Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Chapter 2: Accounting for Departments
Learning outcomes:
• Treatment of general expenses .
• Accounting treatment of the transfers between the departments .
• Treatment of unrealized profit generated by transfers between departments .
• How ending inventory for each department are presented in the Statement of
Financial Position.
1. Treatment of general expenses which serve more than one department .
Direct Expenses/Department: Serving the department only
1. Salaries and wages of the department employee .
2. Rental of Hangar manufacturing department .
3. Head of the department salary .
General expenses which serving more than one department on an appropriate basis.
Example 1: Transferring at cost
Department (A) transferred to the department (B) 100 pieces at a cost of 80 $. Department
(B) sold 70 pieces.
Required:
1. Prepare the journal entries
2. Present ending inventory in the Statement of Financial Position , if the company's
policy make Allowances to reduce inventory to net realizable value = 10%.
Solution:
To record the transfer:
