Question

What are the four indirect expenses and its basis of allocation in departmental accounting?

Answer 1

Answer:

Indirect expenses in departmental accounts include, 1-Expenses on purchases, carriage, duty, etc. This is the expense of one department, i.e make allocation of ratio of departmental net purchases but, ignore the inter-departmental purchases.Cost allocation is the process of identifying, aggregating and assigning costs to cost objects. Departmental Accounts are accounts relating to the several departments or sections of a business drawn up with a view to ascertaining their individual performances.

An allocation base is the basis on which Cost accounting allocates overhead costs. ... Allocation bases are mostly used to assign overhead costs to inventory that is produced. For example, an IT department allocates its expenses according to the number of computers that each department uses.

Answer 2

Normally, all direct expenses are charged to the respective departments, in case of indirect or general expenses, proper allocation among the departments must be made in order to ascertain the profit and loss made by each department. ... Some expenses cannot be apportioned and no basis of apportionment is practicable.