Summary

 An agency is an unincorporated entity in which orders are received and then transmitted
to the home office for processing, shipping and billing of merchandise (Dayag, 2015).
Samples or displays merchandise are usually taken by the agencies but not supplies of
it.
 A branch office normally, carries stocks of merchandise, which may be obtained solely
from home office or a portion may be purchased from outside suppliers (Guerrero &
Peralta, 2013).
 Working fund given to agencies are accounted in the same manner as petty cash fund’s
imprest system (Guerrero & Peralta, 2013).
 In accounting system for branch operations, home office and the branch maintain
separate accounting systems. Each maintains a full set of books with a complete self
balancing set of accounts (Guerrero & Peralta, 2013)..
 Intracompany (Reciprocal) accounts are account where transactions between home
office and branch must be recorded (Guerrero & Peralta, 2013).
 Guerrero & Peralta, 2013 show the reciprocal nature of the intracompany accounts as
follows:
(Home Office Books)
Investment in Branch
Transactions
(Branch Books)
Home Office
xxx
Asset transfers to branch
Xxx
xxx
Asset transfers from branch
xxx
xxx
Branch profit
Xxx
xxx
Branch loss
xxx
 In preparation of combined financial statements, reciprocal accounts must be eliminated.
Therefore, elimination entries are prepared in the working paper and not in the separate
accounting books of home office and branch (Guerrero & Peralta, 2013).
 Common errors in recording reciprocal accounts may be encountered due to
bookkeeping, mechanical error or timing differences in recording same transactions.
Thus, reconciliation between reciprocal accounts must be performed in order to arrive at
adjusted balances.

Summary
 An agency is an unincorporated entity in which orders are received and then transmitted
to the home office for processing, shipping and billing of merchandise (Dayag, 2015).
Samples or displays merchandise are usually taken by the agencies but not supplies of
it.
 A branch office normally, carries stocks of merchandise, which may be obtained solely
from home office or a portion may be purchased from outside suppliers (Guerrero &
Peralta, 2013).
 Working fund given to agencies are accounted in the same manner as petty cash fund’s
imprest system (Guerrero & Peralta, 2013).
 In accounting system for branch operations, home office and the branch maintain
separate accounting systems. Each maintains a full set of books with a complete self
balancing set of accounts (Guerrero & Peralta, 2013)..
 Intracompany (Reciprocal) accounts are account where transactions between home
office and branch must be recorded (Guerrero & Peralta, 2013).
 Guerrero & Peralta, 2013 show the reciprocal nature of the intracompany accounts as
follows:
(Home Office Books)
Investment in Branch
Transactions
(Branch Books)
Home Office
xxx
Asset transfers to branch
Xxx
xxx
Asset transfers from branch
xxx
xxx
Branch profit
Xxx
xxx
Branch loss
xxx
 In preparation of combined financial statements, reciprocal accounts must be eliminated.
Therefore, elimination entries are prepared in the working paper and not in the separate
accounting books of home office and branch (Guerrero & Peralta, 2013).
 Common errors in recording reciprocal accounts may be encountered due to
bookkeeping, mechanical error or timing differences in recording same transactions.
Thus, reconciliation between reciprocal accounts must be performed in order to arrive at
adjusted balances.