Correct Option: B. Contribution of each department Detailed Explanation: Departmental accounts are a specialized form of accounting that focuses on the financial performance of different segments or departments within an organization. The primary purpose of maintaining departmental accounts is to ascertain the contribution of each department to the overall profitability of the organization.

1. Understanding Contribution:
2. The term "contribution" refers to the amount that each department contributes to covering the fixed costs of the organization and generating profit. It is calculated as sales revenue minus variable costs. This helps in understanding how much each department is contributing to the overall financial health of the organization.
3. Importance of Departmental Accounts:
4. By analyzing departmental accounts, management can identify which departments are performing well and which are underperforming. This information is crucial for making informed decisions regarding resource allocation, budgeting, and strategic planning.
5. Components of Departmental Accounts:
6. Sales: The total revenue generated by each department.
7. Direct Costs: Costs that can be directly attributed to a department, such as raw materials and direct labor.
8. Contribution Margin: This is calculated as Sales - Direct Costs. It shows how much each department contributes to covering fixed costs and generating profit.
9. Example Calculation:
10. Suppose Department A has sales of $100,000 and direct costs of $60,000. The contribution margin would be: [ \text{Contribution Margin} = \text{Sales} - \text{Direct Costs} = 100,000 - 60,000 = 40,000 ]
11. This means Department A contributes $40,000 towards covering fixed costs and profit.

Why Other Options Are Incorrect:

• Option A: Profits of the entire organization:
• While departmental accounts can ultimately affect the overall profit of the organization, they do not directly ascertain the total profits. Instead, they focus on the performance of individual departments. The overall profit is a result of aggregating the contributions from all departments.
• Option C: Expenses of each department:
• Although departmental accounts do track expenses, the primary goal is not merely to record expenses but to analyze the contribution of each department. Expenses are part of the calculation, but they do not represent the main focus of departmental accounts.
• Option D: Sales of each department:
• Sales figures are indeed recorded in departmental accounts, but the primary purpose is to analyze how those sales contribute to the overall profitability after accounting for costs. Sales alone do not provide a complete picture of a department's financial performance.

Revision Summary:

• Departmental accounts are maintained to assess the contribution of each department to the organization's profitability.
• Contribution is calculated as sales revenue minus direct costs.
• Understanding departmental performance aids in strategic decision-making and resource allocation.
• The focus is on contribution, not just sales, expenses, or overall profits.