When a business deals in different kinds of products or services under one roof, it is divided into number of divisions which are known as departments. It is like decentralization of business activities where each department has the freedom to take decisions related to his or her department. Here is the list of objectives of department accounting –
1. It helps in determining the commission of the department manager when it is linked to profit achieved by their department.
2. It can help the management in deciding which department should be developed more and which should be closed in order to maximize profitability of the whole company.
3. It also helps in allocating cost to various departments and therefore helps in better control of cost of the departments of the company.
4. For a company which is dealing in multiple products, it is much easier to control and monitor several departments based on the products they sell rather than controlling it as a one single business.