The Difference Between Branch Account and Departmental Account
When it comes to accounting, there are many terms that can become confusing for business owners. Two such terms are branch account and departmental account. While they may sound similar or even interchangeable, they represent two different types of operational structures in accounting.
Branch Account
A branch account is an accounting structure that is established to manage the finances of a separate geographic location or branch of a company. A company may have several branches which require separate bookkeeping records to keep track of individual revenues, expenses and assets. In this case, a branch account is created.
For instance, if a company has several retail stores in different locations, it may want to establish a branch account for each store in order to keep track of each store’s individual financial performance.
Departmental Account
A departmental account is an accounting structure that is established to manage the finances of a specific operational unit or department within a company. This structure allows a company to track revenues and expenses by department or business unit.
For instance, a company may have different departments such as accounting, marketing, and production. In this case, departmental accounts are created for each department in order to track expenses specific to each department. This helps the company to identify its most profitable departments and measure the performance of each department against its targets.
The Main Difference
The main difference between branch account and departmental account is the level of separation and the scope of activities covered. While a branch account is established for separate geographic locations, departmental accounts are established for separate business units.
Additionally, branch accounting is more focused on managing the finances of the branch on a geographical basis, while departmental accounting is focused on managing the finances of each specific operational unit or department.
In conclusion, understanding the difference between branch account and departmental account is vital for business owners who want to keep their finances in order. By using the correct accounting structure, businesses can ensure that they are efficiently tracking their financial performance, and make informed decisions that positively impact their operations.
Table difference between branch account and departmental account
Branch Account vs Departmental Account
| Criteria | Branch Account | Departmental Account |
|---|---|---|
| Definition | An account used to record transactions of a branch of an organization | An account used to record transactions of a department within an organization |
| Scope | Applies to a specific branch only | Applies to a specific department only |
| Control | Managed by the head office of the organization | Managed by the departmental head |
| Reporting | Used for preparing a branch’s financial statements | Used for preparing a department’s financial statements |
| Communication | Information is communicated to the head office | Information is communicated among departments |
| Performance measurement | Branch performance is measured against the set targets | Departmental performance is measured against the set targets |