2.08M

Category:

finance

Accounting for branches

1.

Chapter 1: ACCOUNTING FOR BRANCHES
HEAD OFFICE
(JEDDAH)
BRANCH
(RABIGH)
INLAND
BRANCH
DEPENDENT BRANCH (small scale)
Accounts are made by HO
FOREIGN
BRANCH
INDEPENDENT BRANCH (large scale)
There are three methods to maintain the account
1. Debtors SYSTEM
2. Stock & Debtors SYSTEM
3. Final Account SYSTEM

2.

1st Method: Debtors System
NOTES UNDER DEBBTORS SYSTEM:
1. Credit sales are not shown in branch account.
2. Expenses paid by branch are not shown in branch account b’coz they are adjusted
through cash account.
3. Non-cash expenses (dep., bad debts, loss by fire, and loss by theft) are also not
shown in branch account because they are adjusted through assets account.

3.

FORMAT OF BRANCH ACCOUNT:
Books of the Head Office
Branch Account
Particulars
Op. Stock
Op. Debtors
Op. Petty
Op. Furniture
Op. Prepaid Expenses
Goods sent to Branch
Cash sent to branch
for branch expenses
for any other purpose
Cl. Creditors
Cl. Outstanding Expenses
Profit & Loss A/c (Profit)
Rs.
Opening
Assets
Fresh
Capital
Cl. Liability
Particulars
Op. Creditors
Op. Liability
Op. Outstanding Expenses
Cash received from branch
Cash Sales
Drawings
Collection from Debtors
Goods Returned by Branch
Cl. Stock
Cl. Debtors
Closing
Petty Cash
Assets
Cl. Furniture
Cl. Prepaid Expenses
Profit and Loss A/c (Loss
Rs.

4.

Question.1 (Goel Pg.16.4)
Narmada Limited has a branch at Jaipur. Branch remits all cash received daily to the Head Office and all expenses of
the branch are paid by HO directly. From the following particulars as on 31st December 1994, prepare a Branch
Account in the books of the HO.
Stock at Branch on 1st January, 1994
Petty Cash at Branch on 1st January, 1994
Goods supplied to Branch during the year
Goods Returned by Branch
Cash sent to Branch for:
Salaries
Rent
Advertisement
Cash sent to Branch for Petty Cash
Cash Received from the Branch during the year
Cash sent by Branch on 28th December, 1994 still in transit
Stock at Branch on 31st December, 1994
Balance of Petty Cash on 31st December, 1994
Salary outstanding on 31st December, 1994
19,500
500
1,80,000
5,400
22,000
6,000
1,500
1,000
2,15,000
8,000
22,600
200
2,000

5.

SOLUTION: 1
IN THE BOOKS OF HO. (MULTAN)
LAHORE BRANCH ACCOUNT
PARTICULARS
AMOUNT
PARTICULARS
AMOUNT

6.

SOLUTION: 1
IN THE BOOKS OF HO. (MULTAN)
LAHORE BRANCH ACCOUNT
PARTICULARS
AMOUNT
BALANCE B/D:
OPENING STOCK
Petty cash
PARTICULARS
AMOUNT
Goods Returned by Branch
By Bank A/C ( From Branch)
19,500
500
1,80,000 Cash in transit
8,000
To Bank (exp.)
(22000+6000+1500)
To Bank (Petty exp.)
29,500 Closing stock
22,600
To Profit & Loss A/C
2,15,000
20,000 By Closing Balance :
Goods sent to Branch
Balance c/d O/S Salary
5,400
1,000 Petty Cash
200
30,800
2,000
18,700
2,51,200
2,51,200

7.

Question.2 (Sharma Pg.251)
Shashi & Co. of Bikaner has their branch at Kanpur which sell goods for cash only. The following are the
transactions between the HO and Branch Office for the year ending 31st December 2017.
From the following information, prepare Kanpur Branch Account in the HO Books.
Opening Stock 1st January 2017
Goods supplied to Branch
Cash sent to branch for:
Rent
Other Expanses
Cash received from the branch during the year
Closing stock at 31st December 2017
Closing balance of petty cash at 31st December 2017
20,000
50,000
200
100
60,000
15,000
10

8.

SOLUTION: 2
Opening Stock 1st January 2017
Goods supplied to Branch
Cash sent to branch for:
Rent
Other Expanses
Cash received from the branch during the year
Closing stock at 31st December 2017
Closing balance of petty cash at 31st December 2017
20,000
50,000
200
100
60,000
15,000
10
IN THE BOOKS OF Shashi & Co. of Bikaner
KANPUR BRANCH ACCOUNT
PARTICULARS
BALANCE B/D:
STOCK
To Goods Supplied to Branch A/C
To Cash A/C:
Rent
200
Other Exp.
100
To N.Profit Transfd to General P & L A/C
AMOUNT
PARTICULARS
AMOUNT
20,000 By Cash A/C
50,000 By Balance c/d:
Closing stock
300 Petty Cash
4,710
75,010
60,000
15,000
10
15,010
75,010

9.

Question.3 (zeepedia)
From the following information relating to the Sialkot Branch for the year ending 31st,
March 2007. Prepare the Branch Account in the books of head office.
Opening Stock at Branch
37,500 Cheque sent to Branch:
Opening Debtors in Branch
75,000 Salaries
Opening Petty Cash at Branch
750 Rent & Taxes
Goods Sent to Branch
Cash Sales
Petty Cash
6,30,000
1,50,000 Closing Stock at Branch
Cash Received from Debtors
Closing Debtors at Branch
Goods Returned by Branch
5,25,000
5,000 Closing Petty Cash at Branch
Credit Sales
5,70,000
22,500
3,750
2,750
62,500
120,00
0
500

10.

Solution.3 (zeepedia
BRANCH ACCOUNT
Particulars
Opening Stock at Branch
Opening Debtors in Branch
Opening Petty Cash at Branch
Amount
Particulars
($)
37,500 Cash Received from Branch:
75,000 Cash Sales
750 Cash Recv. from Debtors
Cheque sent to Branch:
Goods Returned by Branch
Salaries
22500
Closing Stock at Branch
Rent & Taxes
3750
Closing Debtors at Branch
Petty Cash
2750
Goods Sent to Branch
Profit & Loss A/c (Profit)
29,000 Closing Petty Cash at Branch
Amount
($)
1,50,000
5,25,000
6,75,000
5,000
62,500
120,000
500
6,30,000
90,750
8,63,000
8,63,000

11.

Question.4 (zeepedia)
Excellent Garments of Multan has a branch at Lahore. Goods are supplied to the branch at cost. The
expenses of the branch are paid from Multan and the branch keeps a sales Journal and the debtors’ ledger
only. From the following information supplied by the branch, Prepare the Branch Account in the books of
HO.
Opening Stock
Closing Stock
Goods received from HO
Credit Sales
Cash Sales
24,000
18,000
33,600
41,000
17,500
Closing Debtors
Opening Debtors
Bad Debt
Exp. paid by Head office
Cash received from Debtors
9,160
?
140
10,400
37,900

12.

SOLUTION: 4
Debtors A/C
PARTICULARS
OPENING DEBTORS (BALANCE ????)
SALES (CREDIT)
AMOUNT
PARTICULARS
6,200 Cash received from Debtors
41,000 Bad Debt
Closing Debtors C/F
47,200
AMOUNT
37,900
140
9,160
47,200
IN THE BOOKS OF HO. (MULTAN)
LAHORE BRANCH ACCOUNT
PARTICULARS
Opening Stock
24,000 Cash received from BRANCH
AMOUNT
17,500
Opening Debtors
Exp. paid by Head office
Goods received from HO
6,200 Cash received from Debtors
10,400 Closing Stock
33,600 Closing Debtors
37,900
18,000
9,160
GEN. PROFIT & LOSS A/C
AMOUNT
8,360
82,560
PARTICULARS
82,560

13.

Question.5 (zeepedia)
From the following particulars of a dependent branch. Prepare Branch a/c showing
the profit or loss of the branch for the year ended 31-12-2007: (all figures are in Rs.)
Opening stock
Cash sent by head office:
for salaries
for other expenses
30,000
Goods sent to branch
Cash sales
90,000
120,000
10,000
4,000
Closing stock could not be ascertained but it is know that the branch usually sells
at cost plus 20% of the cost.

14.

SOLUTION: 5
BRANCH ACCOUNT
PARTICULARS
AMOUNT
To Opening Stock
To Goods sent to branch
30,000 Cash received from BRANCH
90,000 Closing Stock
14,000
To cash sent to branch
GEN. PROFIT & LOSS A/C
COST
100
6,000
1,40,000
+
+
PROFIT
20
IF
SALE 120 THAN COST
IF
SALE
1
THAN COST
IF SALE 1,20,000
=
=
IF 20% IS THE PFOFIT
SALE
120
= 100
=
100
120
=0.8333
THAN COST = 120,000 × 0.83333 = 99,999.99
Opening stock + Goods sent - Closing stock
30,000
+ 90,000 X
X (closing stock)
X (closing stock)
AMOUNT
1,20,000
20,000
1,40,000
Calculation for Closing Stock
Working Notes:
IF
IF
PARTICULARS
= Cost of sales
= 100,000
= 120,000 - 100,000
= 20,000
= 1,00,000

15.

SOLUTION: 5
BRANCH ACCOUNT
PARTICULARS
AMOUNT
To Opening Stock
To Goods sent to branch
30,000 Cash received from BRANCH
90,000 Closing Stock
14,000
To cash sent to branch
GEN. PROFIT & LOSS A/C
COST
100
6,000
1,40,000
+
+
PROFIT
20
IF
SALE 120 THAN COST
IF
SALE
1
THAN COST
IF SALE 1,20,000
=
=
IF 20% IS THE PFOFIT
SALE
120
= 100
=
100
120
=0.8333
THAN COST = 120,000 × 0.83333 = 99,9999.99
Opening stock + Goods sent - Closing stock
30,000
+ 90,000 X
X (closing stock)
X (closing stock)
AMOUNT
1,20,000
20,000
1,40,000
Calculation for Closing Stock
Working Notes:
IF
IF
PARTICULARS
= Cost of sales
= 100,000
= 120,000 - 100,000
= 20,000
= 1,00,000

16.

Question.6)
(Sharma Pg 252
Prepare Branch a/c from the following particulars. Branch makes only cash sales.
Goods supplied to branch
Expenses
Cash Sales
Opening stock
50,000
3,000
55,000
1,000
Closing stock has not been ascertained. Manager gets commission @ 10% on net profit
before charging such commission.
Branch sells goods at cost + 25%.

17.

SOLUTION: 6
BRANCH ACCOUNT
AMOUNT
PARTICULARS
1,000 By Cash (sales)
50,000 Closing Stock
3,000
8,0002
7,200
62,000
PARTICULARS
To Opening Stock
To Goods sent to branch
To Cash (exp.)
To Commission
GEN. PROFIT & LOSS A/C
Calculation for Closing Stock
Working Notes:
IF
IF
COST
100
+
+
PROFIT
25
IF
SALE 125 THAN COST
IF
SALE
=
=
SALE
125
Op. stock + Goods sent -Cl. stock = Cost of sales
1,000 + 5,000 - X
= 44,000
X (closing stock) = 51,000 - 44,000
(1)
X (closing stock) = 7,000
=0.80
125
IF SALE 55,000
2.
62,000
IF 25% IS THE PFOFIT
= 100
THAN COST = 100
1
AMOUNT
55,000
7,0001
THAN COST = 55,000 × 0.80
= 44,000
Commission = ( 62,000 – (1,000+50,000+3,000) x
= (62,000 – 54,000) x
= 8,000 x
10
100
10
100
10
100
= 800

18.

19.

Question.7
Prepare Branch A/C under debtor system with the following information:
Op. Building
2,00,000 Collections from debtors
Op. Cash
40,000 Bad debts
Op. Debtors
30,000 Dep on furniture
Op. Stock
35,000 Goods send to branch during the year
6,30,000
10,000
10%
3,80,000
Op. Furniture
1,00,000 Expenses paid by branch
28,000
Cash sales
2,20,000 Expenses paid by HO
22,000
Credit sales
8,00,000
Stock closing
25,000

20.

Structure.7
Debtors Account
Branch A/C

21.

Solution.7
Op. Debtors
Credit sales
Debtors Account
30,000 By Cash (from debtors)
8,00,000 Bad debts
By Bal C/D
8,30,000
6,30,000
10,000
1,90,000
8,30,000
Branch A/C
Op. Balance:
Building
Cash sales
2,00,000 Collections from debtors
Cash
40,000 Closing Bal:
Debtors
30,000
Building
Stock
35,000
Cash (40,000- 28,000)
Furniture
To Goods send to branch during the year
To Cash
To Profit
2,20,000
6,30,000
2,00,000
12,000
1,00,000
Debtors
3,80,000
Stock
25,000
Furniture (1,00,000 – 10,000)
90,000
22,000
1,90,000
5,60,000
13,67,000
13,67,000

22.

Question.8 (Goel Pg.16.7)
Ali garments has a branch at Makkah. All cash received by the branch is daily remitted to the HO
and all expenses are paid by the HO. Prepare branch a/c in the books of HO from the following
particulars as on 31st December 1994.
Op . stock
25,000 Goods received by branch from HO
Op. debtors
12,000 Cash received from debtors
Cash sales
1,40,000 Cheques sent to branch for:
Credit sales
1,08,000 salaries
1,60,000
92,000
18,000
Bad debts
2,400 Other exp.
12,800
Discount allowed
3,600 cl. stock
21,500
Goods
return
customers
by
4,100 Goods in transit as on 31-12-1994
5,000

23.

STRUCTURE: 8
Debtors Account
Makkah Branch A/C
for the year ending 31st December, 1994

24.

SOLUTION: 8
Debtors Account
Op. Debtors
Credit sales
12,000 By Cash (from debtors)
1,08,000 Bad debts
Disc. allowed
Sales return
By balance c/d
1,20,000
92,000
2,400
3,600
4,100
17,900
1,20,000
Makkah Branch A/C
for the year ending 31st December, 1994
Op. Balance:
stock
Debtors
To Goods send to branch during the year
To Bank (Exp)
To P/ L A/C
25,000
12,000
1,65,000
30,800
43,600
2,76,400
Cash sales
Collections from debtors
Closing Bal:
Debtors
17,900
Stock
21,500
Goods in transit
5,000
Working Notes:
1. Goods sent by HO to the branch:
Goods received by branch
Add: Goods in transit
160000
5,000
1,65,000
1,40,000
92,000
44,400
2,76,400

25.

Revision
1st Method: Debtors System
NOTES UNDER DEBBTORS SYSTEM:
1. Credit sales are not shown in branch account.
2. Expenses paid by branch are not shown in branch account because they are adjusted
through cash account.
3. Non-cash expenses (dep., bad debts, loss by fire, and loss by theft) are also not shown
in branch account because they are adjusted through assets account.

26.

FORMAT OF TRADING AND P & L ACCOUNT

27.

28.

Question.9 (Same question No.7)
Prepare Branch A/C under Final Account system with the following information:
Op. Building
Op. Cash
Op. Debtors
Op. Stock
Op. Furniture
Cash sales
Credit sales
Stock closing
SOLUTION 9 (Final Account Methods)
2,00,000
40,000
30,000
35,000
1,00,000
2,20,000
8,00,000
25,000
Collections from debtors
Bad debts
Dep on furniture
Goods send to branch during the year
Expenses paid by branch
Expenses paid by HO
Branch Trading & Profit and Loss A/C
Op. stock
Goods sent to branch (Purchase)
Gross profit
35,000 Sales cash
3,80,000 Sales credit
6,30,000 C. Stock
10,45,000
Exp by HO
Exp by branch
Non cash exp:
Bad debts
Depreciation
Net Profit
6,30,000
10,000
10%
3,80,000
28,000
22,000
22,000 Gross Profit B/D
28,000
2,20,000
8,00,000
25,000
10,45,000
6,30,000
10,000
10,000
5,60,000
6,30,000
6,30,000

29.

SOLUTION 10: HOME ASSIGNMENT (1)
IN THE BOOKS OF HO. (JEDDAH)
MADINA BRANCH ACCOUNT
(for the year 1987)
TO Opening stock
STOCK
10,000
DEBTORS
5,000
PETTYCASH
30
TO Goods supplied to branch
TO Cash - expenses
To P &L A/C ( Balancing Figure)
BY CASH:
CASH SALES
20,000
RECEIVED FROM DEBTORS
10,000
BY Goods returned by branch a/c
Closing balance:
Debtor
Stock
Cash goods in transit
SOLUTION OF
HOME
ASSIGNMENT (1)
15,030
35,000
2,000
5,470
57,500
30,000
500
20,000
6,000
1,000
57,500
BRANCH DEBTORS ACCOUNT
(to calculate the closing balance of debtors)
To Op. debtors
To Credit sales
5,000 By Cash (received from debtors)
30,000 By return inward (Goods returned by the customers)
By Disc.
Bad debts
By balance b/d
35,000
10,000
3,000
500
1,500
20,000
35,000

30.

Question 10
(HOME ASSIGNMENT No.1)
Almarai company has its HO at Jeddah and branch at Madina. The branch sells for cash as well as
credit. With the help of the following transactions which took place between HO and Branch Office in
the year 2017: Prepare Branch Account and Debtors Account in the books of HO.
Opening stock
10,000 Cash received from debtors
Closing stock
6,000 Cash sent to branch for expenses
Op. debtors
5,000 Goods returned by the branch
Op. petty cash
30 Goods returned by the customers
10,000
2,000
500
3,000
Goods supplied to branch
35,000 Allowed discount to customers
500
Credit sales
30,000 Bad debts
1,500
Cash sales
20,000 Goods in transit from HO on 31st
December 2017
1,000

31.

2nd Method: Stock and Debtors System
1
This methods can be followed only if goods have been sent at loaded price (invoice price)
not at cost price.
2.
Following Basic accounts are prepared:
1.
BRANCH STOCK ACCOUNT:
It is prepared at loaded price.
2.
BRANCH DEBTORS ACCOUNT:
This account is prepared only if goods have also been sold on credit basis.
3.
BRANCH EXPENSE ACCOUNT:
It is an optional account.
4.
BRANCH ADJUSTMENT ACCOUNT: (Load is transferred)
It is prepared to calculate Gross Profit / Gross Loss during the year. It is prepared
with the help of Branch Stock Account. In this account we reverse profit margin of
each and every item appearing in Branch Stock Account (except sales and sales
return). Balancing figure will be called Gross Profit (debit side) or Gross Loss
(Credit Side) during the year.
5.
BRANCH P&L ACCOUNT:
It is prepared to calculate Net Profit / Net Loss earned during the year. In this
account we debit all expenses of branch paid by Head Office or by Branch or NonCash expenses. Balancing figure will be called Net Profit (debit side) or Net Loss
(Credit Side) during the year.

32.

Question: 11
Head Office sends goods to its branch at cost + 25%.
From the following information prepare necessary accounts under Stock and
Debtors System.
Furniture
Stock
Debtors
Goods sent to branch
Cash sales
Credit sales
1,40,000
40,000
60,000
2,00,000
60,000
1,20,000
Collection from debtors
Discount allowed
Bad debt
Expenses paid by branch
Expenses paid by HO
Depreciation on furniture
1,35,000
8,000
2,000
4,000
3,000
10%

33.

SOLUTION 11:
IN THE BOOKS OF HO.
BRANCH STOCK ACCOUNT
(+)
PARTICULARS
(+)
AMOUNT
PARTICULARS
BRANCH DEBTORS ACCOUNT
PARTICULARS
AMOUNT
PARTICULARS
(-)
AMOUNT
(-)
AMOUNT
Cont.

34.

SOLUTION 11:
Under Stock and Debtors System, we have to make following accounts:
1.
BRANCH STOCK ACCOUNT (for Stock)
2.
BRANCH DEBTORS ACCOUNT (for Load of Profit)
3.
BRANCH ADJUSTMENT ACCOUNT (for Gross Profit)
4.
BRANCH P & L ACCOUNT (for Net Profit)
5.
BRANCH EXPENSE ACCOUNT ( Optional)
(+)
PARTICULARS
TO Balance B/D
To Goods Sent To Branch A/C
(+)
PARTICULARS
TO Balance B/D
To Branch Stock A/C (Credit Sales)
Cost
= 100
Load
= 25
Invoice Price =125
IN THE BOOKS OF HO.
BRANCH STOCK ACCOUNT
AMOUNT
PARTICULARS
40,000 By Branch Cash A/C (Cash Sales)
2,00,000 By Branch Debtors A/C (Credit Sales)
By Balance C/D (Balancing Figure)
2,40,000
BRANCH DEBTORS ACCOUNT
AMOUNT
PARTICULARS
60,000 By Branch Cash A/C (Cash Sales)
1,20,000 By Disc. A/C
By bad debts
By Balance C/D (Balancing Figure)
1,80,000
(-)
AMOUNT
60,000
1,20,000
60,000
2,40,000
(-)
AMOUNT
1,35,000
8,000
2,000
35,000
1,80,000
Cont.

35.

BRANCH ADJUSTMENT ACCOUNT (with the help of branch stock account)
PARTICULARS
AMOUNT
BRANCH P&L ACCOUNT
PARTICULARS
AMOUNT

36.

BRANCH STOCK ACCOUNT
PARTICULARS
TO Balance B/D
To Goods Sent To Branch A/C
AMOUNT
PARTICULARS
40,000 By Branch Cash A/C (Cash Sales)
2,00,000 By Branch Debtors A/C (Credit Sales)
By Balance C/D (Balancing Figure)
2,40,000
AMOUNT
60,000
1,20,000
60,000
2,40,000
BRANCH ADJUSTMENT ACCOUNT (with the help of branch stock account)
PARTICULARS
25
TO stock reserve a/c (60000× 125 )
AMOUNT
PARTICULARS
12,000 By Stock Reserve a/c (40,000× 25 )
125
36,000 By Goods sent to branch A/C (2,00,000×
To Gross Profit (Balancing Figure)
48,000
AMOUNT
8,000
25
125
)
40,000
48,000
BRANCH P&L ACCOUNT
To Expenses paid by HO
To Expenses paid by branch
To disc. allowed
To bad debts
To depreciation on furniture
To Net Profit
3,000 By Gross Profit
4,000
8,000
2,000
14,000
5,000
36,000
36000
36,000

37.

Question: 12
Prepare a branch a/c , branch adjustment a/c and P& L a/c from the following
information. HO sends goods to branch with 25% profit on cost
Prepare aforesaid accounts under stock and debtors system.
Op. stock
Cash sales
Loss by fire
2,00,000 Goods sent to branch
4,80,000 Cash sales
12,000 Branch expenses
5,00,000
60,000
65,000
Note :- Condition 1,
Treatment of Abnormal Loss (A/L):
Load of A/L is debited to Branch Adjustment A/C and Cost of A/L is debited to
branch P&L A/C.

38.

SOLUTION:12
(A/L)
(+)
PARTICULARS
IN THE BOOKS OF HO.
(1) BRANCH STOCK ACCOUNT
AMOUNT
PARTICULARS
(-)
AMOUNT
2. BRANCH ADJUSTMENT ACCOUNT (with the help of branch stock account)
PARTICULARS
AMOUNT
PARTICULARS
AMOUNT
PARTICULARS
AMOUNT
3. BRANCH P&L ACCOUNT
PARTICULARS
Working Notes:
AMOUNT
I. Load of Abnormal Loss =
=
II. Cost of Abnormal Loss =
=

39.

SOLUTION:12
(A/L)
IN THE BOOKS OF HO.
BRANCH STOCK ACCOUNT
(+)
PARTICULARS
TO Balance B/D
To Goods Sent To Branch A/C
(-)
AMOUNT
PARTICULARS
2,00,000 By Branch Cash A/C (Cash Sales)
5,00,000 By Loss by fire A/C
By Branch Adj. A/C (Load of A/L)
By Branch P&L A/C (Loss of A/L)
By Balance C/D (Balancing Figure)
7,00,000
AMOUNT
4,80,000
12,000
2,400
9,600
2,08,000
7,00,000
BRANCH ADJUSTMENT ACCOUNT (with the help of branch stock account)
PARTICULARS
AMOUNT
PARTICULARS
2,400 By Stock Reserve a/c (2,00,000×

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