Departments are commonly used for tracking logical or geographic business segments. Departments are very well suited for tracking cost or profit centers. A department allows you to report income and
expenses for a specific cost or profit center individually or to combine the amounts for multiple cost or profit centers.
Departments should not be used to track separate legal entities due to the fact that the balance sheet is not maintained on a department level. All balance sheet accounts are posted using department 1 in the current division. This logic prevents you from having to use multiple accounts or account balances when you are reconciling activity for sub-ledgers such as accounts receivable, accounts payable or inventory.
If you need to track the assets and liabilities for two legal entities separately, you must use either multiple divisions or you must use multiple instances of the application.
Each Department in the system uses the same chart of accounts, but the accounts that can be posted to in each department can be controlled based on the account period records that are created in each department. In a typical situation, account period records are created for all accounts (income statement and balance sheet accounts) in department 1 in each division. For departments other than department 1 the account period records would normally include only sales, cost of sales, and expense accounts.