Meaning of departmental accounts

When a business is split ed up into a number of sections or division and they are situated under the same roof, these sections or divisions are known as Departments. Each departments may deal with different type of commodity. They maintain their accounting in a set of books. In such a condition, departmental Account refers to the maintenance of accounts of a business in a manner that makes it possible to ascertain the operational results of each activity/section/division/or department by preparing separate Trading and Profit and Loss Account. If business organisation is engaged in various lines of business, the preparation of Departmental Accounts is almost a financial necessity and managerial responsibility.

Departmental Accounting is a vital one for large prosperous business organizations. It controls wastage & misusing, compensates employee in terms of profit and commission, compares performance and progress of year to year or department to department or similar type of firm to firm, consolidates all kinds of operations or profitable lines, formulates suitable business policies for its expansion identifies the efficiency of its worker, serves to fulfill financial necessities and managerial responsibilities, and it evaluates employees contribution to the organization, etc