Expenses 8,00,000

Depreciation should be charged at 25% on the machinery value of ₹ 48,000.

Advertisement Expenses are to be apportioned in the turnover ratio, Salaries in 1:2 ratio
& Depreciation in 1:3 ratio between Departments A & B. General Expenses are to be
apportioned in 1:3 ratio.

Question 14 Pg no._____
Calculate Stock Reserves. A, B and C are 3 departments:
Content Ratio Profit Ratio Closing Stock
A Nil 1/4 of sales 15,000
B 2/10 1/5 of cost 22,000
C 5/15 N.A 40,000
A sells to B and B sells to C.

Question 15 (Inter May 2022) (8 Marks) Pg no._____

PQR Limited has three departments L, M and N. The following information is provided
for the year ended 31.3.2022:
L₹ M₹ N₹
Opening stock 10,000 16,000 38,000
Opening reserve for unrealized Profit - 4,000 6,000
Materials Consumed 32,000 40,000 -
Direct labour 18,000 20,000 -
Closing stock 10,000 40,000 10,000
Sales - - 1,60,000
Area occupied (sq. mtr.) 5,000 3,000 2,000
No. of employees 60 40 20
The following information is provided:
Stocks of each department are valued at cost to the department concerned.
Stocks of L are transferred to M at cost plus 20% and stocks of M are transferred to N at
a gross profit of 20% on sales
Other common expenses are salaries and staff welfare, ₹ 36,000 and Rent, ₹ 12,000
You are required to prepare Departmental Trading, Profit and Loss Account for the year
ending 31.3.2022.

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TOPIC 3: MANAGER’S COMMISSION

Pg no._____
Question 16 (ICAI Study Material)
Department A sells goods to Department B at a profit of 50% on cost and to Department
C at 20% on cost. Department B sells goods to A and C at a profit of 25% and 15%
respectively on sales. Department C charges 30% and 40% profit on cost to Department
A and B respectively.
Stocks lying at different departments at the end of the year are as under:
Dept A Dept B Dept C
Transfer from Department A - 45,000 42,000
Transfer from Department B 40,000 - 72,000
Transfer from Department C 39,000 42,000 -

Calculate the unrealized profit of each department and also total unrealized profit.

Question 17 (ICAI Study Material) Pg no._____

Department X sells goods to Department Y at a profit of 25% on cost and to Department
Z at 10% profit on cost. Department Y sells goods to X and Z at a profit of 15% and 20% on
sales, respectively. Department Z charges 20% and 25% profit on cost to Department X
and Y, respectively.
Department Managers are entitled to 10% commission on net profit subject to unrealised
profit on departmental sales being eliminated.
Departmental profits after charging Managers’ commission, but before adjustment of
unrealised profit are as under:
Department X 36,000
Department Y 27,000
Department Z 18,000
Stock lying at different departments at the end of the year are as under:
Dept X Dept Y Dept Z
Transfer from Department X - 15,000 11,000
Transfer from Department Y 14,000 - 12,000
Transfer from Department Z 6,000 5,000 -
Find out the correct departmental Profits after charging Managers’ commission.

Question 18 Pg no._____
M/s P and Co., had four departments A,B,C and D. Each department being managed by
manager whose commission was 10% of the respective departmental profit, subject to a
minimum of ₹ 6,000 in each case. Interdepartmental transfers took place at a 'loaded'
price as follows:
From Department A to Department B 10% above cost
From Department A to Department D 20% above cost
From Department C to Department D 20% above cost
From Department C to Department B 20% above cost
For the year ending on 31st March, 2021 the firm had already prepared and closed the
departmental Trading and Profit and Loss Account. Subsequently, it was discovered that
the closing stocks of departments had included interdepartmentally transferred goods
at loaded price instead of cost price.
From the following information prepare a statement recomputing the departmental profit
or loss:

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Dept. A Dept. B Dept. C Dept. D

Final Profit (Loss) (38,000) 50,400 72,000 1,08,000
Inter departmental 70,000 - 4,800
transfers included (₹ 22,000 from Dept. (₹ 3,600 from
at loaded price in A & ₹ 48,000 from Dept. C & ₹ 1,200
the departmental Dept. C) from Dept. A)
stock

Question 19 Pg no._____
X Ltd. has 3 departments A, B & C. The profits of these departments are ₹ 30,000, ₹ 40,000
& ₹ 17,400 respectively. (Before charging manager’s commission and unrealized profit on
stock transfers).
Department A transfers its goods @ 20% profit on cost to other departments while B
transfers its goods @ 10% profit on cost. Department C transfers its goods at cost to other
departments. However, respective Department’s original goods are only transferred.
On scrutiny of records you find-
a) Purchases made for A Department ₹ 10,000 has been debited in B Department Account.
b) Goods sent on ‘Sale or return basis’ by B Department @120% have been recorded as
regular sale at ₹ 8,400.
c) General Expenses amounting to ₹ 2,100 have been excessively charged in C
Department instead of B Department.
d) The following transfers were made:-
From To Amount Remarks
Department A Department B 24,000 12,000 still in closing
stock
Department C 3,600
Department B Department C 11,000 4,400 still in closing stock
Department C Department A 7,700 3,000 still in closing stock
e) Commission payable to the Manager @ 10% on correct overall Company profit after
charging such commission.
Find out Net Profit of the Company and the commission payable to the General Manager.

TOPIC 4: MEMORANDUM STOCK & MARK UP ACCOUNT METHOD

This method is generally used to have an appropriate control on stock movement of

various departments. Please note that the departments prepare only memorandum
accounts and hence these are just control accounts.
Under this method every department maintains:
• A Memorandum Stock Account which records all stock movements: opening balance,
purchases, stock transfers, shortages and sales. It is prepared at selling price (i.e. even
the purchases and opening / closing balances are adjusted by adding the mark-up), and
• A Memorandum Mark-up Account which is prepared for loading or markup on cost
(selling price – cost price) in the memorandum stock account.
Various accounting adjustments that are required to be made under this method are as
follows:-
1. Opening stock is recorded on the debit side of the Memorandum Stock A/c at selling
price (Cost + Mark-up) and the respective Mark-Up is noted on the credit side of the
Mark-Up Account. Accordingly, any Mark-down (lowering of cost) will have reverse
impact.

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2. Similarly, any purchases (debit) or stock transfers (debit or credit) are also recorded
at selling price itself in the Memorandum Stock Account and its corresponding mark-
up is recorded in the Memorandum Mark-up A/c.

3. Any sales are credited to the Memorandum Stock A/c and they are anyways at selling
price and hence no loading is required and no mark-up is required to be noted in the
Mark-up A/c accordingly.

4. Any theft or shortage or loss of stock is also credited to the Memorandum Stock A/c
at its cost-plus mark-up i.e. at selling price and the corresponding mark-up is debited
to the Memorandum Mark-up Account.

5. If the selling price of any goods is reduced below its normal selling price, the reduction
‘marked down’ is adjusted both in the Stock Account and the Departmental Mark-up
Account.

6. At the end of the period, mark-up on the closing stock (which shall be the balancing
figure of Memorandum Stock A/c) is also recorded in the Memorandum Mark-up A/c.
Accordingly, the balance remaining in the Markup A/c should reflect profit or loss for
the period (which can also be verified by calculating the mark-up % on sales).

Question 20 Pg no._____
Rama Limited is a retail organisation with several departments. Goods supplied to each
department are debited to a Memorandum Departmental Stock Account at cost, plus fixed
percentage (mark-up) to give the normal selling price. The mark up is credited to a
Memorandum Departmental "Mark-up Account". Any reduction in selling prices (mark-
down) will require adjustment in the stock account and in mark-up account. The mark up
for Department A for the last three years has been 40%.
Figures relevant to Department A for the ended 31st March, 2021 were as follows:
Stock 1st April, 2020 at cost, ₹ 2,40,000,
Purchases at cost ₹ 5,40,000,
Sales ₹ 9,60,000

It is further ascertained that:

a) Goods purchased in the period were marked down by ₹ 4,200 from a cost of ₹ 48,000.
Marked-down stock costing ₹ 12,000 remained unsold on 31st March 2021.
b) Stock shortages at the year end, which had cost ₹ 3,600 were to be written off.
c) Stock at 1st April 2020 including goods costing ₹ 24,600 had been sold during the year
and has been mark down in the selling price by ₹ 2,220. The remaining stock had been
sold during the year.
d) The departmental closing stock is to be valued at cost subject to adjustments for
mark-up and mark-down.

Required: Prepare
(i) Departmental Trading Account
(ii) Memorandum Stock Account
(iii) Memorandum Mark-up Account for the year 2020- 2021

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Question 21 Pg no._____
Southern Stores is a retail store operating two departments. The company maintains
Memorandum Stock account and Memorandum Mark-up account for each of the
departments. Supplies issued to the department are debited to the memorandum stock
account of the department at cost plus the mark-up and departmental sales are credited
to this account. The mark-up on supplies issued to the departments is credited to the
Mark-up account for the department. When it is necessary to reduce the selling price
below the normal selling price, i.e. cost plus Mark-up, the reduction (mark down) is
entered in the Memorandum Stock account and in the mark-up account. Department Y
has a Mark-up of 33-1/3% on cost, and Department Z 50% on cost.

The following information has been extracted from the records of Southern Store Ltd. for
the year ended 31st December, 2021:
Dept. Y (₹) Dept. Z (₹)
Stock, 1st January, 2021 at cost 24,000 36,000
Purchases 1,62,000 1,90,000
Sales 2,10,000 2,85,000

a. The stock of Department Y on 1st January, 2021 included goods on which the selling
price has been marked down by ₹ 510. These goods were sold in January, 2021 at the
reduced price.
b. Certain goods purchased in 2021 for ₹ 2,700 for Department Y, were transferred during
the year to Department Z, and sold for ₹ 4,050. Purchase and sale are recorded in the
purchases of Department Y and the sales of Department Z respectively but no entries
in respect of the transfer have been made.
c. Goods purchased in 2021 were marked down as follows:
Dept. Y (₹) Dept. Z (₹)
Cost 8,000 21,000
Mark Down 800 4,100
At the end of the year there were some items in the stock of Department Z, which had
been marked down to ₹ 2,300. With this exception all goods marked down in 2021, were
sold during the year at the reduced prices.
d. During stock taking on 31st December 2021, goods which had cost ₹ 240 were found to
be missing in Department Y. It was determined that the loss should be regarded as
irrecoverable.
e. The closing stock in both departments are to be valued at cost for the purpose of the
annual accounts.

Required: Prepare for each department for the year ended 31st December, 2021:
(i) Trading Account
(ii) Memorandum Stock Account and
(iii) Memorandum Mark-up Account.

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PRACTICE QUESTIONS

TOPIC 1: BASIC QUESTIONS

Question 1 Pg no._____
State the basis on which the following common expenses, the benefit of which is shared
by all the departments is distributed among the departments:
a. Rent, rates and taxes, insurance of building;
b. Selling expenses such as discount, bad debts, selling commission and other such
selling expenses;
c. Carriage Inward;
d. Depreciation;
e. Interest on loan;
f. Profit or loss on sale of investment;
g. Wages;
h. Lighting and Heating Expenses.

Question 2 (RTP May 2020) (Similar) Pg no._____

Give the basis of allocation of the following common expenditure among different
departments:
a) Insurance of Building
b) Discount and bad debts
c) Discount received
d) Repairs and maintenance of capital assets
e) Advertisement expenses
f) Labour welfare expenses
g) PF/ESI contributions
h) Carriage inward

Question 3 (Inter May 2018) (10 Marks)/(ICAI Study Material/RTP Nov 2021) Pg no._____
M/s. Delta is a Departmental Store having three departments X, Y and Z. The information
regarding three departments for the year ended 31st March, 2021 are given below:
Dept. X Dept. Y Dept. Z
Opening Stock 18,000 12,000 10,000
Purchases 66,000 44,000 22,000
Debtors at end 7,500 5,000 5,000
Sales 90,000 67,500 45,000
Closing stock 22,500 8,750 10,500
Value of Furniture in each department 10,000 10,000 5,000
Floor space occupied by each department (in sq. ft.) 1,500 1,250 1,000
Number of employees in each Dept. 25 20 15
Electricity consumed by each Department (in units) 300 200 100

Additional Information:
Items Amount
Carriage Inwards 1,500
Carriage Outwards 2,700
Salaries 24,000

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Advertisement 2,700
Discount allowed 2,250
Discount received 1,800
Rent, Rates and Taxes 7,500
Depreciation on furniture 1,000
Electricity Expenses 3,000
Labour welfare expenses 2,400
Prepare Departmental Trading and Profit & Loss Account for the year ended 31st March,
2021 after providing provision for Bad Debts at 5%.
(Ans: Net Profit 8,975; 4,850 & 12,300)
Question 4 Pg no._____
Trading and Profit & Loss Account of Bindas & Co. for year ended 31st March is as under:
Particulars Amount Particulars Amount
Purchases Sales
Transistors (A) 1,60,000 Transistors (A) 1,75,000
Tape Recorders (B) 1,25,000 Tape Recorders (B) 1,40,000
Spare parts for Servicing 80,000 Spare parts for Servicing 35,000
and Repair Job (C) and Repair Job (C)
Salaries and wages 48,000 Stock on 31st March
Rent 10,800 Transistors (A) 60,100
Sundry Expenses 11,000 Tape Recorders (B) 20,300
Net Profit 40,200 Spare parts for Servicing 44,600
and Repair Job (C)
4,75,000 4,75,000
Prepare Departmental Accounts for each of the three Departments A, B and C mentioned
above after taking into consideration the following:
(a) Transistors and Tape Recorders are sold at the Showroom. Servicing and Repairs
are carried out at the Workshop.
(b) Salaries & wages comprise as follows: Showroom 3/4th and Workshop 1/4th It was
decided to allocate the Showroom Salaries and Wages in ratio 1:2 between
Departments A and B.
(c) Workshop Rent is ₹ 500 per month. Showroom Rent is to be divided equally between
Departments A and B.
(d) Sundry Expenses are to be allocated on the basis of the turnover of each Department.
(Ans: Net Profit 55,200; 4,500 & Net Loss 19,500)
Question 5 (ICAI Study Material) Pg no._____
Z Ltd. has 3 departments & submits the following information for the year ending on 31st
March, 2021:
A B C Total (₹)
Purchases (units) 6,000 12,000 14,400
Purchases (Amount) 6,00,000
Sales (Units) 6,120 11,520 14,976
Selling Price (per unit) 40 45 50
Closing Stock (units) 600 960 36
You are required to prepare departmental trading account of Z Ltd., assuming that the
rate of profit on sales is uniform in each case.
(Ans: GP 60%; Net Profit 1,46,880; 3,11,040 & 4,49,280)

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Question 6 Pg no._____
Sona Ltd has three departments P, Q and R. From the particulars given below compute:
(a) The departmental results and
(b) The value of stock as on 31st Dec. 2021 and
A B C
Stock (on 1.1.2021) 30,000 45,000 15,000
Purchases 1,60,000 1,30,000 60,000
Actual sales 1,88,000 1,66,000 93,000
Gross Profit on normal selling price 25% 33 1/3% 40%
During the year 2021 some items were sold at discount and these discounts were
reflected in the above sales value. The details are given below:
P Q R
Sales at normal price 15,000 8,000 6,000
Sales at actual price 11,000 6,000 4,000
(Ans: GP 44,000; 54,000 & 36,000)

TOPIC 2: STOCK RESERVE / UNREALISED PROFIT

Question 7 (ICAI Study Material) Pg no._____

Goods are transferred from Department P to Department Q at a price 50% above cost. If
closing stock of Department Q is ₹ 27,000, compute the amount of stock reserve
(Ans: Stock Reserve 9,000)
Question 8 Pg no._____
The following balances were extracted from the books of Beta. You are required to
prepare Departmental Trading Account and Profit and Loss account for the year ended
31st December, 2021:
Dept. A Dept. B
Opening Stock 3,00,000 2,40,000
Purchases 39,00,000 54,60,000
Sales 60,00,000 90,00,000
General expenses incurred for both the departments were ₹ 7,50,000 and you are also
supplied with the following information:
a) Closing stock of Department A ₹ 6,00,000 including goods from Department B for ₹
1,20,000 at cost to Department A.
b) Closing stock of Department B ₹ 12,00,000 including goods from Department A for ₹
1,80,000 at cost to Department B.
c) Opening stock of Department A and Department B include goods of the value of ₹
60,000 and ₹ 90,000 taken from Department B and Department A respectively at cost
to transferee departments.
d) The rate of gross profit is uniform from year to year.
(Ans: Net Profit 60,84,000)
Question 9 (ICAI Study Material) Pg no._____
A firm has 2 departments - Sawmill & Furniture. Furniture is made with wood supplied
by the Sawmill department at its usual selling price. From the following figures, prepare
Departmental Trading & Profit & Loss Accounts for the year 2021.

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Sawmill Furniture
Department Department
Opening stock on 1st Jan, 2021 1,50,000 25,000
Purchases 10,00,000 7,500
Sales 12,00,000 2,00,000
Transfer to Furniture Department 1,50,000 -
Wages 30,000 10,000
Selling expenses 10,000 3,000
Stock on 31st Dec, 2021 1,00,000 30,000
The Stock in the Furniture Department consist of 75% wood and 25% other expenses. The
Sawmill Department earned Gross Profit at the rate of 15% on sales in 2020. General
Expenses of the business as a whole came to ₹ 55,000.
(Ans: Net Profit 2,37,812.50)
Question 10 (ICAI Study Material) Pg no._____
M/s. Suman Enterprises has 2 Departments, Finished Leather & Shoes. Shoes are made
by the Firm itself out of leather supplied by Leather Department at its usual selling price.
From the following figures, prepare Departmental Trading and Profit & Loss Account for
the year ended 31st March, 2021:

Finished Leather Shoes Department

Department
Opening Stock (As on 01.04.2020) 30,20,000 4,30,000
Purchases 1,50,00,000 2,60,000
Sales 1,80,00,000 45,20,000
Transfer to Shoes Department 30,00,000 -
Manufacturing expenses - 5,00,000
Selling expenses 1,50,000 60,000
Rent & warehousing 5,00,000 3,00,000
Stock on 31.03.2021 12,20,000 5,00,000
The following further information are available for necessary consideration:
(i) The stock in Shoes Department may be considered as consisting of 75% of Leather
and 25% of other expenses.
(ii) The Finished Leather Department earned a Gross Profit @ 15% in 2019-20.
(iii) General expenses of the business as a whole amount to ₹ 8,50,000
(Ans: Net Profit 31,43,375)
Question 11 Pg no._____
M/s P have 2 Departments - X & Y. From the following information, prepare departmental
Trading A/c and General Profit & Loss Account for the year ended on 31st March 2021.
X (₹) Y (₹)
Opening Stock as on 01.04.2020 (at cost) 2,45,000 2,43,000
Purchases 13,72,000 13,41,000
Sales 20,02,000 20,70,000
Wages 1,89,000 1,62,000
Carriage Inward 21,000 40,500
Closing Stock:
Purchased goods 84,000 1,35,000
Finished goods 3,57,000 2,79,000

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Purchased goods transferred:

by Department Y to X 2,25,000
by Department X to Y 1,26,000
Finished goods transferred:
by Department Y to X 6,75,000
by Department X to Y 6,12,500
Return of finished goods:
by Department Y to X 1,57,500
by Department X to Y 1,44,000

Purchased goods have been transferred mutually at their respective departmental

purchase cost and finished goods at departmental market price and 30% of the closing
finished stock with each department represents finished goods received from the other
department.
(Ans: Net Profit 12,62,555)
Question 12 (Inter Dec 2021) (10 Marks) / (RTP May 2022) (Similar) Pg no._____
M/s Wee has 2 Departments X & Y. From the following particulars prepare Departmental
Trading account and Consolidated Trading Account for the year ending 31st March 2021.

Particulars Department X Department Y

Opening stock (at cost) 1,40,000 1,08,000
Purchases 4,28,000 3,32,000
Carriage inward 12,000 12,000
Carriage outward 5,000 4,000
Wages 42,000 48,900
Sales 5,70,000 4,74,000
Purchased goods transferred by 60,000
Department Y to Department X
Purchased goods transferred by 48,000
Department X to Department Y
Finished goods transferred by 1,60,000
Department Y to Department X
Finished goods transferred by 2,00,000
Department X to Department Y
Closing stock of Purchased goods 24,000 30,000
Closing stock of Finished goods 1,54,000 1,20,000
Purchased goods have been transferred mutually at their respective Departmental
purchase cost and finished goods at departmental market price and that 15% of finished
stock (closing) at each department represented finished goods received from the other
department.
(Ans: Profit 2,42,035)
Question 13 Pg no._____
Ram, Sham and Mahaan sons of Prabhu Dyal are running Punya Hotel in Chennai. Ram
is heading Room division (A), Sham is heading banquet division (B) and Mahaan is heading
Restaurant division (C). Each of the three brothers would receive 60% of the profits, if
any, of the department of which he was incharge and remaining combined profits would
be shared in 2:2:1 ratio.

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The following is the Trading and Profit and Loss Account of the firm for the year ended
March 31, 2021:
To Opening Stock: By Sales:
Room (A) 25,650 Room (A) 2,70,000
Banquet (B) 18,000 Banquet (B) 1,65,000
Restaurant (C) 19,500 63,150 Restaurant (C) 86,700 5,21,700
To Purchases: By Discount Received 1,650
Room (A) 2,35,000 By Closing Stock:
Banquet (B) 1,56,000 Room (A) 55,300
Restaurant (C) 84,200 4,75,200 Banquet (B) 31,800
To Salaries 34,400 Restaurant (C) 42,500 1,29,600
To Royalties 8,000
To Parking fee & car 9,600
washing charges
To Discount allowed 2,500
To Misc. Exp. 7,000
To Depreciation 1,160
To Net Profit 51,940
6,52,950 6,52,950

Prepare:
(I) Departmental Trading and Profit and Loss Account and
(II) Profit and Loss Appropriation Account after incorporating the following information:
(i) Closing stock of Dept. B includes goods amounting ₹ 3,500 being transferred from
Dept. A
(ii) Stock value ₹ 9,300 and other goods of the value of ₹ 1,500 were transferred at
selling price by Departments A and C respectively to Department B.
(iii) The details of salaries were as follows:
(1) Admin Office 60%, Pantry 40%
(2) Allocate Admin Office in the proportion of 3: 2:1 among the Departments A, B, C
(3) Distribute Pantry expenses equally among the Department A and B.
(iv) The parking fee is ₹ 500 per month which is to be divided equally between
Departments A, B & C.
(v) All other expenses are to be allocated in ratio of 2:2:1.
(vi) Discounts received are to be credited to three Departments as follows: A: ₹ 650; B:
₹ 600; C: ₹ 400.
(vii) The opening stock of Department B does not include any goods transferred from
other departments and closing stock of Department B does not include any stock
transferred from Department C.
[Ans: Net Profit 46,496, (12,064) & 17,508]
Question 14 (Inter July 2021) (10 Marks) Pg no._____
The firm, M/s K Creations has two Departments, Dyed fabric and readymade garments.
Readymade garments are made by the firm itself. Both dyed fabric and readymade
garments have independent market. Some of readymade garment department's
requirement is supplied by Dyed Fabric Department at its usual Selling Price.
From the following figures, prepare Departmental Trading and Profit & Loss Account for
the year ended 31st March 2021.

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Particulars Dyed Fabric Readymade

Department garments
department
Opening stock as on April 1, 2020 5,40,000 15,20,000
Purchases 20,12,080 1,50,00,000
(excluding inter department transfers)
Sales 31,06,000 3,12,50,000
(excluding inter department transfers)
Transfer to Readymade garment 5,00,000 -
Direct wages 3,00,000 67,30,000
Direct expenses 1,00,000 19,50,000
Plant and Equipment for dyeing/ 5,00,000 15,00,000
stitching readymade garments
(WDV as on April 1, 2020)
Rent and warehousing 4,50,000 12,00,000
Stock as on March 31st 2021 6,00,000 22,50,000

The following further information are available for necessary consideration:

(i) The Stock in Readymade garments department may be considered as consisting of
60% of dyed fabric and 40% of Other Expenses.
(ii) The Dyed Fabric Department earned a Gross Profit @ 30% in 2019-2020.
(iii) On the plant and equipment, Depreciation @ 20% p.a. to be provided.
(iv) The following expenses incurred for both the departments were not apportioned
between the departments:
(a) Salaries 2,70,000
(b) Advertisement expenses 90,000
(c) General expenses 8,00,000
(v) Salaries in 1:2 ratio, Advertisement expenses in the turnover ratio and General
expenses in 1:3 ratio are to be apportioned between the Dyed Fabric Department and
Readymade Department respectively.
(Ans: Net Profit 56,85,520)
Question 15 Pg no._____
M/s Complex has 3 departments, A, B, C. The following information is provided:
A B C
Opening Stock 3,000 4,000 6,000
Consumption of direct materials 8,000 12,000 -
Wages 5,000 10,000 -
Closing Stock 4,000 14,000 8,000
Sales - - 34,000
Stock of each department is valued at cost to the department concerned, Stocks of A
department are transferred to B at a margin of 50% above departmental cost, Stocks of
B department are transferred to C department at a margin of 10% above departmental
cost. Other expenses were:
Salaries 2,000
Printing & Stationery 1,000
Rent 6,000
Interest paid 4,000
Depreciation 3,000

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Allocate expenses in the ratio of departmental gross profit. Opening figures of reserves
for unrealised profits on departmental stock were: Department B ₹ 1,000 Department C
₹ 2,000.
Prepare Departmental Trading and Profit & Loss Accounts for the year ending March 31,
2021 considering that closing stock of each department consists of only finished goods.
(Ans: Net Loss 4,918)

TOPIC 3: MANAGER’S COMMISSION

Question 16 (RTP Nov 2022) Pg no._____
M/s. Bombay Cotton has 2 Departments Y and Z. The following information is provided for
the year ended 31st March, 2021:
Particulars Departments Y (₹) Department Z (₹)
Opening Stock 60,000 40,000
Purchases 1,20,000 3,05,400
Wages 70,000 32,000
Sales 3,10,300 3,72,700
Closing Stock 23,700 40,700
Other Expenses are:
Particulars Amount (₹)
Salaries 30,000
Rent 9,000
Advertisement 24,000
General Expenses 3,000
Depreciation 18,000
a) Expenses are to be allocated between Departments in the ratio of their Gross Profit.
b) Department Y sells goods to Department Z at a profit of 25% on sales. Department Z
sells goods to Department Y at a profit of 28% on cost.
c) Each Department Managers are entitled to 10% Commission on Net Profit subject to
unrealized profit on departmental sales being eliminated.
d) Stock Transfer during the year from Department Y to Department Z was ₹ 40,000 and
from Department Z to Department Y ₹ 50,000.
e) Closing Stock includes transfer from Department Y to Department Z was ₹ 12,000
&from Department Z to Department Y ₹ 21,200. Opening Stock do not include any inter
Department transfer.
Prepare Department Trading & Profit & Loss Account for the year ended 31st March, 2021.
(Ans: Net Profit 17,280 & 8,246)
Question 17 (RTP Nov 2020) Pg no._____
Department X sells goods to Department Y at a profit of 50% on cost and to Department
Z at 20% on cost. Department Y sells goods to Department X and Z at a profit of 25% and
15% respectively on sales. Department Z charges 30% profit on cost to Department X and
40% profit on sale to Y. Stock lying at different Departments at the end of the year are:
Dept X Dept Y Dept Z
Transfer from Department X - 75,000 48,000
Transfer from Department Y 50,000 - 82,000
Transfer from Department Z 52,000 56,000 -
Calculate the unrealized profit of each department and also total unrealized profit.
(Ans: 33,000; 24,800 & 34,400)

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Question 18 (Inter Nov 2020) (5 Marks) Pg no._____

Department A sells goods to Department B at a profit of 20% on cost and to Department
C at 50% on cost. Department B sells goods to Department A and Department C at a
profit of 15% and 10% on sales respectively. Department C sells goods to Department A
and Department B at a profit of 10% and 5% on cost respectively. Stock lying at different
departments at the end of the year are as follows:
Department A Department B Department C
(₹) (₹) (₹)
Transfer from Department A 1,14,000 60,000
Transfer from Department B 55,000 15,200
Transfer from Department C 52,800 1,11,300
Calculate Department wise unrealised profit on Stock.
(Ans: 39,000; 9,770 & 10,100)
Question 19 (ICAI Study Material) Pg no._____
Department P sells goods to Department S at a profit of 25% on cost and to Department
Q at a profit of 15% on cost. Department S sells goods to P and Q at a profit of 20% and
30% on sales respectively. Department Q sells goods to P and S at 20% and 10% profit on
cost respectively.
Departmental Managers are entitled to 10% commission on net profit subject to
unrealized profit on departmental sales being eliminated. Departmental profits after
charging Manager's commission, but before adjustment of unrealized profits are as
below:
Department P 90,000
Department S 60,000
Department Q 45,000
Stock lying at different Departments at the end of the year are as below:

Dept P Dept S Dept Q

Transfer from Department P - 18,000 14,000
Transfer from Department S 48,000 - 38,000
Transfer from Department Q 12,000 8,000 -
Find out correct Departmental Profits after charging Managers' Commission.
(Ans: 85,117; 41,100 & 42,546)
Question 20 (RTP May 2020) Pg no._____
There is transfer/sale among the three departments as below:
Department X sells goods to Department Y at a profit of 25% on cost and to Department
Z at 20% profit on cost. Department Y sells goods to X and Z at a profit of 15% and 20% on
sales respectively. Department Z charges 20% and 25% profit on cost to Departments X
and Y respectively.
Department Managers are entitled to 10% commission on net profit subject to unrealised
profit on departmental sales being eliminated. Departmental profits after charging
Manager's commission, but before adjustment of unrealized profits are as below:

Department X 1,80,000
Department Y 1,35,000
Department Z 90,000

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Stock lying at different Departments at the end of the year are as below:
Dept X Dept Y Dept Z
Transfer from Department X - 75,000 57,000
Transfer from Department Y 70,000 - 60,000
Transfer from Department Z 30,000 25,000 -
Find out correct Departmental Profits after charging Managers' Commission.
(Ans: 1,57,950; 1,14,750 & 81,000)
Question 21 (Inter Nov 2018) (5 Marks) Pg no._____
Axe Limited has four departments, A, B, C and D. Department A sells goods to other
departments at a profit of 25% on cost. Department B sells goods to other department at
a profit of 30% on sales. Department C sells goods to other departments at a profit of 10%
on cost, Department D sells goods to other departments at a profit of 15% on sales. Stock
lying at different departments at the year-end was as follows:

Department Department Department Department

A B C D
Transfer from Department A - 45,000 50,000 60,000
Transfer from Department B 50,000 - - 75,000
Transfer from Department C 33,000 22,000 - -
Transfer from Department D 40,000 10,000 65,000 -
Departmental managers are entitled to 10% commission on net profit subject to
unrealized profit on departmental sales being eliminated. Departmental profits after
charging manager's commission, but before adjustment of unrealized profit are as under:

Department A 2,25,000
Department B 3,37,500
Department C 1,80,000
Department D 4,50,000
Calculate the correct departmental profits after charging Manager's commission.
(Ans: 1,97,100; 3,03,750 & 1,75,500)

Question 22 (Inter Jan 2021) (10 Marks) Pg no._____

XYZ Garage consists of 3 departments: Spares, Service and Repairs, each department
being managed by a departmental manager whose commission was respectively 5%, 10%
& 10% of the respective departmental profit subject to a minimum of ₹ 5,000 in each case.
Inter departmental transfers take place at a "loaded" price as follows:
From Spares to Service 5% above cost
From Spares to Repairs 10% above cost
From Repairs to Service 10% above cost

In respect of the year ended March 31st 2021 the firm had already prepared and closed
the departmental trading and profit and loss account. Subsequently it was discovered
that the closing stocks of department had included inter-departmentally transferred
goods at "loaded" price instead of the correct cost price.
From the following information, you are required to prepare a statement re-computing
the departmental profit or loss:

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Spares Service Repairs

₹ ₹ ₹
Final Net Profit / Loss 38,000 50,400 72,000
(after charging commission) (Loss) (Profit) (Profit)
Inter-departmental transfers 65,000 4,202
included at "loaded" price in (21,000 from Spares & (from Spares)
the departmental stocks 44,000 from Repairs)
[Ans: (39,382); 50,400 & 68,400]

TOPIC 4: MEMORANDUM STOCK & MARK UP ACCOUNT METHOD

Question 23 (ICAI Study Material) Pg no._____

Martis Ltd. has several departments. Goods supplied to each department are debited to
a Memorandum Departmental Stock Account at cost, plus a fixed percentage (mark-up)
to give the normal selling price. The mark-up is credited to a memorandum departmental
'Mark-up account', any reduction in selling prices (mark-down) will require adjustment
in the stock account and in mark-up account.
The mark up for Department A for the last three years has been 25%.
Figures relevant to Department A for the year ended 31st March, 2021 were as follows:
Opening stock as on 1st April, 2020, at cost 65,000
Purchase at cost 2,00,000
Sales 3,00,000
It is further ascertained that:
a) Shortages of stock found in year ending 31.03.2021, costing ₹ 1,000 were written off.
b) Opening stock on 01.04.20 including goods costing ₹ 6,000 had been sold during the
year and had been marked down in the selling price by ₹ 600. The remaining stock had
been sold during the year.
c) Goods purchased during the year were marked down by ₹ 1,200 from a cost of ₹ 15,000.
Marked-down stock costing ₹ 5,000 remained unsold on 31.03.21.
d) The departmental closing stock is to be valued at cost subject to adjustment for mark-
up and mark-down.
You are required to prepare:
(i) A Departmental Trading Account for Department A for the year ended 31st March,
2021 in the books of Head Office.
(ii) A Memorandum Stock Account for the year.
(iii) A Memorandum Mark-up Account for the year.
(Ans: Profit 58,880)
Question 24 (Inter Nov 2019) (10 Marks) Pg no._____
ABC Ltd. has several departments. Goods supplied to each department are debited to a
Memorandum Departmental Stock Account at cost plus a fixed % (mark-up) to give the
normal selling price. The amount of mark-up is credited to a Memorandum Departmental
Markup account. If the selling price of goods is reduced below its normal selling prices,
the reduction (mark-down) will require adjustment both in the stock account and the
mark-up account. The mark-up for department X for the last three years has been 20%.
Figures relevant to department X for the year ended 31st March, 2021 were as follows:
Stock as on 1st April, 2020, at cost ₹ 1,50,000
Purchases at cost ₹ 4,30,000
Sales ₹ 6,50,000

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 CA NITIN GOEL DEPARTMENTAL ACCOUNTS

It is further ascertained that:

1) Shortage of stock found in the year ending 31.3.2021, costing ₹ 4,000 were written off.
2) Opening stock on 1.4.2020 including goods costing ₹ 12,000 had been sold during the
year and had been marked-down in the selling price by ₹ 1,600. The remaining stock
had been sold during the year.
3) Goods purchased during the year were marked down by ₹ 3,600 from a cost of ₹
30,000. Marked-down stock costing ₹ 10,000 remained unsold on 31.3.2021.
4) The departmental closing stock is to be valued at cost subject to adjustment for mark-
up and mark-down.
You are required to prepare for the year ended 31st March, 2021:
a) Departmental Trading Account for department X for the year ended 31st March, 2021 in
the books of head office.
b) Memorandum Stock Account for the year ended 31st March, 2021.
c) Memorandum Mark-Up account for the year ended 31st March, 2021.
(Ans: Profit 1,05,000)
Question 25 (ICAI Study Material) Pg no._____
Gram Udyog, a retail store, has two departments, ‘Khadi and Silks’ for each of which stock
account and memorandum ‘mark-up’ accounts are kept. All the goods supplied to each
department are debited to the stock account at cost plus a ‘mark-up’, which together
make-up the selling-price of the goods and in the account of the sale proceeds of the
goods are credited. The amount of ‘mark-up’ is credited to the Departmental Mark-up
Account. If the selling price of any goods is reduced below its normal selling price,
reduction ‘marked down’ is adjusted both in Stock Account & Departmental ‘Mark-up’
Account. The rate of ‘Mark-up’ for Khadi Department is 33-1/3% of cost & for Silks
Department it is 50% of cost. The following figures have been taken from the books for
the year ended December 31, 2021:
Khadi Dept. Silks Dept.
Stock as on January 1st at cost 10,500 18,600
Purchases 75,900 93,400
Sales 95,600 1,25,000
(i) The stock of Khadi on January 1, 2021 included goods the selling price of which had
been marked down by ₹ 1,260. These goods were sold during year at reduced prices.
(ii) Certain stock of the value of ₹ 6,900 purchased for the Khadi Department were later
in the year transferred to the Silks department and sold for ₹ 10,350. As a result
though cost of the goods is included in the Khadi Department the sale proceeds have
been credited to the Silks Department.
(iii) During the year 2021 to promote sales the goods were marked down as follows:
Cost Marked Down
Khadi 5,600 360
Silk 10,000 2,000
All the goods marked down, were sold except Silks of the value of ₹ 5,000 marked down
by ₹ 1,000.
(iv) At the time of stock-taking on December 31, 2021 it was discovered that Khadi cloth
of the cost of ₹ 390 was missing and it was decided that the amount be written off.
You are required to prepare for both the departments for the year 2021:
a. The Memorandum Stock Account; and
b. The Memorandum Markup Account
(Ans: Profit Khadi Dept. 22,685 & Silk Dept. 41,000)

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