( Or why my Department P&L doesn’t match my Company P&L )
The P&L handles reviewing what took place in your business from Sales and Expense stand point ( meaning what did you sell, what did that cost you to have it to sell, and what other monies have you paid to operate your business )
From an expense standpoint, departmental accounting is simply a way to break an expense across multiple departments ( for example, your Rent or Electric bill is probably divided between the departments based on actual square footage each department takes up ). As an example, your $300 electric bill would divvied up based on some percentage set up – but the combined department total would still be $300.
Where things can get tricky is when the Sales/Cost Departmental accounting is added to the mix. This is due to the ‘interdepartmental’ transactions that take place in the course of a sale. For example, let’s say we are selling a $100 helmet, that cost us $50. On a normal sale – or a parts sale from the parts department to a customer, that’s recorded as $100 sales – $50 cost. But if that same helmet is put on a RO or a Unit Sale – then all the internal departmental hits start to take place. So lets say you have it set that Parts sells its parts at 20% above cost. That means that the $50 helmet, parts sells to service/sales for $60, who then sell it to the customer for $100. This introduces 2 new hits to the GL equation. We have a parts department sales hit for $60, and a service/sales department cost hit for $60. These hit different internal sales and cost accounts on the GL. Now, because these 2 hits are internal hits, we don’t show them on the Company P&L because 1) the bank doesn’t care about seeing this extra $60 Sales/Cost and 2) It actually affects your sales to net income ratios [as in the company standpoint – you made $50 of gross proft from $100 in sales, where as in the departmental standpoint – you made $50 gross profit from $160 in sales ( with $110 in dept costs )]. So instead of having a Gross Sales margin of 50%, you have a Gross Sales Margin of 31% due to the department fluctuations – so naturally – we don’t want to see these figures – plus they are fake #s anyways – as no actual transaction took place between the departments – it just managerial accounting that aids you in determining the profitability more accurately between your profit centers. )
So based on this – the default 400.99.998-9 and the 500.99.998-9 accounts do not show up on the Company P&L…
UNLESS – you as a user – do something and manually hit one of these accounts ( say push a PO or write a check, or manual GL adjustment, etc ) – then – those items would appear on the P&L ( else your balance sheet would be out of balance and your p&l wouldn’t match ).
Now, when comparing your departmental p&l’s to each other, you really can only match up the bottom line #s. Now, with expenses, you should be able to add up all the departments together, and that should give you the matching amount on the company p&l – but with sales – that will never happen. All you can do there is add up the gross profit for each department – and that should match the gross department for the company p&l.