Basis of Organisation |
- Branch Accounting is based on geographical locations or separate business units that operate as semi-independent entities.
- Each branch has its own set of books and accounts.
- Suitable for businesses with physically distinct locations, such as retail stores or sales offices.
|
- Departmental Accounting is based on functions or departments within a single business location or entity.
- Different departments within the same organization have their own accounts.
- Suitable for businesses with different functional areas like production, marketing, finance, etc., all operating within a single location.
|
Degree of Autonomy |
- Branches often have a higher degree of autonomy and may make certain operational decisions independently.
- Each branch maintains its own financial records, and the head office consolidates them periodically.
|
- Departments operate under the direct control and authority of the main or head office.
- Decisions and policies are typically centralized, and departments do not have significant decision-making power.
|
Level of Integration |
- Branches are often more integrated with the local market and adapt to specific customer needs in their respective locations.
- May have varying pricing strategies, product offerings, and marketing campaigns.
|
- Departments are typically integrated with the overall business strategy and may work together to achieve common organizational goals.
- There is often a higher level of co-ordination and sharing of resources among departments.
|
Accounting Treatment |
- Each branch maintains its own set of books, including cash book, sales book, and ledger accounts.
- Inter-branch transactions are recorded separately and eliminated during consolidation.
|
- Departments maintain their own accounts for expenses, revenues, and assets, but they are all part of the larger entity’s financial statements.
|
Scope of Operations |
Typically involves branches that are located in different physical locations, often in different cities or regions. |
Involves various functional departments operating within the same business location or entity. |
Cost Allocation |
Costs and expenses incurred at each branch are recorded separately, allowing for a detailed assessment of branch profitability. |
Costs are allocated to specific departments, helping in evaluating the performance and efficiency of each department. |
Examples |
- A retail chain with stores in different cities or countries.
- A bank with branches in different regions.
|
- A manufacturing company with departments for production, marketing, finance, and human resources.
- A large hospital with departments for different specialties (e.g., cardiology, pediatrics, surgery).
|