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CMA Intermediate · Financial Accounting · Branch (including Foreign Branch) and Departmental Accounts

In departmental accounting, rent of a showroom building occupied by three departments is normally apportioned among the departments on which basis?

Rent of a shared building is apportioned on the basis of floor area occupied by each department, because the expense arises from the use of space. Sales, headcount or stock value have no direct link with the space each department uses.

  1. AFloor area occupied by each departmentCorrect
  2. BSales made by each department
  3. CNumber of employees in each department
  4. DCost of closing stock of each department

Explanation

Rent is a cost of using space, so the logical basis is the floor area occupied. Sales, employee numbers or stock values do not reflect the space consumed by a department.

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