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Advanced Financial Accounting Notes 1
Advanced Financial Accounting Notes 1
The term Dependent Branch means a Branch which does not maintain its own se of
books. All records should be maintained by the head office. All branch accounting
transactions and administration are wholly controlled by the head office.
2. Independent Branch
The independent branches which are otherwise called as Branches maintaining full
system of accounting or are those branches, which are empowered to purchase
goods from the market besides getting the goods from the head office. They can
also supply goods to the head office meet the expenses from the cash realized and
deposit cash in their own account.
Department Branch :
A branch which does not keep full system of accounting.
Department accounts ;
Department accounts are prepared to find out the earning capacity of each
department and to find out any deficiency in the normal working of the
department.
Department accounts are prepared in the same manner as that of regular accounts.
1) Rent and rates: The value of the floor space occupied by each department, taking
into account that office and sales departments normally occupy a more valuable
part of site than other departments.
2) Repairs to plant and Machinery: The actual cost of repairs to the plant and
machinery furniture in that department. In the absence of any specific information,
value of the asset can be considered as the basis for apportionment.
4) Electricity expenses: Where each department has a separate meter, the actual
consumption as shown by meter readings, otherwise the consumption is estimated
on the basis of past experience having regard to the number of machines in each
department and the number of running hours per machine
Inter-Departmental Transfers
Usually goods are supplied at cost. When inter departmental transfer is made at
cost price a simple rule to be followed is to debit the receiving department for the
cost of goods or services and credit the selling department.
Cash price :
This is the retail price of the articles at which they can be purchased immediately for
cash
Down payment :
This is the advance payable by the buyer while signing the hire purchase agreement.
It is also a part of the hire purchase price.
This is the total amount payable by the buyer, in agreed installments for the goods
purchased. This price includes cash price and interest
Under debtors method Hire purchase Trading Account is prepared to ascertain the
profit or loss. It is like consignment Account
Under installment purchase system, the property in goods passes to the purchaser
immediately on signing the contract. In short, sale is outright but payment is made
by different installments
Difference between Installment and hire purchase system;
Unlike the hire purchase system, under installment purchase system, the property
in goods passes to the buyer immediately
Nature of Partnership
When two or more persons join hands to set up a business and share its profits and
losses, they are said to be in partnership.
Section 4 of the Indian Partnership Act 1932 defines partnership as the ‘relation
between persons who have agreed to share the profits of a business carried on by
all or any of them acting for all’
Partnership Deed
Partnership comes into existence as a result of agreement among the partners. The
agreement can be either oral or written. The Partnership Act does not require that
the agreement must be in writing. But wherever it is in writing, the document,
which contains terms of the agreement is called ‘Partnership Deed’