Fastlane Accounting, LLC Online Accounting Management & Bookkeeping

As a business grows, it may expand into a new department that will need its own degree of autonomy. A business may incubate another business, a start-up in the making. For example, a famous apparel company, Rock and Republic, have decided to launch an energy drink. While the beverage department may be funded by the apparel company, it should still have its own profit and loss (p&l) statement to track the revenue and expenses. The apparel company has a master p&l but is able to separate the p&l for the beverage if they need it as a tool for budgeting and forecasting.

Another example is Microsoft. It has a Windows department, Xbox department, and Microsoft Office department. In order to evaluate the performance of each product, it has its own accounting system. Departmental accounting, however, may not necessarily involve a new product line. It could be services such as manufacturing, additional retail store, marketing, and so on.

Departmental accounting may not be separated from the main profit and loss statement because it still shares expenses such as rent and utilities from the parent company. However, it is very important to track the new and growing department to see how much money you are losing or making; to determine whether this business is a cost center or a profit center.

At FastLane Accounting, we can give your Accounting department support in managing the growing department so that you can have peace of mind knowing that everything will be accounted for. We can give an advice about the set-up and will work as a team with your accounting staff to provide allocations to the master p&l until the new department can be independent on its own.