Branch
A trading company may try to
expand its business by opening
BRANCHES as another
establishment of the company in
different locations
Branch Accounts
~ Branches keep their own records
Procedures:
Procedures:
trading account)
In Branch books:
Head Office Current Account is
opened to record transactions
between them
HOs Book:
Branch Current
$
$
X Goods in Transit
X
Remittance from branch
X
X Cash
in Transit
X
Bal c/f
X
Bal b/f
Branch net profit
Branchs Book:
HO Current
$
Remittance to HO
Bal b/f
X c/f
Bal
X Net profit
X
$
X
X
X
7
Remittances/Cash in
Transit (CIT)
The remittance or cash was
remitted by the branch before the
end of the financial period, but was
received by the Head office after
the end of the financial period
CIT= Remittance to Head Office
Remittance from Branch
10
Transactions
Head office
(HO) books
1 Opening Stock
Dr HO Trading
Dr Branch
Cr Stock (opening Trading
stock)[at cost]
Cr Stock
(Opening stock)
[at Cost or
Cost+profit]
2 Goods
purchased
directly from HO
suppliers[at cost]
Dr
No entry
Purchase(Trading)
Cr Creditors
3 Goods
purchased
directly from
Branch suppliers
NO entry
Branch books
Dr
Purchase(trading
)
11
Cr Creditors
Transactions
Head office
(HO) books
4 Goods sent
from HO to
Branch
[cost+profit]
Dr Branch
Dr Good received
Current
from HO
Cr Goods sent to Cr HO Current
Branch
5 Goods returned
from Branch to
HO
Dr Goods sent
to branch
Cr Branch
Current
6 Cash
Dr HO
sales/Credit sales Cash/Debtors
Cr HO Sales
Branch books
Dr HO Current
Cr Good received
from HO
Dr Branch cash/
debtors
Cr Branch sales
12
Transactions
Head office
(HO) books
Branch books
7 Closing stock
Dr
Stock(Closing)
Cr HO Trading
Dr Stock (Closing)
Cr Branch Trading
good purchased
directly from Branch
suppliers [at cost] &
goods received from
HO [cost+profit]
8 Gross profit on
trading
Dr HO Trading
Dr Branch Trading
Cr HO profit and Cr Branch profit
loss
and loss
9 HO expenses
paid by HO
Dr Expenses
(P&L)
Cr Cash/Bank
No entry
13
Transactions
Head office
(HO) books
Branch books
10 Branch
expenses paid by
Head Office
Dr Branch
Current
Cr Cash/Bank
Dr Expenses (P&L)
Cr HO Current
11 Branch
expenses paid by
Branch
No entry
Dr Expenses (P&L)
Cr Cash/Bank
12 Administrative
charges for
services rendered
by HO to Branch
Dr Branch
Current
Cr HO P&L
(Income)
Dr Branch P&L
Cr HO Current
14
Transactions
Head office
(HO) books
Branch books
13 Provision for
Unrealized Profit
(Branch & Goods
in Transit)
[cost+profit]
Increase in provision
Dr HO P&L
Cr Prov. For
Unrealized profit
Decrease in
provision
Reverse
No entry
14 Goods in
Transit(GIT)
Dr Goods in
Transit
Cr Branch
Current
NO entry
15
Transactions
Head office
(HO) books
Branch books
16 Profit made
by the branch
Dr Branch
Current
Cr Retained
profit
Dr Branch P&L
Cr HO Current
17 Profit made
by HO
Dr P&L
Cr Retained
profit
No entry
Dr Bank
18 Cash
Cr Branch Current
remittances
Or
from the branch
Dr HO Current
Cr Bank
Or
Dr Bank
Dr Remittance to HO
Cr remittance from Cr Bank
branch
Dr HO Current
Dr Remittance from
Cr Remittances to
branch
16
HO
Inter-company
transactions
It would not be transferred to the total
column of the trading and profit and
loss account and the balance sheet
For example, goods sent to the branch,
goods from the head office, service
overheads charged by the head office to
the branch, head office current account,
branch current account provision for
unrealized profit
17
Example 2
18
Colour Toys Ltd. has its head office in Central and a branch
Shatin and separate final accounts are prepared for HO an
Branch.
Trial Balance as at 31 December as at 31 Dec 1997
HO
Branch
$
$
$
$
Cash and Bank
114300
80800
Debtors
360000
40000
HO Current
146000
Branch Current
194000
Fixed assets
1532000
152000
Stock,1Jan 1997
60000
36000
Creditors
96000
1000
Prov. For dep
38300
380
Remittances to HO
11000
Remittances from Branch
10000
Capital
1200000
19
HO
Branch
$
$
$
$
Retained Profits
112000
Purchases and Sales
900000 1400000
860
Good sent to branch
664000
Good from HO
616000
Selling Expenses
120000
48000
Service Charged Received
5000
Administrative Expenses
245000
36000
3525300 3525300 1019800 1019
Additional information:
1. Goods purchased by the HO are sent to the branch at cost
2. Stock at 31 Dec 1997: HO $80000; Branch $10600
3. Depreciation is to be provided at 10% on cost per annum
4. Administrative expenses include an annual charge of $500
for services rendered by the head office
Required:
Prepare final accounts of HO and Branch for the year ended 3
1997
20
Trading and profit and loss a/c for the year ended 31 Dec 1997
HO
Branch
Total
$000
$000
$000
$000
$000
$00
Sales
Good Sent to Branch
Less COGS
Opening Stock
Purchases
Goods from HO
1400
664
2064
60
900
960
860
860
36
616 80+10.6+48
652
880
Gross profit
1184
Add: Service charges received
5
Less: Depreciation
153.2
Selling expense 120
Admin. Exp.(WK2)245
518
Net profit
670.8
10.6
226
2260
96
900
996
641.4
138.6
218.6
15.2
48
36
99.2
119.4
140
168.4
168
276 6
79
245+36-5
21
WK1:
The total closing stock should be included Goods in tran
as GIT are still unsold goods at year end but those good
transported on the way
=> 80+10.6+48 = 138.6
Wk2:
The total administrative expenses should deduct the int
Company service charges of $5000
=> 24.5+36-5=276
Back
22
HOs Book:
Branch Current
$
$
Bal b/f
194000Goods in Transit
Branch net profit 119400
(664000-61600)
48000
Remittance from branch 1000
Cash in Transit
(11000-10000)
1000
Bal c/f
254400
313400
313400
Branchs Book:
HO Current
$
Remittance to HO
Bal b/f
11000
Bal
c/f
254400 Net profit
265400
$
146000
119400
265400
23
1532
191.5
1340.5
1437.5
Total
$000
152
19
133
$00
1684
210
80
10.6
138.6
48
254.4
- 80+10.6+48
360
40
400
114.3
80.8
196.1
1
857.7
131.4
734.7
114.3+80.8+1
Less Current Liabilities
Creditors
96
10
106
Working Capital
761.7
121.4
628.
2102.2
254.4
2102.2
Capital
1200 112+670.8+119.4 1200
Retained profit
902.2
902.2
Head Office Current
254.4
212.2
254.4
2102
24
25
26
27
Account entries
Increase in Provision Dr P/L
Cr Provision for unrealized profit
Decrease in Provision Dr Provision for unrealized profit
Cr P/L
Example 3
29
Goods sent form the head office are charged to the branc
At cost plus 10% the closing stock was valued as follows:
Date
HO
31 Dec 1991
80000
(1st year of business)
31 Dec 1992
96000
31 Dec 1993
84000
31 Dec 1994
108000
Branch
66000
86900
71500
75900
Goods in tran
22000
5500
4950
550
Required
Prepare Provision for unrealized profit account for 1992-1
30
P/L
92
92
Bal b/d
Dec 31 Bal c/d
8400Jan 1
Dec 31
P/L
(869000+5500)*10/110
8400
93
93
Dec 31
P/L
1450Jan 1
Bal b/d
Dec 31 Bal c/d
6950
(71500+4950)*10/110
8400
94
94
Dec 31 Bal c/d
6950Jan 1
Bal b/d
(75900+550)*10/110
$
8000
8000
400
8400
8400
8400
6950
31
Stock Loss
Normal stock loss
Caused by an
exceptional
events
e.g. fire loss, burglary
loss
Accounting recorded
needed
32
HOs book
Branchs
book
Total
column
Stock loss in
the HO
Dr P/L
Cr Trading (cost)
No entry
Dr P/L
Cr Trading
(Cost)
Stock loss in
transit
Dr P/L
Cr Trading
(cost)
Stock loss in
Branch
NO entry
Dr P/L
Dr P/L
Cr Trading Cr Trading
(cost)
(cost)
33
Example 4
34
Colour Toys Ltd. has its head office in Central and a branch
Shatin and separate final accounts are prepared for HO an
Branch. All goods sold by branch are supplied by the HO
at cost plus 10%
Trial Balance as at 31 December as at 31 Dec 1997
HO
Branch
$
$
$
$
Share Capital
260000
Profit and loss account
125000
HO Current
79500
Branch Current
85000
Fixed assets
345000
70000
Stock,1Jan 1997
48500
15400
Debtors/Creditors
60400 35000 14700
37
Prov. For dep
13700
1640
Remittances to HO
26000
Remittances from Branch
22000
35
HO
Branch
$
$
$
$
Bank and cash
15900
3100
Purchases and Sales
255000 229700 44600 19970
Good sent to branch
154000
Good from HO
148500
Provision for unrealized profit
1400
Administrative Expenses
31000
10500
840800 840800 332800 332800
Additional information:
1. Stock as at 31 Dec 1997 excluding goods in transit was val
followings:
Head office, at cost
$32600
Branch, at cost to branch
- received from HO $16500
- own purchases
$8000
Required
Prepare final accounts for HO and Branch separately as at 31
1997
37
Trading and profit and loss a/c for the year ended 31 Dec 1997
HO
Branch
Total
$000
$000
$000
$000
$000
$000
Sales
Good Sent to Branch
Less COGS
Opening Stock (WK1) 48.5
Purchases
255
Goods from HO
303.5
Less:Fire loss (WK2) -
229.7
154
383.7
429.4
16.5+8
270.9
199.7
199.7
15.4
44.6
148.5
208.5
11
62.5
299.6
362.1
10
24.5
112.8
173
74.3
60.6 2
26.7
1.4
11
10.5
38.5
429.4
-
8.3
10
41.5
22.9
3.8
38
59.8
78.1
WK1:
HO and Branch value stock on different bases in this case.
Stock is valued at cost; while Branchs stock is valued at m
Total opening stock should be recorded at cost price
WK2:
Fire loss in total column should be recorded at cost price ra
than mark-up price
Invoice price = Cost + Profit
Cost = Invoice Price Profit
= 1.1 1.1*10/110
= 10
Back
39
WK3:
Total closing stock should be included HOs stock, Branc
Stock and Goods in transit
Back
40
WK
4:
Bal b/f
Bal c/f
2000 P/L
(16500+5500)*10/110
2000
1400
600
2000
Back
41
345
20.6
324.4
Total
$000
70
17.8
52.2
Current Assets
Stock
32.6
24.5
Goods in Transit
5.5
Branch Current(WK1) 57.3
Debtors
60.4
14.7
Cash and Bank
15.9
3.1
75.1
Cash in Transit
1
175.7
42.3
15.9+31+4
Less Current Liabilities
Creditors
35
37.2
Prov for unrealized
2
profit
Working Capital
138.7
5.1
463.1
57.3
Capital
260 12.5+74.3+3.8
Retained profit
203.1
Head Office Current WK2)
57.3
463.1
57.3
$00
415
38
376.6
60.6
23
158.7
72.2
-
86.5
463.1
260
203.1
42
463.1
WK1:
HOs book:
Branch Current
Bal b/f
85000 Goods in transit
5500
Branch net profit 3800Remittance from branch22000
Cash in transit
(26000-22000)
4000
Bal c/f
57300
88800
88800
Wk2:
Branchs book:
HO Current
Remittance to HO
26000Bal b/f
Bal c/f
57300 Branch net profit
833000
Back
79500
3800
83300
43
44
Account kept by HO
The branch do not keep their won
records, the HO will keep all
accounting records for the branch
transactions
45
Goods Sent to
Branch a/c
Profit
Branch Stock
Adjustment a/c
Invoiced price
Transactions
Opening stock
balance
Accounting entries
Goods sent to
branch
Goods returned by
Branch to HO
47
Transactions
Accounting entries
Goods returned by
customer to Branch
Branch income
Dr Cash/Bank
Cr Branch Profit and loss
48
Transactions
Treatment of closing
stock
Accounting entries
Branch Stock a/c- actual stock+
GIT
recorded as cost plus profit will
be entered on the credit side as
closing debit balance
Branch stock adjustment a/cactual stock + GIT recorded as
Profit portion will be entered on
debit side as closing credit balance
Example 5
50
750,000
354,000
350,000
51
Branch Stock(SP)
$
$
55000
Bal b/f
110000Return to HO (50000*1.1)
Gd sent to branch
Branch debtors
354000
(750000*1.1)
825000
Branch cash
350000
Branch debtors-return 33000
Bal c/f (171500+37500)
209000
968000
968000
Branch Adjustment(Profit)
$
Return to HO
Bal b/f (110000*10/110)
(55000*10/110)
5000
Branch stock (75000*0.1)
Branch P/L
Bal c/f(209000*10/110)
61000
19000
85000
$
10000
7500
85000
$
50000
Branch stock
750000
$
750000
750000
52
Transactions
Stock Loss in Branch
Accounting entries
Transactions
Accounting entries
Dr Branch Adjustment
Cr Branch Stock [with the total
reduction off the selling price]
Addition mark up
-Goods are sent to the
branch at mark up lower
than selling price
Dr Branch Stock
54
Transactions
Accounting entries
Cash Misappropriation
-loss from the theft of
the cash takings
Dr Cash Misappropriated
Cr Cash
Dr Branch profit and loss
Cr Cash Misappropriated
55
Example 6
56
$
$
100,000
57
806,000
80,000
--
64,000
--
13,500
--
340,200
2,000
500
2,400
58
91,680
4,800
26,800
59
Branch Stock(SP)
$
Branch debtors
Bal b/f (100000*1.2) 120000
Gd sent to branch
Return to HO (80000*1.2)
Fire loss (64000*1.2)
(806000*1.2)
967200
Branch adj.-reduction in
selling price
Shatin Branch
$
800000
96000
76800
13500
Branch Stock
$
Branch debtors
Bal b/f (100000*1.2) 120000
Gd sent to branch
Return to HO (80000*1.2)
(806000*1.2)
967200
Fire loss (64000*1.2)
Branch adj.-reduction in
Branch debtors-return
2400
selling price
Shatin Branch
$
800000
96000
76800
13500
Branch Debtors
$
$
Branch cash
340200
Branch stock
800000
Discount allowed
2000
Bad debts
500
Branch stock-return
2400
Branch profit and loss account for the year ended 31 Dec 1997
$
$
Fire loss
64000
Discount allowed
2000
Bad debts
500
61
Branch Stock
$
Branch debtors
Bal b/f (100000*1.2) 120000
Gd sent to branch
Return to HO (80000*1.2)
(806000*1.2)
967200
Fire loss (64000*1.2)
Branch adj.-reduction in
Branch debtors-return
2400
selling price
Branch transfer
Shatin Branch
$
800000
96000
76800
13500
960
Branch Adjustment
$
$
Return to HO(80000*0.2) 16000
Bal b/f (100000*0.2)
20000
Fire loss (64000*0.2)
12800
Branch stock (806000*0.2)
161200
Branch adj.-reduction in
selling price
13500
Branch transfer
160
(960*20/120)
Goods Sent to Branch
$
$
Gd return to HO
80000
Branch stock
806000
Branch transfer
(960*100/120)
800
62
Branch Stock
$
$
Branch debtors
800000
Bal b/f (100000*1.2) 120000
Gd sent to branch
Return to HO (80000*1.2)
96000
(806000*1.2)
967200
Fire loss (64000*1.2)
76800
Branch adj.-reduction in
Branch debtors-return
2400
selling price
13500
Branch transfer
960
Pilferage & wastage(Bal fig)
Bal c/f (91680+4800)
5860
96480
1089600
1089600
Branch Adjustment
$
$
Return to HO(80000*0.2) 16000
Bal b/f (100000*0.2)
20000
Fire loss (64000*0.2)
12800
Branch stock (806000*0.2)
161200
Branch adj.-reduction in
selling price
13500
Branch transfer
160
(960*20/120)
Pilferage & wastage
5860
Branch P/L(Bal fig)
116800
Bal c/f(96480*20/120)
63
16080
181200
181200
Shatin Branch
Gd return to HO
Branch transfer
(960*100/120)
800
HO Purchase(bal.fig.)
725200
806000
$
806000
806000
Branch Debtors
$
$
Branch cash
340200
Branch stock
800000
Discount allowed
2000
Bad debts
500
Branch stock-return
2400
Bal c/f
454900
800000
800000
Branch profit and loss account for the year ended 31 Dec 1997
$
$
116800
Fire loss
64000Branch Adj.- gross profit
Discount allowed
2000
Bad debts
500
Expense
26800
Net profit
23500
64
116800
116800
65
Branch Stock
$
Branch debtors
72800
$
476840
500000
20000
Branch Adjustment
$
$
Bal b/f (56000*0.3)
16800
Branch stock (400000*0.25) 10000
Branch stock (400000*0.05) 20000
Goods Sent to Branch
$
$
Branch stock
400000
Branch stock
Branch Debtors
$
Branch cash
476840
$
345320
66
Branch stock
Branch Debtors
$
Branch cash
476840
Discount allowed
Bad debts
$
345320
3000
800
Branch profit and loss account for the year ended 31 Dec 19
$
$
Discount allowed
3000
Bad debts
800
67
Branch Stock
$
Branch debtors
72800
$
476840
$
400000
68
800
Branch Stock
$
Branch debtors
72800
Bal c/f
500000
$
476840
117000
137040
69
Branch stock
400800
Branch Debtors
$
Branch cash
476840
Discount allowed
Bad debts
Bal c/f
400800
$
345320
3000
800
127720
476840
476840
Branch profit and loss account for the year ended 31 Dec 1997
$
$
Branch Adj.- gross profit
110040
Discount allowed
3000
Bad debts
800
Expense
34500
Net profit
71740
110040
70
110040
71
Account entries
Transactions
Balance transferred
from goods sent to
branch account to the
head office purchases
account
Branch net profit
transferred to head
office profit and loss
account
Accounting
Entries
Dr Goods sent to
branch
Cr HO
purchases/tradin
g
Dr Branch Profit
and loss
Cr HO P/L
72
Example 7
73
$
16560
3009
800000
250000
774600
200000
3800000
9500
346320
225000
108000
456500
74
$
Branch stock 1 Jan 1997-Shatin
250000
16800
Additional information:
6606900
1. On 31 Dec 1997, stock in the HO was
valued at $180000
2. 6606900
The branches paid local expenses and remitted all the
remianing cash received from debtors to the HO. NO ent
had been made about the remittances from the branche
3. Depreciation is to be charged on the fixed asset at 10% p
annum on cost.
Prepare final account for Joyce Ltd for the year ended7531 De
Joyce Ltd.
Trading and Profit and Loss Account for the year ended 31 December 1997
$
Opening Stock
250,000 Sales
Purchases
3,800,000
1,126,000
($725,200 + $400,800)
Less Closing Stock
Cost of Goods Sold
Gross Profit
$
3,463,200
2,674,000
2,924,000
180,000
2,744,000
719,200
3,463,200
3,463,200
Administrative Expenses
Selling Expenses
108,000 - Shatin
23,500
Net Profit
71,740
814,440
719,200
814,440
76
Joyce Ltd.
Balance Sheet as at 31 December 1997
$
Fixed Assets
1,656,000
702,340
520,000
Current Assets
Stock
Current Liabilities
350,400 Creditors
1,357,220
1,080,720
3,308,340
950,000
3,308,340
77
Workings:
W1.
Branch Cash
Shatin
$
Branch Debtors
340,200
Tsuen Wan
Shatin
$
345,320 Expenses
Remittances to HO
340,200
345,320
Tsuen Wan
26,800
34,500
313,400
310,820
340,200
345,320
Note
Total Stock:
HO
Shatin
Tsuen Wan
Goods in transit
Provision for Unrealized Profit
$
180,000
91,680
117,000
4,800
(43,080)
350,400
78