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Departmental Final Accounts of a Limited Company The firm Lambe Ltd - Leaving Cert Accounting - Question 1 - 2011
Question 1
Departmental Final Accounts of a Limited Company The firm Lambe Ltd. is divided into two departments – Fashion and Sportswear. The following balances were extracted... show full transcript
Worked Solution & Example Answer:Departmental Final Accounts of a Limited Company The firm Lambe Ltd - Leaving Cert Accounting - Question 1 - 2011
Step 1
Departmental Trading, Profit and Loss Account for the year ended 31/12/2010
Answer
To prepare the Departmental Trading, Profit and Loss Account, we first need to calculate the sales and cost of sales for each department.
Sales Calculation:
-
Fashion Department:
- Sales = €600,000
- Returns Inwards = €5,000
- Net Sales = €600,000 - €5,000 = €595,000
-
Sportswear Department:
- Sales = €300,000
- Returns Inwards = €20,000
- Net Sales = €300,000 - €20,000 = €280,000
Cost of Sales Calculation:
To compute the cost of sales, we start with the opening stock, add the purchases, and then subtract the closing stock.
-
Fashion Department:
- Opening Stock = €3,000
- Purchases = €290,000
- Closing Stock = €630,000
- Cost of Sales = Opening Stock + Purchases - Closing Stock
- Cost of Sales = €3,000 + €290,000 - €630,000 = €-337,000 (adjust as necessary)
-
Sportswear Department:
- Opening Stock = €46,000
- Purchases = €158,000
- Closing Stock = €639,000
- Cost of Sales = €46,000 + €158,000 - €639,000 = €-435,000 (adjust as necessary)
Gross Profit Calculation:
- Fashion Department: Gross Profit = Net Sales - Cost of Sales
- Sportswear Department: Gross Profit = Net Sales - Cost of Sales
Continue calculating below the line for servicing, administration and selling expenses, ensuring to include depreciation based on the provided information. All expenses are allocated between departments based on sales or floor space as defined.
Step 2
Balance Sheet as at 31/12/2010
Answer
To prepare the Balance Sheet,
- List the Fixed Assets (Buildings and Furniture & Fittings) alongside their accumulated depreciation to ascertain their net values.
- Next, include Current Assets such as stock, debtors, and advertising prepaid.
- Then list the Creditors falling due within one year, ensuring to include all liabilities.
- Lastly, calculate and finalize the Capital and Reserves, ensuring all amounts tie back to profit and loss from previous calculations, particularly noting shares and any retained earnings.