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Difficulty: MediumPreparation of Departmental Trading, Profit and Loss Accounts

A retail store operates two departments, Department X and Department Y. For the year ended 31 December 2025, the following financial details are provided:

- Department X Gross Profit: ₦150,000
- Direct administrative expenses for Department X: ₦25,000
- Total Rent and Rates: ₦60,000 (apportioned based on floor space: Department X occupies 1,200 m21,200\text{ m}^2 and Department Y occupies 800 m2800\text{ m}^2)
- Total Staff Salaries: ₦40,000 (apportioned based on staff headcount: Department X has 6 employees and Department Y has 4 employees)

What is the Net Profit of Department X in Naira (₦)?

Answer: 65000 ₦

Answer

The Net Profit of Department X is ₦65,000.
To find the Net Profit of Department X, calculate the apportioned share of shared expenses and add direct expenses. Rent apportioned to Department X based on floor space is 1,2002,000×₦60,000=₦36,000\frac{1,200}{2,000} \times ₦60,000 = ₦36,000. Salaries apportioned based on headcount are 610×₦40,000=₦24,000\frac{6}{10} \times ₦40,000 = ₦24,000. Adding direct administrative expenses of ₦25,000₦25,000 yields total expenses of ₦36,000+₦24,000+₦25,000=₦85,000₦36,000 + ₦24,000 + ₦25,000 = ₦85,000. Subtracting total expenses from the Gross Profit (₦150,000−₦85,000₦150,000 - ₦85,000) gives a Net Profit of ₦65,000₦65,000.

Step-by-Step Solution

1
Apportion Rent and Rates to Department X
Rent for Dept X = 1,2001,200+800×₦60,000=₦36,000\frac{1,200}{1,200 + 800} \times ₦60,000 = ₦36,000
Rent expense is apportioned in proportion to floor space occupied.
2
Apportion Staff Salaries to Department X
Salaries for Dept X = 66+4×₦40,000=₦24,000\frac{6}{6 + 4} \times ₦40,000 = ₦24,000
Salaries are apportioned in proportion to the number of staff in each department.
3
Compute Total Expenses for Department X
Total Expenses = ₦36,000+₦24,000+₦25,000=₦85,000₦36,000 + ₦24,000 + ₦25,000 = ₦85,000
Combine the apportioned rent, apportioned salaries, and direct administrative expenses.
4
Determine Department X Net Profit
Net Profit = ₦150,000−₦85,000=₦65,000₦150,000 - ₦85,000 = ₦65,000
Deduct total departmental expenses from the departmental gross profit.

Key Concept

Apportionment of indirect expenses and computation of departmental net profit.
Estimated Time:1m 30s
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Topics

Preparation of Departmental Trading, Profit and Loss Accounts

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