Departmental Accounts – CA Inter Accounts Question Bank

Departmental Accounts – CA Inter Accounts Question Bank is designed strictly as per the latest syllabus and exam pattern.

Departmental Accounts – CA Inter Accounts Question Bank

Question 1.
Basis of aNocation of common expenditure among different departments. (Nov 1998, 4 marks)
Answer:
Basis of allocation of common expenditure among different departments:
At the time of preparing department accounts, expenses should be distributed among the different departments on the basis of the following principles:
1. Expenses incurred specially for each department are charged directly to it. For example, insurance charges of stock held by a department.

2. The expenses which are not capable of correct measurement are dealt in the following ways:
(i) Expenses incurred on selling.are charged on the basis of sales for e.g. discount, bad debts. selling commission etc.
(ii) Administrative and other expenses such as salaries of managers, directors, common advertisement expenses, depreciation on assets etc. are allocated equally among all the caepartmerts that have benefitted thereby. Alternatively, no allocation may be made and such expenses may be charged to the combined profit and loss account.

3. Common expenses, the advantages of which is shared by all the departments and which are competent enough of precise allocation (e.g. rent, lighting expenses etc.) are distributed among the departments related on some particular basis which are considered suitable for the circumstances. Rent are charged to different departments as per the floor area occupied by each department. Lighting and heating expenses are distributed on the basis of consumption of energy by every department and so on.

Question 2.
State the basis on which the following common expenses, the benefit of which is shared by all the departments is distributed among the departments:
(i) Rent, rates and taxes, Insurance of building;
(ii) Selling expenses such as discount, bad debts, selling commission, and other such selling expenses:
(iii) Carriage Inward;
(iv) Depreciation;
(v) Interest on loan;
(vi) Profit or loss on sale of investment;
(vii) Wages;
(viii) Lighting and Heating Expenses (Nov 2013, 4 marks)
Answer:

Expenses Basis
(i) Rent, rates & taxes, insurance of building Floor area occupied by each department (It given) otherwise on time basis.
(ii) Selling expenses such as discount, bad debts etc. Sales of each department.
(iii) Carriage Inward Purchase of each department.
(iv) Depreciation Value of assets of each department or time basis.
(v) Interest on loan Utilisation of loan amount in each department (if identifiable) otherwise in combined P&L A/c.
(vi) Profit or loss on sale of investment Equal or shown in general P&L A/c.
(Vii) Wages Time devoted to each department.
(viii) Lighting & Heating expenses Consumption of energy by each department.

Question 3.
Give the basis of allocation of the following common expenditure among Different departments:
(i) Insurance of Building
(ii) Discount and bad debts
(iii) Discount received
(iv) Repairs and maintenance of capital assets
(v) Advertisement expenses
(vi) Labour welfare expenses
(vii) PFFESI contributions
(viii) Carnage Inward (May 2016, 4 marks)
Answer:

Item Basis
(i) Insurance of Building Floor area of each department
(ii) Discount and bad debts Sales of each department
(iii) Discount received Purchases of each department
(iv) Repairs and maintenance of capital assets Assets value of each department
(v) Advertisement expenses Sales of each department
(vi) Labour welfare expenses No. of employees in each dept.
(vii) PF/ESI contributions Wages and Salaries of each department
(viii) Carriage inward Purchases of each department

Departmental Accounts - CA Inter Accounts Question Bank

Question 4.
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 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 Managers commission, but before adjustment of unrealised profit are as under:
Departmental Accounts - CA Inter Accounts Question Bank 1
(Nov 2001, 8 Marks)
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 2

Question 5.
Goods are transferred from Department P to Department O at a price 50% above cost. If dosing stock of Department Q is ₹ 27,000, compute the amount of stock reserve. (Nov 2009, 2 marks)
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 4

Question 6.
Department R sells goods to Department S at a profit of 25% on cost and Department T at 10% profit on cost. Department S sells goods to R and T at a profit of 15% and 20% on sales respectively. Department T charges 20% and 25% profit on cost to Department R and S 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 unrealised profit are as under:
Departmental Accounts - CA Inter Accounts Question Bank 5
(Nov 2010, 8 marks)
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 6
Departmental Accounts - CA Inter Accounts Question Bank 7

Question 7.
Department A sells goods to Department B at a profit of 20% on cost and Department C at 15% profit on cost. Department B sells goods to A and C at a profit of 10% and 20% on sales respectively. Department C sells goods to A and B at 15% 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 profit are as under:
Department A ₹ 36,000
Department B ₹ 27,000
Department C ₹ 18,000
Stock lying at different departments at the end of the year are as below:
Departmental Accounts - CA Inter Accounts Question Bank 8
(Nov 2012, 8 marks)
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 9

Question 8.
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.
Stock lying at different departments at the end of the year are as under:
Departmental Accounts - CA Inter Accounts Question Bank 10
Calculate the unrealized profit of each department and also total unrealized profit. (May 2013, 4 marks)
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 11

Question 9.
Department P sells goods to Department S at a profit of 25% on cost and to Department O 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 arid 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 aller 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:
Departmental Accounts - CA Inter Accounts Question Bank 12
(May 2014,8 Marks)
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 13

Question 10.
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 Managers’ commission, but before adjustment of unrealised profit are as under:
Departmental Accounts - CA Inter Accounts Question Bank 14
Find out the correct departmental profits after charging Managers’ commissions. (May 2016, 8 marks)
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 15

Question 11.
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. Stocks lying at different departments at the end of the year are as under:
Departmental Accounts - CA Inter Accounts Question Bank 17
Calculate the unrealized profit of each department and also total unrealized profit.
(Nov 2017, 4 marks)
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 18

Question 12.
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 departments 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:
Departmental Accounts - CA Inter Accounts Question Bank 19
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. (Nov 2018, 5 marks)
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 20

Departmental Accounts - CA Inter Accounts Question Bank

Question 13.
Answer the following:
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.
Departmental Accounts - CA Inter Accounts Question Bank 22
Calculate Department wise unrealised profit on Stock. (Nov 2020, 5 marks)

Question 14.
XYZ Garage consists of 3 departments: Spares, Service, and Repairs, each department being managed by a departmental manager whose commission was respectively 5%. 10% and 10% of the respective departmental polit subject to a minimum of ₹ 5000 in each case. Interdepartmental 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, 2019, 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:
Departmental Accounts - CA Inter Accounts Question Bank 23
(Jan 2021,10 Marks)

Question 15.
FGH Ltd has three departments I. J. K. The following information is provided for the year ended 31.3.2004
Departmental Accounts - CA Inter Accounts Question Bank 24
Stocks of each department are valued at costs to the department concerned. Stocks of I are transferred to J at cost plus 20% and stocks of J are transferred to K at a Gross Profit of 20% on sales. Other common expenses are Salaries and Staff Welfare ₹ 18,000, Rent ₹ 6,000. Prepare Departmental Trading, Profit and Loss Account for the year ending 31 .3.2004. , (Nov 2004, 10 marks)
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 25

Question 16.
Brahma Limited has three departments and submits the following information for the year ending on 31st March 2011.

Particulars A B C Total (₹)
Purchases (units) 5,000 10,000 15,000
Purchases (Amount) 8,40,000
Sales (units) 5,200 9,800 15,300
Selling price (₹ per unit) 40 45 50
Closing Stock (Units) 400 600 700

You are required to prepare departmental trading account of Brahma Limited assuming that the rate of profit on sales is uniform in each case. (May 2011, 5 marks)
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 27

Question 17.
M/s. AM Enterprise had two departments, Cloth and Readymacle Clothes. The Readymade clothes were made by the firm itself out of the cloth supplied by the Cloth Department at its usuel selling price. From the following figures, prepare Departmental Trading and Profit & Loss Account for the year ended 31 March, 2011:

Cloth Department  ₹ Readymade Clothes Department ₹
Opening Stock on 1st April 2010 31,50,000 5,32,000
Purchases 2,10,00,000 1,68,000
Sales 2,3100,000 47,25,000
Transfer to Ready-made
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, 2011 21,00,000 6,72,000

In addition to the above, the following information is made available for necessary consideration:
The stock In the Readymacie 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 2009-10. General Expenses of the business as a whole amount to ₹ 10,85,000. (Nov 2011, 8 marks)
Answer:
Working Note:
Calculation of Stock Reserve:
Rate of Gross Profit of Cloth Department, for the year 2010-11
= \(\frac{\text { Gross Profit }}{\text { Total Sales }} \times 100\)
= \(\frac{₹ 42,00,000}{₹(2,31,00,000+31,50,000)} \times 100\) = 16%
Closing Stock of cloth in Readymade Clothes Department = 75%
i.e. 6,72,000 x 75% = ₹ 5,04,000
₹ 5,04,000 x 16% = ₹ 80,640
Stock Reserve for unreaLized profit included In opening stock of readymade clothes @ 15% i. e. (₹ 5,32,000 x 75% x 15%) = ₹ 59,850
Additional Stock Reserve required during the year = ₹ 80,640 – ₹ 59,850
= ₹ 20,790.
Departmental Accounts - CA Inter Accounts Question Bank 29

Question 18.
Mega Ltd. has two departments, A and . From the following particulars. prepare departmental Trading A/c and General Profit & Loss Account for the year ended 31st March. 2014.
Departmental Accounts - CA Inter Accounts Question Bank 31
Purchased goods have been transferred mutually at their respective departmental purchase cost and finished goods at departmental market price and that 30% of the closing finished stock with each department represents finished goods received from the other department. (Nov 2014,8 marks)
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 32

Particulars Department A (₹) Department B (₹)
Stock of Finished Goods 1,02,000 62,000
Stock related to other departments (30% of Finished Goods) 30,600 18,600

** Net transfer of Finished Goods by
Department A to B = ₹ (1,75,000 – 45,000) = ₹ 1,30,000
Department B to A = ₹ (150,000 – 32,000) = ₹ 1,18,000
Departmental Accounts - CA Inter Accounts Question Bank 33
2. Unrealised profit included In the closing stock
Department A = 27.16% of ₹ 30,600 (30% of Stock of Finished Goods
₹ 1,02,000) = ₹ 831100
Department B = 24.79% of ₹ 18,600 (30% of Stock of Finished Goods ₹ 62,000) = ₹ 4611.00.

Departmental Accounts - CA Inter Accounts Question Bank

Question 19.
M/s. Suman Enterprises has two Departments, Finished Leather and 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 2014:

Finished Leather Department (₹) Shoes Department (₹)
Opening Stock (As on 01.04.2013) 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 5,00,000
Manufacturing Expenses
Selling Expenses 1,50,000 60,000
Rent and Warehousing 5,00,000 3,00,000
Stock on 31.03.2014 12,20,000 5,00,000

The following further information 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 2012-1 3.
(iii) General expenses of the business as a whole amount to ₹ 8,50,000. (May 2015, 8 marks)
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 34
Stock Reserve for this year 75,000 – 48,375 = ₹ 26,625

Question 20.
The following balances were extracted from the books of Beta. You are required to prepare Departmental Trading Account and General Profit & Loss Account for the year ended 31st December 2016:

Particulars Deptt A ₹  Deptt. B ₹
Opening Stock 3,00,000 2,40,000
Purchases 39.00,000 60,00,000
Sales 54,60,000 90,00,000

General expenses incurred for both the Departments were ₹ 7,50,000 and you are also supplied with the following information:
(i) Closing stock of Department A ₹ 6,00,000 including goods from Department B for ₹ 1,20,000 at cost to Department A.
(ii) Closing stock of Department B ₹ 12,00,000 including goods for Department A for 180,000 at cost to Department B.
(iii) 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.
(iv) The gross profit is uniform from year to year. (May 2017, 8 marks)
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 36

Question 21.
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 2018 are given below:

Particulars 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 Dept. (in sq It) 1,500 1,250 1,000
Number of employees in each Department 25 20 15
Electricity consumed by each Department (in units) 300 200 100

Additional Information:

Amount (₹)
Carriage inwards 1,500
Carriage outwards 2,700
Salaries 24,000
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 2018 after providing provision for Bad Debts at 5%. (May 2018, 10 marks)
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 38

Question 22.
The following details are available in respect of a business for a year.

Department Opening Stock Purchase Sales
A 120 units 1000 units 1,020 units at  ₹ 20.00 each
B 80 units 2,000 units 1,920 units at ₹ 22.50 each
C 152 units 2,400 units 2,496 units at ₹ 25.00 each

The Total Value of Purchases is 1,00,000. It is observed that the rate of Gross Profit is the same in each department. Prepare Departmental Trading Account for the above year.

Answer:
Departmental Accounts - CA Inter Accounts Question Bank 40
2. Computation of Gross Profit Ratio
We are informed that the GP Ratio is the same for all Departments. Selling Price is given for each department products but the Sale Quantity is different from that of Purchase Quantity. To find the Uniform GP Rate, the Sale Value of Purchase Quantity should be compared with the Total Cost of Purchase, as under:
Departmental Accounts - CA Inter Accounts Question Bank 41

Departmental Accounts - CA Inter Accounts Question Bank

Question 23.
The following balances were extracted from the books of ABC Sons. You are required to prepare Departmental Trading Account and Profit and Loss Account for the year ended 31 March after adjusting the unrealized Department Profits if any.

Particulars Deptt. A Deptt. 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 àf 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.
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 42

Question 24.
XY and Z carried on a business of Drapers and Tailors in Delhi; X was in charge of Department “A” dealing in cloth, Y of Department B (or selling garments and Z of Department ‘C the tailoring section. It had been agreed that each of the three partners would receive 75% of the profits disclosed by accounts of the department of which he was in charge and the balance of the profits would be shared in the proportion. X ½, Y 1/4, and Z 1/4. The following is the Trading and Profit and Loss Account of the firm for the six months ended 31st March 2012.
Departmental Accounts - CA Inter Accounts Question Bank 44
After consideration of the following, prepare Departmental Accounts and Profit and Loss Appropriation Account.
(i) 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.
(ii) Cloth and garments are sold in the showroom. Tailoring work is carried out in the workshop.
(iii) The details of salaries and wages were as follows:
(a) General Office 50%, showroom 25%, and 25% for workshop 75% of which is for tailoring alone.
(b) Allocate General Office Expenses, in the proportion of 3:2:1 among the Departments A, B, C.
(c) Distribute showroom expenses in the proportion of 1:2 between Departments A and B.
(iv) The workshop rent is ₹ 1,000 per month. The rent of the General Office and Showroom is to be divided equally between Departments A and B.
(v) Depreciation charges are to be allocated equally amongst the three Departments.
(vi) All other expenses are to be allocated on the basis of turnover (excluding Internal Transfers).
(vii) Discounts received are to be credited to the three Departments as follows: A ₹ 400; B ₹ 250; C ₹ 150.
(viii) The opening stock of Department C does not include any goods transferred from Department A.
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 45
Note: Gross profit of Department A is 30% in Sales (including transfer to Dept C). There is some unrealised profit only on inter-departmental stock. 30% of ₹ 5,700 is required as stock reserve. This will be debited to Profit and Loss Appropriation account.
Departmental Accounts - CA Inter Accounts Question Bank 45

Departmental Accounts - CA Inter Accounts Question Bank

Question 25.
ABC Ltd., has 3 departments, A, B, C. The following information is provided:
Departmental Accounts - CA Inter Accounts Question Bank 47
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 ₹ 3000, Allocate expenses in the ratio of departmental gross profit. Opening figures of reserves for unrealised profits on departmental stocks were; Department B ₹ 1,000; Department C ₹ 2,000. Prepare Departmental Trading and Profit and Loss Account for the year ending on March 31, 2012.
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 48

Question 26.
Martis Ltd. has several departments. Goods supplied to each department are debited to a Memorandum Departmental Stock Account at cost, plus a fixed percentage (markup) 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 r the stock account and in mark-up account. The markup for Department A for the last three years has been 25%. Figures relevant to Department A for the year ended 31st March 2013 were as follows:
Opening stock as on 1 April 2012, at cost ₹ 65,000
Purchase at cost ₹ 2,00,000
Sales ₹ 3,00,000
It is further ascertained that:
(1) Shortage of stock found in the year ending 31.03.2013, costing to ₹ 1,000 were written oil.
(2) Opening stock on 01.04.12 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.
(3) 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 .03.13.
(4) The departmental closing stock is to be valued a cost subject to adjustment for markup and mark-down.
You are required to prepare:
(i) A Departmental Trading Account for Department A for the year ended 31st March 2013 in the books of Head Office.
(ii) A Memorandum Stock Account for the year.
(iii) A Memorandum Mark-up Account for the year. (Nov 2023, 12 marks)
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 49

Question 27.
M/s Shyam Udyog, a retail store, has two departments, Department X and Department Y for each of which stock account and memorandum ‘mark-up’ account are kept. All the goods supplied to each department are debited to the stock account at cost plus a markup’, which together make up the selling price of the goods, and in the account the sale proceeds of the goods are credited. The amount of ‘mark-up’ is credited to the Departmental Mark-up amount. 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. The rate of ‘Mark up’ for X Department is 33-1/3% of the cost and for Y Department it is 50% of the
cost. The following figures have been taken from the books for the year ended March 2016:

X Department Amount (₹) Y Department Amount (₹)
Stock as on April 1st at cost 3,15,000 5,58,000
Purchases 22,77,000 28,02,000
Sales 28,68,000 37,50,000

(1) The stock of Department X on April 1st, 2015 included goods the selling price of which had been marked down by ₹ 37,800. These goods were sold during the year at the reduced prices.
2) Certain stock of the value of ₹ 2,07,000 purchased from the Department X was later in the year transferred to the Department Y and sold for ₹ 3,10,500. As a result, though cost of the goods is Included in the Department X the sale proceeds have been credited to the Department Y.
(3) During the year 2015-16 to promote the goods, they were marked down as follows:

Cost (₹) Marked  down (₹)
Department X 1,68,000 10,800
Department Y 3,00,000 60,000

All the goods marked down, were sold except of Department Y of the value of 1,50,000 marked down by ₹ 30,000.
(4) At the time of stock-taking on 31st March 2016, it was discovered that cloth of Department X of the cost of ₹ 11,700 was missing and it was decided that the amount be written off. You are required to prepare for both the departments for the year ended 31st March 2016:
(a) The Memorandum Stock Account and
(b) The Memorandum Mark-up Account. (Nov 2016, 8 marks)
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 54

Departmental Accounts - CA Inter Accounts Question Bank

Question 28.
ABC Ltd. has several departments. Goods supplied to each department are debited to a Memorandum Departmental Stock Account at cost plus a fixed percentage (marks-up) to give the normal selling price. The amount of markup 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 markup for department X for the last three years has been 20%. Figures relevant to department X for the year ended 31st March 2019 were as follows:
Stock as on 1 April, 2018 at cost ₹ 1,50,000
Purchases at cost ₹ 4,30,000
Sales ₹ 6,50,000
It is further ascertained that:
1. Shortage of stock found in the year ending 31.3.2019, costing ₹ 4,000 were written off.
2. Opening stock on 1.4.2018 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 .3.2019.
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, 2019:
(i) Departmental Trding Account for department X for the year ended 31st March, 2019 in the books of head office.
(ii) Memorandum Stock Account for the year ended 31st March 2019.
(iii) Memorandum Mark-Up account for the year ended 31st March 2019. (Nov 2019, 10 marks)
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 56
Note: It has been assumed that markup (given in the question) is determined as a percentage of cost.

Question 29.
A B & C is a Retail Store having 2 Departments A and B. The Company maintains Memorandum Stock Account & Memorandum Mark-Up Account for each of the Departments. Supplies issued to the Departments are debited to the Memorandum Stock Account of the Department at Cost plus Mark-Lip, 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 Mark-up Account. Department P has a markup of 1/3rd on Cost, and Department Q has a markup of 50% on Cost. The following information has been extracted from the records of the Company for a year ending 31st December.

Particulars A B
Opening Stock (at Cost) 24,000 36,000
Purchases 1,62,000 1,90,000
Sales 2,10,000 2,85,000

Opening Stock of Department A includes goods on which the Selling Price has been marked down by ₹ 510. These goods were sold in January at the reduced Selling Price.
Certain goods purchased during the year for ₹ 2,700 for Department A, were transferred during the year to Department B and sold for ₹ 4,500. Purchases and Sales are recorded in the Purchases of Department A and the Sales of Department B respectively, but no entries have been made in respect of the transfer.

Goods purchased during the year were marked down as follows:

A B
Cost 8,000 21,000
Markdown 800 4,100

At the end of the year there were some items ¡n the stock of Department B, which had been marked down to ₹ 2,300. With this exception, all goods marked down during the year were sold during the year at reduced prices.
During stock-taking at the end of the year, goods which had cost ₹ 240 were found to be missing in Department
It was determined that loss should be regarded as irrecoverable. Closing Stock in both Departments are to be valued at Cost for the purpose of the annual accounts.

Prepare for the year ended 31st December –
1. Trading A/c,
2. Memorandum Stock A/c, and
3. Memorandum Mark Up A/c.
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 59
Note 1: Mark Down In Unsold Stock of Department Q
Total Mark down × \(\frac{\text { Value of Stock }}{\text { Value of Mark Down Goods }}=4,100 \times \frac{2,300}{27,400} \) = ₹ 344
Value of Mark Down G00ds = Cost (+) Normal Mark Up 50% (-) Amount Marked Down
= ₹ 21,000 (+) ₹ 10,500 (-) ₹ 4,100 (given)
= ₹ 27,400
Departmental Accounts - CA Inter Accounts Question Bank 61

Question 30.
ABC 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 (markup) to give the normal selling price. The markup 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 markup for Department A for the last three years has been 40%. Figures relevant to Department A for the ended 31st Dec. 2018 were as follows:
Stock 1st Jan., 2018 at cost, ₹ 80,000, Purchases at cost ₹ 1,80,000, Sales 3,20,000. It is further ascertained that:
(a) Goods purchased in the period were marked down by ₹ 1,400 from a cost of ₹ 16,000. Marked-down stock costing ₹ 4,000 remained unsold on 31st’ Dec 2018.
(b) Stock shortages at the year-end, which had cost 1,200 were to be written off.
(c) Stock at 1st Jan. 2018 including goods costing ₹ 8,200 had been sold during the year and has been mark down in the selling price by ₹ 740. 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.
Prepare
(i) A Departmental Trading Account
(ii) A Memorandum Stock Account
(iii) A Memorandum Mark-up Account for the year 2018.
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 62

Departmental Accounts - CA Inter Accounts Question Bank

Question 31.
Fbb Store Ltd. 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 markup 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 (markdown) is entered in the Memorandum Stock account and in the mark-up account.

Department A has a Mark-up of 33-1/3% on cost, and Department B 50% on cost. The following information has been extracted from the records of Southern Store Ltd. for the year ended 31st December 2018.

Department A ₹ Department B ₹
Stock, 1 January. 2012 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 A on 1st January 2018 included goods on which the selling price has been marked down by ₹ 510. These goods were sold in January. 2018 at the reduced price.
(b) Certain goods purchased in 2012 for ₹ 2,700 for Department A were transferred during the year to Department B and sold for ₹ 4,050. Purchase and sale are recorded in the purchases of Department A and the sales of Department B respectively, but no entries in respect of the transfer have been made.
(C) Goods purchased In 2018 were marked down as follows:

Department A ₹ Department B ₹
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 B which had been marked clown to ₹ 2,300. With this exception all goods marked down in 2018, were sold during the year at the reduced prices:
(d) During stocktaking on 31st December 2018, goods which had cost ₹ 240 wore found to be missing in department A, 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. Prepare for each department for the year ended 31st December, 2018
(i) a Trading Account,
(ii) a Memorandum Stock Account, and
(iii) a Memorandum Mark-up Account.
Answer:
Departmental Accounts - CA Inter Accounts Question Bank 66

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