Distinguish between branch accounts and departmental accounts?

Answer 1

LocationOne of the primary differences in branch accounting and departmental accounting stems from how the business is structured. Businesses with their own accounting departments use departmental accounting when the accounting process takes place in a central location but is compartmentalized because the business consists of various departments. Each department might have some level of autonomy and might undergo separate audits. Branch accounting is used in industries such as banking where the business consists of branches that are generally independent of one another, even though they are all owned by a parent company or organization. CostOne way branch accounting and departmental accounting differ is the amount of manpower required to perform the jobs. With departmental accounting, most of the accounting procedures can be performed in-house and might be able to use an individual accountant or a small team that oversees the accounting for all departments. B.K. Banerjee, author of "Financial Accounting: Concepts, Analyses, Methods and Uses," notes that maintaining separate books for each department can be expensive. Instead, many companies opt for one group of Accountants to maintain all of the books. This cost consideration can also affect businesses using branch accounting because they might need multiple accountants to maintain books in separate branch locations. ResponsibilityThe level of responsibility and oversight is greater with branch accounting than it is with departmental accounting. Lack of centralization requires that each branch keep accurate records of its own. However, this also requires the parent company or organization to keep a watchful eye over the accountant and the branch organization. In departmental accounting, these actions occur within the central organization. Although the need to keep watch over each department remains, it can be easier to do so because it occurs within the parent company. ProfitabilityWhile branch and departmental accounting both help create a financial portrait of the company, with branch accounting, the profitability of each branch can be equally important. Companies can make adjustments as necessary for each branch of their organization. Adjustments can be made within individual departments as well, but profitability is seen within the larger picture of the parent organization's profits, rather than on an individual level.

Answer 2

1. Basis : Linkage

Departmental Accounting

Department are attached with the main organization under a single roof.

Branch Accounting

Branches are separated from the main organization.

2. Basis : Types

Departmental Accounting

There are no classification of Departments.

Branch Accounting

The Branches may be dependent or independent.

3. Basis : Expenses

Departmental Accounting

Allocation of departmental common expenses is a tough job.

Branch Accounting

There is no need for allocation of branch expenses.

4. Basis : Functional Division

Departmental Accounting

Fuctional Division is possible in case of departmental concerns.

Branch Accounting

It is not possible in case of branch.

5. Basis : Reconciliation of results

Departmental Accounting

Departmental Accounting presents the trading results of each individual department.

Branch Accounting

Branch Accounting present the trading results of each individual branches.