In case of a multi-divisional organizational structure, there is one parent company, or head-office. And that parent owns smaller departments, under the same brand name. Dividing the firm, into several self-contained, autonomous units, provides the optimal level of centralization, in a company.
The divisions are nothing, but distinct parts, of the same business.
A division of a business or "business division" is one of the parts, into which a business, organization, or company is divided.
Divisions are self-contained units.
The divisional structure consists of self-contained divisions.
Divisions can be defined for different business areas, research units, or administrative offices.
They might have different appointed managers.
And, Divisions may have programmatic, operational, fiscal and budgetary responsibility, for a specific set of business activities, and projects
A department or division can be viewed as the intersection between a legal entity and a business unit.
In a simplistic scenario, all divisions are part of the same company.
The company itself is legally responsible, for all of the obligations and debts of the divisions.
However, this relationship, may change, in case of large organizations.
In that case, a business division may include, one or many subsidiaries as well.
Initially, in such companies, business units which are part of the same legal entity, are setup to operate in divisions.
Later with growth, these divisions become subsidiaries, and also independent legal entities.
In such cases, various parts of the business may be run by different subsidiaries.
Each subsidiary in such a case is a separate legal entity, owned by the primary business, or by another subsidiary in the hierarchy.
Divisions are also used by management, as a tool for segregation and delegation of responsibilities, to various parts of the business.
Divisions also help the management, in operational control.
Let us understand how they help management in these objectives.
In case of a multi-divisional organizational structure, there is one parent company, or head-office.
And that parent owns smaller departments, under the same brand name.
Dividing the firm, into several self-contained, autonomous units, provides the optimal level of centralization, in a company.
Although, the whole organization is controlled by central management.
But most decisions are left to autonomous divisions or departments.
Central management provides the overall direction of the firm.
While each division operates autonomously to cater to its own needs.
It is held accountable for its own profits, and can remain productive, even if the other divisions fail.
A division is a collection of functions, which manage similar types of activities, like the one which produce a product.
They are generally used as cost accumulators and also for revenue recognition.
They may have profit and loss responsibility, and may consist of a group of cost centers.
Departments can also serve as profit centers, managing their own profitability.
In that case, they utilize a budget plan to compete, and operate, as a separate business profit center.
Divisional structure could be based on, many external or internal parameters, based on the management needs.
Some commonly used parameters across industry are, product, customer segment, geographical locations etc.
For example, in case of differentiation by products, each division is responsible for certain product, and has its own resources, such as finance, marketing, warehouse, maintenance etc.
Let us look at some common methods of differentiation, for creating divisions.
First could be, By Product; For example separate divisions are created, to manage different product or service lines.
Another way is to differentiate By Geographical Location; Example is the regional offices created by companies, like Northern Division, Southern division etc.
One can also define divisions by the Type of Customer; For example in case of a bank, different divisions are created to take care of retail business, wealth management and corporate clients.
And divisions can also be created by different Processes; for example in case of a hospital, one can have a division managing admissions, another for surgery, and one for discharge processes, etc.
Trial Balance in General Ledger
One of the greatest benefits of using a double-entry accounting system is the capability to generate a trial balance. What do we mean by trial balance? As the name suggests a trial balance is a report that must have its debits equals to credits. Understand the importance of trial balance and why it is balanced. Learn how it is prepared and in which format.
Horizontal or Flat Organizational Structures
Flat organizational structure is an organizational model with relatively few or no levels of middle management between the executives and the frontline employees. Its goal is to have as little hierarchy as possible between management and staff level employees. In a flat organizational structure, employees have increased involvement in the decision-making process.
A joint venture (JV) is a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. A joint venture takes place when two or more parties come together to take on one project.
What is a Business Eco System?
The goal of a business is to generate capital appreciation and profits for its owners or stakeholders by engaging in provision of goods and services to customers within the eco system/framework governed by respective laws(local/international). The eco system involves various entities that the business works with for delivery of a product or service.
Global Business Services (GBS) Model
Global business services (GBS) is an integrated, scalable, and mature version of the shared services model. Global Business Services Model is a result of shared services maturing and evolving on a global scale. It is represented by the growth and maturity of the Shared services to better service the global corporations they support.
In this article, we explain some commonly used subsidiary ledgers like accounts receivable subsidiary ledger, accounts payable subsidiary ledger or creditors' subsidiary ledger, inventory subsidiary ledger, fixed assets subsidiary ledger, projects subsidiary ledger, work in progress subsidiary ledger, and cash receipts or payments subsidiary ledger.
This article explains the process of entering and importing general ledger journals in automated accounting systems. Learn about the basic validations that must happen before the accounting data can be imported from any internal or external sub-system to the general ledger. Finally, understand what we mean by importing in detail or in summary.
Hierarchical Organization Structures
Hierarchical structure is typical for larger businesses and organizations. It relies on having different levels of authority with a chain of command connecting multiple management levels within the organization. The decision-making process is typically formal and flows from the top down.
Accrued expenses, sometimes referred to as accrued liabilities, are expenses that have been incurred but have not been recorded in the accounts. Discuss the need to record accrued liabilities and why they require an adjustment entry. Understand the treatment for these entries once the accounting period is closed and learn to differentiate when the commitments become liabilities.
In this article, we will explain the general Ledger journal processing flow from entering journals to running the final financial reports. Understand the generic general ledger process flow as it happens in automated ERP systems. The accounting cycle explains the flow of converting raw accounting data to financial information whereas general ledger process flow explains how journals flow in the system.
© 2023 TechnoFunc, All Rights Reserved