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SS2: FINANCIAL ACCOUNTING - 2ND TERM

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The usual method is to set the trading profit and loss accounts, using separate columns for each department, with an additional column to record the total of all departments.

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Inter-Departmental Transfer

Transfer of goods from one department to another may be made at cost or cost plus percentage. The value should be deducted from the goods available for sales of the department transferring and added to the goods available for sale of the department receiving it.

Manager’s Commission

There may be difficulty as to the commission to the managers. Since the profit is not known and the commission is charged on the profit, reference must be made to the accounting ratio.

Formula for Manager’s Commission

:- \( \frac{Percentage \; commission \; \times \; Profit \; before \; commission}{100 \; + \; Percentage \; commission} \)

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