Illustration 2
From the following balances of Magnum Limited, you are required to prepare departmental trading, Profit, and Loss Account for the year ended 31st December 1997.
Additional Information
- The total floor area occupied by each department was: Department A: (2/5) Department B: (3/5)
- The following basis of apportionment should be used for the departments: Commission, Advertising, Discount allowed:
Proportionate to sales
(ii) Discount received: Proportionate of Purchases
(iii) Cleaning, electricity, Internal telephone, Insurance: On the basis of total floor rate.
- All other expenses should be apportioned equally between the departments.
Solution
Magnum Ltd
Departmental, Trading, Profit and Loss Account for the year ended 31st December 1997.
Solution
MAGNUM LTD.
Departmental, Trading, Profit and Loss Account for the Year ended 31st December, 1997.
1. Commission Proportionate to Sale
Dept A 30,000/50,000 x 700/1 = 420
Dept B 20,000/50,000 x 700/1 = 280
2. Advertising
Dept A 30,000/50,000 x 230/1 = 138
Dept. B 20,000/50,000 x 230/1 = 92
3. Discount allowed
Dept. A 30,000/50,000 x 60/1 = 36
Dept. B 20,000/50,000 x 60/1 = 24.
Floor Area Basis
4. Cleaning
Dept. A: 2/5 x 20/1 = 8
Dept. B: 3/5 x 20/1 = 12.
5. Electricity
Dept. A : 2/5 x 820/1 = 328.
Dept. B: 3/5 x 820/1 = 492.
6. Internal Telephone
Dept. A: 2/5 x 120/1 = 48
Dept. B: 3/5 x 120 = 72
7. Insurance
Dept. A: 2/5 x250/1 = 100
Dept. B 3/5 x250/1 = 250
Proportionate To Purchase
8. Discount received:
Dept. A: 23,600/40,000 x x 50/1 = 30
Dept B: 16,400/40,000 x 50/1 = 20
Equity Basis
9. General Office Salaries
Dept. A: ½ x 1,000 = 500
Dept. B: ½ x 1,000 = 500
10. Stationery:
Dept. A ½ x 150 =75
Dept. B: ½ x 150 =75
11. Repairs:
Dept. A: ½ x 240 = 120
Dept. B: ½ x 240 = 120
12. Lighting:
Dept. A: ½ x 600 = 300
Dept. B: ½ x 600 = 300
13. Rates:
Dept. A: ½ x 300 = 150
Dept. B: ½ x 300 = 150
14. Sundry expenses:
Dept. A: ½ x 70 =35
Dept. B: ½ x 70 = 35
Responses