Normally, there are two methods of departmental accounting. They are:
1. Separate Unit Method
2. Analytical Method
1. Separate Unit Method
This method is suitable if the organization is very large in size and operation. In this method, each department maintains and prepares books of account separately. The principle 'one department one account' is followed in this method. At the end of the accounting period, all the departmental accounts are combined together to calculate the result of the organization as a whole. This method is not suitable for a small organization.
2. Analytical Method
Separate unit method has different limitations such as overlapping of accounts, waste of time, expansiveness etc. Due to these limitations, the departmental organizations followed analytical method, which is also known as columnar method of accounting. This method is very simple to maintain. When the size of the departmental organization is small, the entire book keeping system for the business as a whole is generally kept by a central accounts department. An independent and individual department just maintains the records like purchase book, sales book, purchase return book, sales return book etc. A typical columnar subsidiary book is maintained by central account department.
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