Difference between branch account and departmental account


What is branch accounting:

Branch accounting could be a clerking system during which separate accounts area unit maintained for every branch or operational location of a corporation. generally found in geographically distributed firms, multinationals, and chain operators, it permits for larger transparency within the transactions, cash flows, and overall monetary position and performance of every branch.

Branch accounts can even visit records singly created to indicate the performance of various locations, with the accounting records really maintained at the company headquarters. However, branch accounting sometimes refers to branches keeping their own books and later causation them into the top workplace to be combined with those of different units.

Working of branch account:

In branch accounting, every branch defined as a geographically separate operational unit is treated as a personal profit or value center. Its branch has its own account. Therein account, it records such things as inventory, assets, wages, equipment, expenses like rent and insurance, and monetary fund.

Like any double entry system, the ledger keeps a tally of assets and liabilities, debits and credits, and ultimately, profits and losses for a collection amount.

What is departmental accounting:

Departmental accounting is Associate in Nursing accounting utilized by organizations to manage the accounts of their varied departments in separate books, i.e., for each department separate balance and profit and loss account is ready, and at the tip of the year balances of every department gets transferred to general profit and loss account, ready to search out the gain of a firm as an entire.

Advantage of departmental accounting:

If the organization prepares division accounts, it becomes helpful for them to boost the department wise potency by ascertaining and reducing the operational expenses of every department.

Departmental accounting enhances the profits of every department per annum.

Departmental accounts area unit reviewed for getting ready the division budgets of a corporation.

Departmental accounting proves helpful to calculate the stock turnover quantitative relation of each department.

It is advantageous to calculate the performance of the staff operating in every department to reward them consequently.

Departmental accounting helps to boost the competitive spirit of every department’s personnel that as a full profit the organization.

Objective of departmental accounting:

To compare the performance of every department with their previous year performance additionally like the opposite departments of the organization to live the potency of the departments.

It helps the organizations to spot high profit serving departments.

Departmental accounting clarifies the image of the upper in operation departments of the organization.

It helps the organization in deciding relating to enlargement or closure of the departments, i.e., that department ought to be continued  and that ought to be finish off.