Lesson 2.

Interbranch Transfers of Cash (Guerrero & Peralta, 2013)

Home Office has the discretion to open several branches in their choice of locations.
Occasionally, the home office may instruct one branch to transfer cash to another branch.
The
accounting rule to clear such transfer is through the use of its Home Office account instead
of
using special accounts.
Assume that as instructed by the home office Branch A transfers cash to Branch B. The
entries to record this transfer can be shown as follows:
Home Office books
Branch A books
Branch B books
Investment in Branch B xx
Investment in Branch A xx
Home Office xx
Cash xx
Cash xx
Home Office xx
Lesson 3. Interbranch Transfers of Merchandise (Guerrero & Peralta, 2013)
In some instances, the home office may find it necessary to authorize the transfer of
merchandise from one branch to another. Like interbranch transfers of cash, the accounting
rule
that branches should not carry an account with another branch but should clear the transfer
through its Home Office account can be used.
In the case of interbranch transfers of merchandise, the handling of freight charges poses
a special problem. Freight on goods received by the branch directly home office are properly
included in cost of branch inventory, but the transfer of merchandise from one branch to
another
does not justify increasing inventory value by additional freight costs incurred because of
indirect
routing. Excess freight cost should be absorbed by the Home Office and treated as expense.
To understand further, assume that the home office instructed Branch A to transfer
merchandise to Branch B. The entries to recognize such transaction can be recorded as
follows:

Lesson 2. Interbranch Transfers of Cash (Guerrero & Peralta, 2013)

Home Office has the discretion to open several branches in their choice of locations.
Occasionally, the home office may instruct one branch to transfer cash to another branch.
The
accounting rule to clear such transfer is through the use of its Home Office account instead
of
using special accounts.
Assume that as instructed by the home office Branch A transfers cash to Branch B. The
entries to record this transfer can be shown as follows:
Home Office books
Branch A books
Branch B books
Investment in Branch B xx
Investment in Branch A xx
Home Office xx
Cash xx
Cash xx
Home Office xx
Lesson 3. Interbranch Transfers of Merchandise (Guerrero & Peralta, 2013)
In some instances, the home office may find it necessary to authorize the transfer of
merchandise from one branch to another. Like interbranch transfers of cash, the accounting
rule
that branches should not carry an account with another branch but should clear the transfer
through its Home Office account can be used.
In the case of interbranch transfers of merchandise, the handling of freight charges poses
a special problem. Freight on goods received by the branch directly home office are properly
included in cost of branch inventory, but the transfer of merchandise from one branch to
another
does not justify increasing inventory value by additional freight costs incurred because of
indirect
routing. Excess freight cost should be absorbed by the Home Office and treated as expense.
To understand further, assume that the home office instructed Branch A to transfer
merchandise to Branch B. The entries to recognize such transaction can be recorded as
follows: