BRANCH ACCOUNTS
Meaning of branch
The offices or outlets or establishments of business enterprise at other places, other than
the head office are called branch.
Objectives of branch accounting
a) To know the profit or loss of each branch separately
b) To know the financial position of each branch
c) To evaluate the performance of each branch
d) To calculate the monetary rewards to the employee of the branch
e) To have control over the branch
Types of branches
1. Domestic branches – branches located in the same country in which head office is
located is known as domestic branches, they are classified into dependent branches
and independent branches.
2. Dependent branches – they are branches which completely depend on the head
office for its administration. They are further classified into fully controlled branches
and partly controlled branches.
3. Fully controlled branches – they are the branches which have no powers for any
decision making. They are not permitted to make any purchases on their own. But
must depend on the supplies of head offices. These branches cannot retain any
amount collected from its debtors or from any other sources, but must be
completely remit it to the head office. The expense of such branches is totally met by
the head office.
4. Partly controlled branches – these branches are given some limited powers for
decision making. They have certain amount of flexibility in its operations. The branch
can make purchases on its own in case of emergency. It can retain the amount and
meet expenses and remit the balance to the head office.
5. Independent branches – they refer to the branches which operates like a separate
entity. They maintain a complete accounting system. The head office would only
incorporate the results of such branches at the end of the accounting period.
6. Foreign branches – they refer to the branches located outside the country in which
the head office is located. All foreign branches are independent branches.
Debtors system
Under this system, the head office treats the branch office as a debtor. At the end of the
accounting period the head office prepares a branch account to ascertain the profit or loss
of the branch. The assets and liabilities of the branch at the beginning of the accounting
year is treated as given by the head office and those at the end of the year is treated as
returned by the branch to the head office.
Format
In the books of Head Office
Branch account as on ----------
Particulars Amt. Particulars Amt.
To opening assets Xxx By opening liabilities Xxx
To goods sent to branch Xxx By goods returned by branch Xxx
To cash / bank account Xxx By cash / bank account Xxx
To closing liabilities Xxx By closing assets Xxx
To P/L account (profit) Xxx By P/L account (loss) Xxx
Total xxx Total xxx
Problems:
1. A trader has a branch in Mysore. You are given the following particulars relating to
Mysore branch for the year ending 31-3-2022.
Stock on 1-4-2021 Rs.32,600
Petty cash at branch on 1-4-2021 Rs.110
Goods sent to branch Rs.45,600
Goods returned by the branch Rs.3,900
Cash sales at branch Rs.71,900
Cash sent to branch for expenses: salaries Rs.12,800; rent Rs. 3,000; petty cash
Rs.2,600
Stock at branch on 31-3-2022 Rs.90
Petty cash at branch on 31-3-2022 Rs.90
Prepare branch accounts in the books of head office.
2. A trader has a branch at Mangalore to which goods are sent at cost price. Sales are
made by the branch only for cash. From the following information prepare branch
accounts.
Goods sent to branch during the year Rs.72900
Cash sales at the branch Rs.71900
Cash sent to branch for expenses – salaries Rs.5000 and rent Rs.1700
Stock at the end Rs,18300
3. From the following particulars prepare branch accounts in the books of head offices
Opening stock at branch Rs.15000
Goods sent to branch Rs.45000
Cash sales Rs.60000
Expenses paid by the head office for salaries Rs.1000; other expenses Rs.2000
Closing stock could not be ascertained but it is known that the branch usually sells
goods at cost plus 20%.
4. Bangalore traders has a branch at Mysore. The following are the transactions
between the head office and the branch during the year 2022
Opening stock Rs.750
Opening petty cash Rs.200
Cheque sent to branch for salaries Rs,1000; rent Rs.2000; petty cash Rs.300
Cash remitted to head office account Rs.18000
Goods received from head office Rs.13000
Petty cash at the end Rs.150
Stock at the end Rs.1000
5. A private ltd. has a branch in Bangalore. From the following information prepare
branch account as on 31-3-2022
Stock at branch on 1-4-2021 Rs.16300
Stock at branch on 31-3-2022 Rs.16000
Petty cash at branch on 1-4-2021 Rs.55
Goods sent to branch Rs.22800
Goods returned by the branch Rs.1950
Cash sales at branch Rs.35800
Cash sent to branch for salaries Rs.6400; rent Rs.1500; petty expenses Rs.1800
Petty cash at branch on 31-3-2022 Rs.55
6. A trader has a branch in Bangalore. All purchases were made by the head office. All
cash received by the branch is remitted to the head office. Branch petty expenses are
paid out of impressed which is to be reimbursed by the head office from the time to
time. From the following particulars you are required to prepare branch account in
the books of head offices
Opening balance
Stock Rs.8000
Petty cash Rs.80
Plant Rs.10,000
Closing balance
Stock Rs.7000
Transaction during the year
Goods sent to branch Rs.50000
Petty cash paid by the branch out of impressed Rs.700
Cash sales during the year Rs,70000
Sale of plant on 1-1-2020 Rs,800 (book value of plant on the date of sales
Rs.900)
Expenses paid by the head office Rs,5000
Depreciation on plant 20% p.a.
Books of accounts are closed on 31-12-2020,
Section C problems
1. A ltd. co. with the head office in Bangalore has a branch at Mysore goods are
supplied to the branch at cost. The expenses of the branch are paid by the head
office. From the following information prepare branch account in the books of Head
office as on 31-3-2020.
Stock on 1-4-2019 Rs.16,700
Goods sent to branch Rs.48,600
Total sales at branch Rs.78,300
Cash sales Rs.19300
Cash received from debtors Rs.54400
Petty cash on 1-4-2019 Rs.220
Goods returned by the branch Rs.5900
Cash sent to branch for expenses: salaries Rs.13200; petty cash Rs.2600 and
rent Rs.3200
Stock on 31-3-2020 Rs.20800; Petty cash Rs.200; Debtors Rs.300
2. From the following particulars relating to Bangalore branch for the year ending 31-
12-2020. Prepare branch account in the books of Head office:
Balance on 1-4-2019: stock Rs.22500; debtors Rs.45000; petty cash Rs.450
Goods sent to branch during the year Rs.378000
Cash sales Rs.90000
Cash received from debtors Rs.315000
Credit sales during the year Rs.342000
Cheques sent to branch for salaries Rs.13500; rent Rs,2250 and petty
expenses Rs.1650
Goods returned by the branch Rs.3000
Balance on 31-4-2020: stock Rs.37500 and petty cash Rs.300
3. A ltd. co, opened a branch in Bangalore on 1-1-2020. Branch is instructed to sell the
goods both for cash and credit. All collections are remitted to the head office. The
head office sends the cash to the branch to meet the expenses. From the following
details prepare branch account in the books of head office.
Balance on 1-1-20: stock Rs.5000; petty cash Rs.150; furniture Rs,2500
Balance on 31-12-20: stock Rs.17000; petty cash Rs.50
Transactions during the year:
I. Goods sent to branch Rs.50,000
II. Goods returned by branch Rs.3,000
III. Expenses paid by the head office Rs.10,000
IV. Cash sent by the head office for petty expenses Rs.250
V. Cash sales Rs.2500
VI. Collections from debtors Rs.42500
VII. Credit sales Rs.51000
VIII. Depreciate furniture at 10% p.a.
IX. Discount allowed to debtors Rs.1800
4. From the following particulars prepare Mysore branch account in the books of Head
office:
Balance on 1-1-2021: stock Rs.10000; debtors Rs.4000; petty cash Rs.500;
furniture Rs.2000; prepaid insurance Rs.150; outstanding salary Rs.100
Transactions during the year:
I. Goods sent to branch Rs.80000
II. Cash sales by the branch Rs.130000
III. Credit sales by the branch Rs.40000
IV. Amount collected from debtors Rs.35000
V. Amount received by Head office directly from branch debtors Rs.2000
VI. Cash sent to branch for expenses: rent Rs.2000; salary Rs.2400; petty
cash Rs.1000; insurance premium Rs.600 p.a. (paid upto 31-3-2019)
VII. Goods returned by the branch Rs.1000
VIII. Goods returned by the debtors Rs.2000
IX. Petty expenses paid by branch Rs.850
X. Depreciation on branch furniture at 10% p.a.
XI. Stock on 31-12-2018 Rs.5000
5. From the following particulars prepare branch accounts in the books of Head office
as on 31-3-2021.
I. Balance on 1-4-2020: stock Rs.40000; debtors Rs.15000; prepaid insurance
Rs.2300; petty cash Rs.2000; furniture Rs.12000; outstanding salary Rs.4100
II. Goods sent to branch Rs.330,000
III. Cash sales during the year Rs.280,000
IV. Credit sales Rs.183000
V. Cash received from debtors Rs.135000
VI. Cash paid by the branch debtors directly to Head office Rs.22000
VII. Discount allowed to debtors Rs,2300
VIII. Cash sent to branch for expenses: rent Rs.15000; salary Rs.10800; petty cash
Rs.4000; insurance Rs.2600 ( paid upto 30-6-2021)
IX. Goods returned by the branch Rs.5000
X. Goods returned by debtors Rs.7200
XI. Petty expenses paid by the branch Rs.3850
XII. Depreciation on furniture at 10% p.a.
XIII. Closing stock Rs.36000.
6. From the following information prepare branch account in the books of head office
for the year ending 2021-22.
Particulars 31-3-2021 31-3-2022
Goods sent to branch 3,000 4200
Cash sales 1200 1920
Credit sales 2160 3000
Cash received from debtors 1920 2400
Discount allowed to debtors 30 90
Bad debts 30 60
Cash sent to branch 420 600
Closing stock 480 840
Closing petty cash 10 12
7. From the following information relating to a branch, prepare branch account for year
ended 31-3-2019 and 31-3-2020
Particulars 31-3-2019 31-3-2020
Goods sent to branch 15000 21000
Cash sales 6000 9600
Credit sales 10800 15000
Cash received from branch 9600 12000
Discount allowed to debtors 150 450
Dad debts 150 300
Cash sent to branch for expenses 2100 3000
Closing stock 2400 4200
Closing petty cash 50 60
8. Goods are invoiced by the head office at cost + 25%. All the expenses are paid by the
head office. From the following details, prepare branch accounts in the books of
head office as on 31-12-2020:
I. Stock on 1-1-2020 at invoice price Rs.12500
II. Debtors on 1-1-2020 Rs12000
III. Goods sent to branch at invoice price Rs,.40000
IV. Cash remitted to Head office: cash sales Rs.16000; cash from debtors
Rs.29500
V. Goods returned to head office at invoice price Rs.2400
VI. Cash received from head office for wages and salaries Rs.11000; rent Rs.3000
and sundry expenses Rs,510
VII. Closing stock Rs,15000
VIII. Closing debtors Rs.22500.
