In the preparation of departmental income statements,the preparer completes the following steps in the following order:

A) Identify direct expenses; allocate indirect expenses; allocate service department expenses.
B) Identify indirect expenses; allocate direct expenses; allocate service department expenses.
C) Identify service department expenses; allocate direct expenses; allocate indirect expenses.
D) Identify direct expenses; allocate service department expenses; allocate indirect expenses.
E) Allocate all expenses.

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kirsten schlange · Accepted Answer

Final Answer : A, Explanation :  The correct sequence for preparing departmental income statements involves first identifying direct expenses that can be directly attributed to a department. Next, indirect expenses, which cannot be directly linked to a specific department, are allocated based on a suitable basis. Finally, expenses from service departments, which provide support to other departments, are allocated to those benefiting departments. This process ensures that all costs are accounted for in the respective departments.

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