This post addresses departmental income statements.
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1.) Explain the steps required to prepare a departmental income statement.
2.) Describe the information found on a responsibility accounting performance report.
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Solution Summary
The solution thoroughly discusses the steps required to prepare a departmental income statement and also thoroughly discusses the information found on a responsibility accounting performance report. References are also provided.
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There are four main steps that are needed to prepare a departmental income statement. They are: 1) to accumulate all direct expenses, 2) to allocate indirect expenses across all departments, 3) to allocate expenses of the service departments to the operating departments, and 4) to prepare the performance reports. The steps are done in this exact order. If they are not performed in the prescribed order, the statements run the risk of not being consistent.
Departmental costs "report operating costs that are classified as direct costs, which are directly traceable to a specific department" (Hotelmule, 2010). The direct costs are traceable to the specific department and include the same direct expenses as are used in typical accounting ...
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