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650
BRANCH ACCOUNTS
INCLUDING FOREIGN
BRANCH
CLASSIFICATION OF
BRANCHES :
A. Inland Branches:
(i) Dependent Branches : branches in respect of
which the whole of the accounting records are kept
at Head Office only.
(ii) Independent Branches : branches which
maintain independent accounting records.
B. Foreign Branches : branches which are located
in a foreign country(i.e. in a country other than in
which the company is incorporated and registered)
DEPENDENT BRANCHES
METHODS OF
ACCOUNTING :
i.
FINAL ACCOUNTS
METHOD
(a) At cost price
Branch Trading and Profit & Loss Account
Particulars
Amt
Particulars
Amou
nt
Xxxxx
Xxx
Xxx
Xxx
xxx
QUESTION. 1
From the following particulars prepare Branch
Trading and Profit and Loss Account in the books of
Head Office:
Particulars
Amount Particulars
Amou
The Kabul stores invoiced goods to its Jalalabad
nt
Branch
at cost which sells Rates
both&for
cash and credit.
Opening
Balance:
Taxes
3,000
Stock
5,000
Salary is
& Wages
6,000
Cash received by the
branch
remitted to H.O.
Debtors
20,000
expense
by the the H.O.
1,000
Branch expense are
paidPetty
direct
from
Petty Cash
1,000 branch
1,000
except
petty
expense
which
are
met
by
the
branch.
Goods from H.O.
50,000 Pilferage of goods
Cash Sales
Credit Sales
Sales Return
Bad Debts
Discount Allowed
Goods returned to H.O.
30,000
40,000
4,000
1,000
1,000
5,000
Closing Balance:
Stock
Debtors
Petty Cash
8,000
25,000
800
SOLUTION
To Opening Stock
5,000 By Sales:
Branch
Trading
and Profit and
Loss
Account for the year
,, Goods
sent
to
50,000
Cash
Sales
30,000
Branch
5,000 ended
Credit Sales
40,000
Less: Returns
45,000 Less: Return
4,000 36,000
25,000 ,, Closing Stock
8,000
,, Gross Profit c/d
Add: Pilferage of
1,000
9,000
75,000 Stock
75,00
1,000
0
To Pilferage of
1,000 By Gross Profit
25000
Stock
1,000 b/d
,, Bad Debt
3,000
,, Discount
6,000
Allowed
1,000
,, Rates & Taxes
12,000
,, Salaries &
00
wages
,, Petty Expense
,, General
KHURSHEED AHMAD ASSISTANT PROFESSOR (CONTROLLER OF FINANCES BAKHTAR UNIVERSITY)
(B) AT INVOICE
PRICE
If goods are invoiced above cost, the loading (i,e,
profit element) on Opening Stock, Goods Sent from
Head office (net of returns) and Closing Stock are
reversed, to ascertain the true profits.
QUESTION 2
X Ltd. has its H.O. in Kabul and a branch in Mazarshareef. H.O.
supplied goods to its branch at cost plus 33 1/3%. From the particulars
given below prepare a Branch Trading Account in the books of H.O.
Particulars
Amou Particulars
nt
40,000
2,50,0
00
10,000
Amoun
t
Sales:
Cash
1,00,00
Credit
0
Discount allowed to
3,00,00
customers
0
It is estimated that 2% of the goodsClosing
received Stock
are lost(I.P
through
natural
.)
wastage.
10,000
60,000
KHURSHEED AHMAD ASSISTANT PROFESSOR (CONTROLLER OF FINANCES BAKHTAR UNIVERSITY)
SOLUTION:
In the books of H.O.
Trading Account for the year ended
Particulars
Amoun
t
Amou Particulars
nt
To Opening Stock
Less: Loading
40,000
10,000
By Sales:
Cash
30,000 Credit
Amou Amou
nt nt
1,00,0
00
3,00,0 40000
00 0
,, Goods sent to
2,50,0
Branch
00
,, Closing Stock
Less: Returns to
10,000
Less : Loading
H.O.
2,40,0
(1/4 60,000)
60,000
Less: Loading
00 1,80,0
15,000 45000
(1/4 2,40,000)
60,000
00
Note: 1. Discount allowed to customer will appear in Branch Profit & Loss
[1/3 on CP = 1/4
2,35,0
Account.
on SP]
00
4,45,0
Loss Profit
through
is a normal loss and as such, the00
same
,,2.Gross
c/dnatural wastage
4,45,0
should be charged against branch
00 gross profit. So, no adjustment is
required.
QUESTION 3.
Y Ltd. with its H.O. in Kabul invoiced goods to its
branch at Kandhar at 20% less than the catalogue
price which is cost plus 50%, with instruction that
cash sales were to be made at invoice price and
credit sales at catalogue price less discount at 15%
on prompt payment.
From the following particulars, prepare the Branch
Trading and Profit and Loss Account for the year
ended 31st March 2013 in H.O. books so as to show
the actual profit and loss for the branch for the
year.
KHURSHEED AHMAD ASSISTANT PROFESSOR (CONTROLLER OF FINANCES BAKHTAR UNIVERSITY)
Particulars
Amou Particulars
nt
Stock on 1.4.2012
12,000 Discount allowed to
(Invoice Price)
Debtors
Debtors ( ,, )
10,000 Expense
Goods received from
1,32,0 Remittance to H.O.
H.O. (I.P.)
00 Debtors (31.03.2013)
Cash sales
Cash in hand
Credit Sales
46,000 (31.03.2013)
Cash received from
1,00,0 Stock on 31.03.2013
Debtors
(Invoice
Price)
It was further reported00that
a part
of stock
85,635
Amt..
13,36
5
6,000
1,20,0
00
11,00
0
5,635
at 15,00
the
0
Working:
1.Cost price
20%)
`100
Particulars
To Opening Stock
(`12,000 *
100/120)
,, Goods sent to
Branch
(`1,32,000
*100/120)
,, Gross Profit c/d
(Working 2) Particulars
Catalogue Price
Amou
Invoice Price (Cat. Price nt
= `100
+ 50%Amou
= `150
`30
Amou
Particulars
Add:
Goods
Sent
(I.P.)
= `150
=
nt
nt`120
10,000
Sales:
Less:
Cash By
Sales
Cash
Invoice value
of goods sold
on credit Credit
1,10,0 x120 /150)
(`1,00,000
80,00000 ,, Closing Stock
(`15,000
Closing Stock
(I.P.) x 100/
120)
41,000 Add: Stock
Destroyed
Stock
(Bal. fig.)by fire
1,61,0Destroyed
00
6,000 By Gross Profit
13,365 b/d
2,500
1,337
Amou
nt
12000
Amou Amou
1,32,0
nt
nt
00
46,000 1,44,0
46,000 00
1,00,0
80,000
00
1,46,0
15000
00
12,500
1,41,0
2,500 00
15,000
,, Expense
,, Discount Allowed
,, Stock Destroyed
by fire
,, Provision for
17,798
KHURSHEED AHMAD ASSISTANT PROFESSOR (CONTROLLER OF FINANCES BAKHTAR UNIVERSITY)
Discount
3000
1,61,0
00
41000
QUESTION 4
Particulars
H.O.
Stock on 01.04.2012
Purchase
Goods sent to Branch (at invoice price)
Sales
Stock on 31.03.2013
Expenses
7,00,000
42,00,000
15,12,000
42,84,000
16,80,000
80,000
Branch
------14,40,00
0
2,52,000
Sales at H.O. are made only on wholesale basis and that
at
40,000
WORKING:
Solution
In the books of H.O.
Puri Branch Trading Account
for the year ended 31st March, 2013
Particulars
To Opening Stock
(I.P.)
,, Goods sent to
Branch (I.P.)
,, Purchase
,, Gross Profit c/d
H.O.
7,00,00
0
--42,00,0
00
25,76,0
00
74,76,0
00
80,000
Branc Particulars
h
By Sales
,, Goods sent to
Branch (I.P.)
,, Closing Stock
H.O.
42,84,0
00
15,12,0
00
16,80,0
00
By Gross Profit
b/d
To Expenses
747600
,, Closing Stock
0
Reserve
By Opening
on Branch Stock:
Stock Reserve
25,76,0
(`2,52,000 x 40/
72,000
Provision for
00
140)
unrealized profit
On H.O. Stock:
4,80,00
(`7,00,000 x 40
2,00,00
(`16,80,000 x 40/
0
140)
0
140)
KHURSHEED AHMAD ASSISTANT PROFESSOR (CONTROLLER OF FINANCES BAKHTAR UNIVERSITY)
,, General P&L A/c 21,44,0
Branch
Solution
In the books of H.O.
Puri Branch Trading Account
for the year ended 31st March, 2013
Particulars
To Opening Stock
(I.P.)
,, Goods sent to
Branch (I.P.)
,, Purchase
,, Gross Profit c/d
H.O.
7,00,00
0
Branc Particulars
h
---
H.O.
By Sales
42,84,0
,, Goods sent to 00
15,12,0 Branch (I.P.)
15,12,0
--00 ,, Closing Stock 00
42,00,0
--00 1,80,00
16,80,0
25,76,0
0
00
00 16,92,0 By Gross Profit
To Expenses
74,76,0 00
b/d
747600
,, Closing Stock
00
40,000
0
Reserve
80,000
By Opening
on Branch Stock:
----- Stock Reserve
25,76,0
(`2,52,000 x 40/
72,000
Provision for
00
140)
----- unrealized profit
On H.O. Stock:
4,80,00
(`7,00,000 x 40/ 2,00,00
(`16,80,000 x 40/
0
140,00 140)
0
140)
0
KHURSHEED AHMAD ASSISTANT PROFESSOR (CONTROLLER OF FINANCES BAKHTAR UNIVERSITY)
,, General P&L A/c 21,44,0 180,00
Branch
14,40,0
00
--2,52,00
0
169200
0
1,80,00
0
nt
QUESTION
Amount Particulars
12,500
5,000
1,000
40,000
5,000
13,000
30,000
Bad Debts
Allowances to customers
Returns Inwards
Charges sent to Bank:
Rates & Taxes
Salaries
Misc. Exps.
Stock on 31.03.2013 (I.P.)
Debtors ( ,, )
Petty Cash ( ,, )
Amount
2,000
1,000
1,000
3,000
8,000
1,000
15,000
4,000
1,000
Note: Here, loading is 25/ 125 = 1/5 of invoice price. Hence, loading on
opening stock will be `12,500 x 1/5 = `2,500 and so on.
SOLUTION
Particulars
Amou
nt
Amou Particulars
nt
Amou
nt
Amou
nt
By Stock Reserve
2500
To Balance b/d
12,500
(Loading)
Stock
5,000
Debtors
,, Bank A/c:
1,000 18500 Cash Sales (13000- 12,000
Petty Cash
40000 1000)
,, Goods sent to
30,000 42,000
branch
,, Cash Received
3,000
from Debtors
To Bank A/c:
8,000
5,000
,, Goods sent to
Rates & Taxes
1,000 12000 branch
Salaries
8,000
(Return to H.O.)
Misc. Expenses
1,000 ,, Goods sent to
,, Goods sent to
15,000
branch
Branch
3,000 (Loading)
4,000
(Loading on
40000x1/5
1,000 20,000
returns)
3,000 By Balance c/d
,, Closing Stock
Stock
KHURSHEED AHMAD ASSISTANT PROFESSOR (CONTROLLER OF FINANCES BAKHTAR UNIVERSITY)
Reserve
Debtors