TYPES OF DEPARTMENTS

TYPES OF DEPARTMENTS

There are two types of departments: Dependent and Independent Departments. 

 Independent Departments

Departments which work independently of each other and have negligible inter- department transfers are called Independent Departments. 

 Dependent Departments

Departments which transfer goods from one department to another department for further processing are called dependent departments. Here, the output of one department becomes the input for the other department. These transfers may be done at cost or some pre-decided selling price. The price at which this is done is known as transfer price. In these departments, unloading is required if the transfer price is having a profit element. The method of eliminating unrealised profit is being discussed in the succeeding para.