Lesson 1.

Difference between Sales Outlets – Sales Agency and Branch

New sales outlets may be organized as sales agencies or branches. Regardless of which
form of operation is used, the financial statements of each separate unit are combined with
those
of the controlling unit to come up with financial statements of the economic entity as a
whole
(Guerrero & Peralta, 2013).
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). They
usually
carries a line of samples or displays merchandise but does not carry stocks of it. They rarely
collect cash from customers, since collections are performed by the home office. A working
fund
for sales agency expenses is provided by the home office and replenished when exhausted
(Guerrero & Peralta, 2013).
On the other hand, a branch is used to describe a business unit located at some distance
from the home office. This unit carries merchandise obtained from the home office or a
portion
may be purchased from outside suppliers, generate sales, approve customer’s credit and
makes
collection from its customers (Dayag, 2015).

Lesson 2. Accounting System for Sales Agencies (Guerrero & Peralta, 2013)
The accounting process for the operation of a sales agency does not introduce any new
accounting problem because a sales agency is simply an extension of existing sales
territories.
An imprest system is usually adopted by the home office for the working fund of the sales
agency.
The entries made by the home office depend on whether the sales agency net income is
determined separately or not separately. If the office wants to determine the net income of
each
sales agencies separately, it must maintain in the general ledger distinct revenue and
expense
accounts in the name of sales agency. Refer to the illustrative entries below for further
explanation

Lesson 1. Difference between Sales Outlets – Sales Agency and Branch

New sales outlets may be organized as sales agencies or branches. Regardless of which
form of operation is used, the financial statements of each separate unit are combined with
those
of the controlling unit to come up with financial statements of the economic entity as a
whole
(Guerrero & Peralta, 2013).
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). They
usually
carries a line of samples or displays merchandise but does not carry stocks of it. They rarely
collect cash from customers, since collections are performed by the home office. A working
fund
for sales agency expenses is provided by the home office and replenished when exhausted
(Guerrero & Peralta, 2013).
On the other hand, a branch is used to describe a business unit located at some distance
from the home office. This unit carries merchandise obtained from the home office or a
portion
may be purchased from outside suppliers, generate sales, approve customer’s credit and
makes
collection from its customers (Dayag, 2015).
Lesson 2. Accounting System for Sales Agencies (Guerrero & Peralta, 2013)
The accounting process for the operation of a sales agency does not introduce any new
accounting problem because a sales agency is simply an extension of existing sales
territories.
An imprest system is usually adopted by the home office for the working fund of the sales
agency.
The entries made by the home office depend on whether the sales agency net income is
determined separately or not separately. If the office wants to determine the net income of
each
sales agencies separately, it must maintain in the general ledger distinct revenue and
expense
accounts in the name of sales agency. Refer to the illustrative entries below for further
explanation