Good day everyone!

We are the group 7 and we will be discussing about Home Office and Branch Accounting under
Special Procedures.
1ST SLIDE:
HOBA or the Home Office and Branch Accounting has two procedures which are the general procedures and
special procedures. But we will only be focusing on the special procedures.

2ND SLIDE:
Home Office and Branch Accounting Special Procedures
Here are my groupmates. Ms. Erika Camille Asuncion and Mr. Jerald Torres.
I will just discuss the introduction and some overview of this whole chapter and later on, my groupmates will be
giving us the detailed information and illustrations regarding these topics.
In addition to the general procedures discussed in the preceding chapter, there are transactions between the home
office and the branch which create special accounting problems.
Special procedures usually have 3 methods
1. Merchandise shipments to the branch’s selling price
2. Merchandise shipments to the branch billed at prices above cost
3. Interbranch transactions or transactions between branches
- Interbranch transfers of cash
- Interbranch transfers of merchandise

3RD SLIDE:
In the book of Guerrero, Merchandise shipments to the branch’s selling price is not discussed. This is not widely
used since it allows no gross profit for the branch.
Hence, when this method of billing of shipment is used by the home office, branch will operate at a loss equal to
the operating expenses of the branch. This method provides very little useful information from a control or
management viewpoint. Because of this, it will not be illustrated in this chapter.

4TH SLIDE:
So here are the table of contents for this chapter.
1st is the introduction to be followed by Merchandise shipments to the branch billed at prices above cost to be
reported by Ms. Erika Camille Asuncion, Interbranch transactions to be reported by Mr. Jerald Torres and for the
last part, I will be presenting Additional Problems that will help us understand more this topic.

5TH SLIDE:
The home office and its branch(es) may enter into the following transactions:

 Merchandise shipments to the branch billed at prices above cost

 Inter-branch transactions
6TH SLIDE:
 Although these transactions do not affect the general purpose financial statements, they require some special
accounting for internal reporting purposes.

7TH SLIDE:
So what is internal reporting.

8TH SLIDE:

Internal reports keep internal stakeholders “in the know” of company activities.

It will let you keep track of business transactions, but they will also – and this is an important point – help you
maintain a budget, predict cashflow, and forecast revenue. They also allow for an assessment of the current
situation compared to a previous one and/or compared to a forecast.
Internal reporting involves the compilation of financial and operational information on a frequent basis, which is
distributed to those within an organization who can use it to improve performance.
Examples of the information included in internal reports are expense trends, failure rates, detailed sales data, and
employee turnover. Internal reports are not shared with anyone outside of the firm. Only financial statements are
usually issued to outsiders.

9TH SLIDE:
MERCHANDISE SHIPMENTS TO THE BRANCH BILLED AT ABOVE COST
 Home office may prefer to bill merchandise to branches at cost an arbitrary percentage, otherwise
known as billed price.
 Under this method, the branch manager is not given complete information concerning the actual cost
of merchandise shipped.
Hence, upon receipt of merchandise from the home office, the branch records the charges that are listed on the
invoice accompanying the goods.
When billings to the branch exceed cost, the profits determined by the branch will be less than actual profits. The
inventories reported by the branch are overstated inasmuch as they were valued based on the billed price, not at
their cost. Such must be considered by the home office in summarizing the branch operations.
This is only for internal reporting purposes and its purpose to consider the home office’s contribution to profit
through its central functions (such as procurement, manufacturing, marketing and the like) when comparing the
profitability of the various business units within the company
When shipments are billed at cost, the branch’s gross profit is attributed solely to the branch.
On the other hand, when shipments are billed above cost, a portion of the branch’s gross profit is attributed to the
home office.

10TH SLIDE:
Interbranch transactions also known as transactions between branches. Normally, a branch transacts only with the
home office and with unrelated parties. However, there may be instances where home office instructs a branch to
transfer assets to another branch.
 Interbranch transfers of assets are accounted for “as if” the asset transferred went through the home office and
“as if” the branches were transacting with the home office rather than with each other. Accordingly, the
inter-branch transfer is recorded not only by the transacting branches but also the home office.
 Other transactions that need special consideration:
- inter-branch transfers of cash
- inter-branch transfers of merchandise

11TH SLIDE:
Inter-branch transactions have two subcategories:
Inter-branch transfers of cash

 Instead of setting up separate inter-branch receivable or payable accounts, the transacting

branches record interbranch transfers in their respective “Home Office” accounts. The home
office will in turn increase its investment on the receiving branch and decrease its investment on
the transferring branch. This accounting method results to more effective internal control by
facilitating the reconciliation of reciprocal accounts.
 It is “as if” the transferring branch transferred the asset to home office and the home office, in
turn, transferred personally the asset to the receiving branch.
 There is no further special accounting if later on there is settlement between.
Inter-branch transfers of merchandise

 Are accounted for similar to inter-branch transfers of cash. However, a special problem may arise
on the accounting for freight.
 A branch should be charged only for nominal freights and not excessive freight.
 Any excess freight caused by indirect routing should be charged as an expense in the home office
books.
 The excess freight is not a necessary cost of bringing the asset to its intended location as it could
have been avoided; therefore, it should be charged as expense.

So that ends my report, this is just an introduction and an overview for the next topics. So Let’s learn deeper! Again, I’m
Hazel Jane G. Esclamada. Thank you and God bless!