Branch Accounting-All types of account , branch stock account,

what is dependent branch

dependent branch: when the policies and administration of a branch are totally controlled by the head office , which also maintains its accounts , the branch is called a dependent branch:

features of dependent branch:

a dependent branch does not maintains its own set of books , the head office maintains a record of all the transactions however , the branch maintains a debtors , ledger and a stock ledger , debtors, ledger is maintained in order to find out the money due from the debtors, stock ledger is kept to provide information regarding the movement of the goods from the head office and the balance of stock in hand ,,
generally , all the goods are supplied to the branch by the head office sometime , the branch may be allowed to make purchase from the local parties for which the payments are made by the head office,
goods are generally sold by such branches in cash , such branches can sell goods with the permission of the head office
all major expenses of the branch are paid , as far as possible , by thehead office .
In order to meet the petty expenses of the branch, the branch may be provided with the petty cash from the head office , petty cash account at the branch may be maintained on either simple system or imprest system ,

dependent branch

when the size of the branches is very large , their functions become complex, in such a situation , it is desirable for each branch to eatablish its owndouble entry book-keeping system quite separate from those of the head office, under this system of branch accounting , the branches are treated as separate, independent units , these types of branches are known as independent branches :

what is the debtors, system:

debtors system: this system of accounting is suitable for the small – size branch , under this , a branch account is opened for each branch in the head office , s ledger , all transactions are recorded in this account , the branch account is prepared in such a way that it discloses the profit or loss of the branch , branch account is a nominal account in nature , head office may send goods to the branch either at ,, cost price” or ” selling price”(also called invoice price). debtors system is also called direct method

journal entries for under debtors system

For recording opening balances branch assets	Branch a/c To branch assests (individually)
For recording opening balances of branch liabilities	Branch liabilities(individually) To branch A/c
When goods are supplied by the head office/another branch to the branch	Branch A/c To goods send to branch A/c
When goods are returned by the branch/branch customers directly to the head office	Goods send to branch A/c To branch A/c
When goods are supplied by the branch to another branch under instructions of the head office	Goods send to branch A/c To branch A/c
When goods are supplied by the head office but not received by the branch	Goods -in- transit A/c To branch A/c
When the head office meets the branch expenses or sends cash to the branch for meeting its expenses	Branch A/c To cash/ bank A/c
When remittances are received by the head office from the branch/ branch customers	Cash/bank A/c To branch A/c
When remittance are send by the branch but not received by the head office	Cash-in transit A/c To branch A /c
When the balance in goods send to the branch account is transferred	Goods send to branch A/c To purchase A/c(in cash of trading concerns) or To trading A/c ( in cash of manufacturing concerns)
For recording the closing balances of branch assets	Branch assets A/c (individual) To branch A/c
For recording the closing balances of branch liabilities	Branch A/c To branch liabilities ( individual)
for recording profit or loss i if credit side exceeds the debit side ii, if debit side exceeds the credit side	branch A/c To General profit & loss A/c general profit & loss A/c To branch A/c

format of branch account

Particulars	Amount	particulars	Amount
To balance b/d Stock Petty cash Debtors Fixed assets Prepaid expense To goods send to branch A/c Goods send by H.O Goods send by other branches To cash/bank (remittance by H.O) To balance Creditors Outstanding expense To net profit transferred to general profit &loss A/c	** **	By balance b/d Creditors Outstanding expense By cash/bank (remittance to H. O) Remittance by branch debtors Directly By goods send to branch A/c Return by branch Return by branch debtors directly to H.O Send to other branches By balance c/d Stock Petty cash Debtors Fixed assets Prepaid expenses By net loss transferred to general profit &loss A/c	** **

note: the following items are to be ignored while preparing branch account under this method :

bad ,debts , discount allowed , credit sales, sales returns by the customers to the branch, cash received by the branch from the branch debtors etc, since the debtors at the end appers at the adjusted figure ..
depreciation and profit/loss on sale of fixed assets since fixed assets at the end appears at the adjusted figure
abnormal losses; since stock at the end appears at the end adjusted figure ,
expenses met by branch out of cash , since either reduced cash balance at the end is decreased or the liability at the end is increased
purchase of goods/fixed assets by branch, since book value of goods/ fixed assets at the end is increased and either the amount of remittances is reduced or the creditors at the end are increased ,
sale of goods/ fixed assets by branch: since book value of goods/ fixed assets at the end is decreased and either the amount of remittances is increased or the debtors at the end are increased ,
petty cash Expense paid by the branch: the branch account is debited with the opening balance of petty cash and the amount, of petty cash sent by the head office, and is credited with the closing petty, cash for calculating closing petty cash , all expenses paid by the branch are taken into consideration, therefore, it should be ignored for the preparation of branch account,

In cash the petty cash in maintained on Imprest system, the expenses met by the branch are to be shown in the same manner as the branch expenses met by the head office, in such a case , petty cash balance at the end appears at the same amount at which it appears in the beginning,

Invoice price: sometimes,the head office does not want to reveal the cost of the goods to the branch and therefore, invoices, good at a price which is higher than the cost price (IP) ,such price is knows as invoice, (IP) the difference between the Invoice price and the cost price (CP) is called loading,

how to Eliminate/Remove loading? ‘ when goods are sent at the invoice price, for ascertaining correct profit/ loss of the branch, the items recorded at invoice price should be brought down to cost price level, for this purpose, the loading included in the various item should be eliminated by passing the following adjusting entries:

(1) for Loading on opening stock

stock Reserve A/c —Dr

To Branch A/c

(2) for loading (net) on goods sent to the branch (i;e good sent to the branch less Return to the branch or the branch customers ) to H.O]

goods sent to branch A/c –Dr

To branch A/c

(3) for loading on closing stock

Branch A/c —-Dr

To stock Reserve A/c

stock and debtors system

stock and debtors system is generally
used when the goods are send to the branch at an invoice price and the size of the branch is large under this system , head office usually maintains the following accounts

journal entries under stock and debtors method:

When goods are sent by the H. O /another branch	Branch stock A/c(IP) To goods sent to branch A/c
When goods are returned by the branch /or when goods are supplied to another branch	Goods sent to branch A/c (IP) To branch stock A/c
When goods are returned by the branch customers directly to H. O	Goods sent to branch A/c (IP) To debtors A/c
For credit sales	Branch debtor A/c To branch stock A/c
When goods are returned by the branch debtors to the branch	Branch stock A/c To branch debtors A/c
When cash in received by the branch from its debtors	Branch cash A/c To branch debtors A/c
To record bad debts , discount allowed etc,	Branch expenses A/c To branch debtors A/c
To record abnormal loss of stock (due to abnormal factors like ,fire theft etc)	Branch adjustment A/c (loading) Branch profit &loss A/c (cost) To branch stock A/c (invoice price)
To record normal loss of stock (due to the inherent nature of the goods)	Branch adjustment A/c (invoice price) To branch stock A/c
To record surplus representing excess of selling over invoice price	Goods sent to branch A/c (loading ) To branch adjustment A/c
To remove loading from the amount of the closing stock,	Branch adjustment A/c (loading) To stock reserve A/c
To remove loading from the amount opening stock ,	Stock reserve A/c (loading ) To branch adjustment
For recording gross , profit made by the branch	Branch adjustment A/c To branch profit &loss A/c
For transfer of branch expenses	Branch profit & loss A/c To branch expenses A/c
For recording net profit made by the branch	Branch profit & loss A/c To general profit & loss A/c
For transfer of the balance in the goods sent to branch A/c	goods sent to Branch A/c –Dr To Trading A/c purchases A/c

branch stock account

particulars	Amount	particulars	Amount
To balance b/d To goods sent to branch A/c To branch debtors A/c (return by the customers to the branch) To goods sent to branch A/c (transfer of goods from the other branch ) To branch adjustment (excess of selling price over invoice price *I, e,* surplus)	** **	By branch cash A/c(cash sales) By branch debtors A/c (credit sales) To good sent to branch A/c (return to H.O) To good sent to branch A/c (transfer of goods to other branch ) To branch adjustment A/c (loading on abnormal loss due to fire, theft, etc) By branch profit & loss A/c ( cost of abnormal loss due to fire etc,,) By branch adjustment A/c (normal loss) By balance c/d In hand In transit	** **

branch adjustment account

particulars	Amount	particulars	Amount
To branch stock A/c (loading on abnormal loss due to fire, etc) To branch stock A/c (normal loss) To stock reserve A/c (loading on closing stock) To gross profit transferred to branch profit & loss A/c	** **	By stock reserve A/c (loading on opening stock) By goods sent to branch A/c (loading on net goods sent ) By branch stock A/c (excess of selling price over invoice price I, e , surplus)	** **

branch expenses account:

particulars	Amount	particulars	Amount
To salaries To rent To petty cash To bad bebts To discount To depreciation		By branch profit & loss A/c

branch profit & loss account

particulars	Amount	particulars	Amount
To branch stock A/c (cost of abnormal loss)’ To branch expense A/c To net profit transferred to general profit & loss A/c *		By branch adjustment A/c (gross profit) By branch cash A/c (insurance) By net loss transferred to general profit & loss A/c*

branch debtors account

particulars	Amount	particulars	Amount
To branch b/d To branch stock A/c (credit sales) To bills receivable A/c (B/R dishonoured)		by branch cash A/c (collection) By bill receivable A/c By branch expenses A/c Discount allowed Bad debts By branch stock A/c (returns) By balance c/d

treatment of shortage: when branch profit and loss account is also prepared along with the branch adjustment account, loading on the shortage is debited to the branch adjustment account , cost element of the shortage is debited to branch profit & loss A/c

when branch profit & loss account is not prepared along with the branch adjustment account, then the branch adjustment account is divided into two parts: the first part is used to determine the gross profit and the second part to determine the net profit loading on shortage is debited to the first part and the cost element of the shortage is debited to the second part:

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Branch Accounting -All, Formats,-Branch stock account branch adjustment account, branch expense account , branch profit and loss account, branch debtors account