Departmental accounts

Nothing much, just that separate transfer figures help us in calculating stock reserve (Unrealised profit in stock of one department to whom transfers were made). In this paper, this is little tricky adjustment. It is similar to ICAI Illustration 7. But in ICAI illustration, shoes were being made out of leather supplied by finished leather department only. So, we would directly apply gp ratio to opening and closing stock. But here only some of ready made garment's requirement is met internally, rest is from usual market. So, you have to take an assumption how much of inter-department transfer material will be there in closing stock. I believe ratio of transfer to readymade department (5L) and purchases excl. transfer (1.5cr) by that department which comes out to be 3.33% can be taken as a fair assumption. So, for calculation of stock reserve, we will take stock value x 60% (as only 60% is dyed fabric) x 3.33% and then apply GP ratio on that. In ICAI illustration this 3.33% etc. was not relevant as entire material was received from other department so, basically we have 100% in that case. We should wait for ICAI suggested answers and understand how they have solved. Meanwhile, do look at above Illustration as mentioned. And practice similar question 4 in Practical Problems.

Sahibdeep Singh

CA Inter

★ 14K+

11-Oct-21 14:59