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    TYBCom - Accounting-I

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    TYBCom - Accounting-I

    Uploaded by

    tsedal8775
    6 views6 pages

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    6 views6 pages

    TYBCom - Accounting-I

    Uploaded by

    tsedal8775

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    © All Rights Reserved
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    of 6

    Unit IV: Branch Accounting:

    A branch is a part of central system of organisation. It is subordinate unit of the organisation


    and carries on some of the activities of organisation. An organisation expands activities
    through operating branches at different places, when it finds it inconvenient or uneconomical
    to manage its transactions form single place.

    Branch v/s department

    Branch Department
    1. location Generally branches are located at Generally departments are
    different places. located at the same place under
    one roof.
    2. Independence Branches can have independence Departments do not have
    to varying extent in operation. independence in operation.
    3. Control Branches are controlled through Departments are directly
    head office, as these are located at controlled, as these are located
    different places. under same roof.
    4. Accounts a. Branches may have a. Departments do not have
    independent books of independent books of
    account. accounts. The columnar
    books of accounts are
    maintained and certain
    expenses are allocated to
    departments on scientific
    basis.
    b. Where branches maintain b. Such account is not
    independent accounts, only required.
    final accounts are
    incorporated by office. In
    other cases, periodical
    statements are recorded by
    head office.

    c. Head office maintains an c. Such account is not


    account for each branch for required.
    recording transaction at
    head office.
    Types of branches:

    The branches are classified on different basis as follow-

    1. Based on Location-
    a. Local or Inland (located in same country)
    b. Foreign Branches (i.e. located in other country)
    2. Based on dependence-
    a. Dependent Branches
    b. Independent Branches

    The dependent branch has to obtain permission or approval or authorisation from head office
    for its significant transactions. Dependent branches are those which do not maintain separate
    books of accounts and wholly dependent on head office. The result of the operation, i.e.,
    profit and loss, is ascertained by Head office.

    Independent branches are generally followed in case of foreign branches. They have wide
    powers. Such branches are to operate in accordance with overall objectives of the
    organisation.

    Methods of maintaining Branch Accounts:

    a) Debtor method
    b) Stock and Debtor method
    c) Wholesale branch method
    d) Final account method

    Debtor method:

    This system is adopted in the case of those branches which are small in size. Under this
    system, head office opens a separate account for each branch called “Branch Account” for the
    purpose of finding out profit or loss of branch. Branch account prepared in head office book
    only. Under this system, head office consider branch as a ‘Debtor’ and accounting entries are
    made treating branch as personal account.

    The group of transactions are recorded viz., transaction between

    • Head office and branch


    • Head office and other in relation to branch
    • Branch and head office
    Proforma of Branch Account:

    Particulars amt Particulars amt


    To Balance b/d By balance B/d
    Stock xx Outstanding expenses xx
    Debtors xx Creditors xx
    Prepaid expenses xx
    Petty cash xx
    Fixed asset xx
    Cash xx
    To goods sent to Branch A/c xx By Goods sent to Branch xx
    (for goods Returned by branch or its
    consumer to Head office)
    To Cash/ Bank xx By Cash / Bank xx
    (cash remitted to branch) (for cash remitted by branch )
    To cash / Bank xx By cash / Bank xx
    (for expenses) (Remitted by customer of branch to
    head office)
    To profit & loss A/c xx By profit and loss A/c xx
    (Bal fig./ loss) (Bal Fig./profit)
    To Balance c/d By Balance C/f
    Outstanding expenses xx Stock xx
    Creditors xx Debtors xx
    Prepaid expenses xx
    Petty cash xx
    Fixed asset xx
    Cash xx
    xxx xxx

    The following transactions effected by branch will not be recorded in Branch account:

    i. Sale of goods by branch on cash or credit;


    ii. Purchase of goods by branch on cash or credit;
    iii. Return of goods by debtors to branch
    iv. Return of goods by branch to suppliers
    v. Receipt of cash from customer
    vi. Payment to supplier or for expenses
    vii. Discount allowed to customer and by suppliers
    viii. Write off/ bad debts
    ix. Loss of cash or goods at branch
    x. Other sundry receipt at branch
    xi. Purchase of assets by branch

    The omission of these transactions does not affect correctness of the accounts and profits.
    Accounting Entries:

    Transactions Journal Entries


    1. Goods sent to branch by head office Branch A/c
    or any other branch To Goods sent to branch A/c
    (being value of goods sent to the branch)
    2. Goods returned by branch to head Goods sent to branch A/c
    office or to any other branch To Branch A/c
    (being value of goods returned by branch)
    3. Cash remitted to branch or paid to Branch A/c
    others To Cash/Bank A/c
    (Being amount sent to branch for payment /exp)
    4. Expenses in respect of branch paid by Branch A/c
    head office To Cash/Bank A/c
    (Being payment for expenses relating to branch)
    5. Provision for expenses relating to Branch A/c
    branch To outstanding Exp. A/c
    (Being provision of unpaid expenses)
    6. Charging depreciation on assets used Branch A/c
    at branch not included in branch To asset A/c
    account (Being dep. on asset used at branch provided)
    7. Cash remitted by branch to head Cash/Bank A/c
    office To Branch A/c
    (Being amount remitted by branch)
    8. Amount received from customer & Cash/Bank A/c
    other sundry income of branch by To Branch A/c
    head office (Being amount received from third party in
    respect of branch sales/income)
    9. Goods received from customer of Goods sent to branch A/c
    branch by head office To Branch A/c
    (Being goods sold by branch returned by
    customer directly)
    10. Goods sent to branch account Goods sent to branch A/c
    transferred to trading account at the To Purchase or (Trading) A/c
    end of accounting year (Being value of goods sent to branch transferred
    to trading)
    11. Profit or loss at branch (balancing Branch A/c
    figure in branch account) To Profit & Loss A/c
    (Being Profit/loss for the year at the branch) (for
    loss entry will be reversed)
    12. Assets at the end of the accounting Branch Assets A/c
    year To Branch A/c
    13. liabilities at the end of the accounting Branch A/c
    year To Branch liabilities A/c
    14. Assets & Liabilities of the branch at a) For branch assets:
    the end of the accounting year will Branch A/c
    appear in H.O. Balancesheet. To Branch assets
    In the beginning of the next year, they b) For branch liabilities:
    will be transferred to Branch account. Branch liabilities A/c
    To Branch A/c
    c)

    Prob. 1.

    M/s Latoor & sons are having their head office at Bombay and a branch at Pune. The
    following are the transactions of the head office which the branch for the year ended 31st July
    2012.

    Stock at branch as on 1st august 2011 Rs. 30800

    Debtors at the branch as on 1st August 2011 Rs. 16500

    Petty cash as on 1st August 2011 Rs. 500

    Goods supplied to Branch Rs. 151200

    Remittances from the branch:

    i. Cash sales Rs. 10500


    ii. Realisation of debtors Rs. 157740

    Amount sent to the branch for:

    i. Salary Rs. 7440


    ii. Rent Rs. 2400
    iii. Petty cash Rs. 3000

    Stock at the branch as on 31st July 2012 Rs. 23150

    Sundry debtors at the branch as on 31st July 2012 Rs. 50460

    Petty cash as on 31st July 2012 Rs. 750

    Show the Branch A/c in the books of the head office at Bombay.

    Prob. 2:

    From the following particulars relating to Colva branch for the year ending 31st dec 2011,
    prepare Branch A/c in the books of the head office.

    Stock at branch on 1/1/2011 Rs. 20000

    Branch debtors on 1/1/2011 Rs. 8000

    Petty cash at branch on 1/1/2011 Rs. 1000

    Furniture at the branch on 1/1/2011 Rs. 4000

    Prepaid fire insurance premium on 1/1/2011 Rs. 300


    Salaries outstanding at the branch on 1/1/2011 Rs. 200

    Goods sent to the branch during the year Rs. 160000

    Cash sales during the year Rs. 260000

    Credit sales during the year Rs. 80000

    Cash received from debtors Rs. 70000

    Cash paid by the branch directly to the head office Rs. 2000

    Discount allowed to the debtors Rs. 200

    Cash sent to branch for expenses:

    i. Rent Rs. 4000


    ii. Salaries Rs. 4800
    iii. Petty cash Rs. 2000
    iv. Insurance upto 31st march 2012 Rs. 1200

    Goods returned by branch RS. 2000

    Petty cash utilised Rs. 1700

    Goods returned by the debtors to branch Rs. 4000

    Stock on 31/12/2011 Rs. 10000

    Goods costing Rs. 2400 were destroyed on account of fire and the sum of Rs. 2000 was
    received from the insurance company.

    Provide depreciation on furniture @ 10% p.a.

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