Divisional income.

Divisional income is measured similar to business Profit for the period in financial accounting. It takes account of all interdivisional transfers of goods and services. All transfers constitutes revenue to selling division and expense to buying division. Divisional income to reflect divisions underlying performance has to be accounted for in such a way as each divisions are separate business units. Every transfers of goods & service to and from head office or another division is charged at market price. However, this is not necessary, business may have different policies for charging transfer of goods and services between divisions.

Limitation of divisional income is that it is an absolute measure. It does not takes into account size (investment made to generate income) of different divisions. Divisional income may not worthwhile to compare divisional performance but it can be used to compare divisional performance with its own budgeted divisional income or actual previous years divisional income figure.