Branch Account

Branch
A trading company may try to expand i
ts business by opening BRANCHES as a
nother establishment of the company i
n different locations

Branch Accounts
~ Branches keep their own records

~ Head office keeps records for branches

Procedures:

Procedures:

Separate trial balances for the head

Branch adjustment account (= Branch

office and the branches

trading account)

Separate trading and profit and loss

Branch profit and loss account

accounts for the head office and the

branches

Trading and profit and loss account for the

whole business

Separate balance sheets for the

head office and the branches

Balance sheet for the whole business

3

Account kept by Branch

Account Kept by Branch

Head office and Branch will open a full
set of books to record their won transa
ctions instead of branch books are kept
by the Head office

In Head Office books:

Branch Current Account is opened to re
cord transactions between the Head Of
fice and the Branch

In Branch books:
Head Office Current Account is opened
to record transactions between them

HOs Book:

Branch Current
$
$
X Goods in Transit
X
from branch
X
XRemittance
Cash in Transit
X
Bal c/f
X

Bal b/f
Branch net profit

Branchs Book:

HO Current
$
Remittance to HO
Bal b/f
X c/f
Bal
X Net profit
X

$
X
X
X
7

Goods in Transit (GIT)

Goods were sent by the Head Office be
fore the end of the financial period, but
received by the branch after the end of
the financial period
GIT =Goods Sent to Branch Goods received
from HO

Remittances/Cash in Transit
(CIT)
The remittance or cash was remitted b
y the branch before the end of the fina
ncial period, but was received by the H
ead office after the end of the financial
period
CIT= Remittance to Head Office
mittance from Branch

Re

Preparation of the Final Account

s
Separate trading and profit and loss ac
counts and balance sheets would be pr
epared for the head office and the bran
ch(es)

10

Transactions

Head office
(HO) books

1 Opening Stock

Dr HO Trading
Dr Branch
Cr Stock (opening Trading
stock)[at cost]
Cr Stock
(Opening stock)
[at Cost or
Cost+profit]
Dr
No entry
Purchase(Trading)
Cr Creditors

2 Goods
purchased
directly from HO
suppliers[at cost]
3 Goods
purchased
directly from
Branch suppliers

NO entry

Branch books

Dr
Purchase(trading
)
Cr 11
Creditors

Transactions
4 Goods sent
from HO to
Branch
[cost+profit]

Head office
(HO) books

Dr Branch
Current
Cr Goods sent to
Branch
5 Goods returned Dr Goods sent
from Branch to
to branch
HO
Cr Branch
Current
6 Cash
Dr HO
sales/Credit sales Cash/Debtors
Cr HO Sales

Branch books
Dr Good received
from HO
Cr HO Current
Dr HO Current
Cr Good received
from HO
Dr Branch cash/
debtors
Cr Branch sales
12

Transactions

Head office
(HO) books

Branch books

7 Closing stock

Dr
Stock(Closing)
Cr HO Trading

Dr Stock (Closing)
Cr Branch Trading
good purchased
directly from Branch
suppliers [at cost] &
goods received from
HO [cost+profit]

8 Gross profit on
trading

Dr HO Trading
Dr Branch Trading
Cr HO profit and Cr Branch profit
loss
and loss

9 HO expenses
paid by HO

Dr Expenses
(P&L)
Cr Cash/Bank

No entry

13

Transactions

Head office
(HO) books

Branch books

10 Branch
expenses paid by
Head Office

Dr Branch
Current
Cr Cash/Bank

Dr Expenses (P&L)
Cr HO Current

11 Branch
expenses paid by
Branch

No entry

Dr Expenses (P&L)
Cr Cash/Bank

12 Administrative
charges for
services rendered
by HO to Branch

Dr Branch
Current
Cr HO P&L
(Income)

Dr Branch P&L
Cr HO Current

14

Transactions

Head office
(HO) books

Branch books

13 Provision for
Unrealized Profit
(Branch & Goods
in Transit)
[cost+profit]

Increase in provision
Dr HO P&L
Cr Prov. For
Unrealized profit
Decrease in
provision
Reverse

No entry

14 Goods in
Transit(GIT)

Dr Goods in
NO entry
Transit
Cr Branch
Current
15 Cash in Transit Dr Cash in Transit No entry
(CIT)
Cr Branch
Current
15

Transactions

Head office
(HO) books

Branch books

16 Profit made
by the branch

Dr Branch
Current
Cr Retained
profit
Dr P&L
Cr Retained
profit

Dr Branch P&L
Cr HO Current

17 Profit made
by HO

Dr Bank
18 Cash
Cr Branch Current
remittances
Or
from the branch

No entry

Dr HO Current
Cr Bank

Or
Dr Bank
Dr Remittance to HO
Cr remittance from Cr Bank
branch
Dr HO Current
Dr Remittance from Cr Remittances to
branch
HO 16
Cr Branch Current

Inter-company transactions
It would not be transferred to the total colu
mn of the trading and profit and loss account
and the balance sheet
For example, goods sent to the branch, good
s from the head office, service overheads cha
rged by the head office to the branch, head o
ffice current account, branch current account
provision for unrealized profit

17

Example 2

18

Colour Toys Ltd. has its head office in Central and a branch in
Shatin and separate final accounts are prepared for HO and
Branch.
Trial Balance as at 31 December as at 31 Dec 1997
HO
Branch
$
$
$
$
Cash and Bank
114300
80800
Debtors
360000
40000
HO Current
146000
Branch Current
194000
Fixed assets
1532000
152000
Stock,1Jan 1997
60000
36000
Creditors
96000
10000
Prov. For dep
38300
3800
Remittances to HO
11000
Remittances from Branch
10000
Capital
1200000
19

HO

Branch
$
$

$
$
ained Profits
112000
chases and Sales
900000 1400000
860000
d sent to branch
664000
d from HO
616000
ng Expenses
120000
48000
vice Charged Received
5000
ministrative Expenses
245000
36000
3525300 3525300 1019800 1019800

tional information:
Goods purchased by the HO are sent to the branch at cost
tock at 31 Dec 1997: HO $80000; Branch $10600
Depreciation is to be provided at 10% on cost per annum
Administrative expenses include an annual charge of $5000
or services rendered by the head office
uired:
pare final accounts of HO and Branch for the year ended 31Dec
7
20

Trading and profit and loss a/c for the year ended 31 Dec 1997
HO
Branch
Total
$000
$000
$000
$000
$000
$000
Sales
Good Sent to Branch
Less COGS
Opening Stock
Purchases
Goods from HO

1400
664
2064
60
900
960

Less Closing stock(WK1)80

860
860
36
616
652

880

Gross profit
1184
Add: Service charges received
5
Less: Depreciation
153.2
Selling expense 120
Admin. Exp.(WK2)245
518
Net profit
670.8

80+10.6+48

10.6

641.4
218.6
-

15.2
48
36

99.2
119.4
245+36-5
21

2260
2260
96
900
996

138.6 85

1402.
168.4
168
276 612
790.

WK1:
The total closing stock should be included Goods in transit
as GIT are still unsold goods at year end but those goods ar
transported on the way
=> 80+10.6+48 = 138.6
Wk2:
The total administrative expenses should deduct the interCompany service charges of $5000
=> 24.5+36-5=276

Back
22

HOs Book:

Branch Current

$
$
Bal b/f
194000Goods in Transit
Branch net profit 119400
(664000-61600)
48000
Remittance from branch 10000
Cash in Transit
(11000-10000)
1000
Bal c/f
254400
313400

313400

Branchs Book:

HO Current
$
Remittance to HO
Bal b/f
11000
Bal
c/f
254400Net profit
265400

$
146000
119400
265400
23

Balance Sheet as at 31 Dec 1997

HO
Branch
$000
$000
$000
$000
Fixed Assets
Less provision for Dep
Current Assets
Stock
Goods in Transit
Branch Current
Debtors
Cash and Bank
Cash in Transit

1532
191.5
1340.5
1437.5

152
19
133

Total
$000
$000

1684
210.5

80
10.6
138.6
48
80+10.6+48
254.4
360
40
400
114.3
80.8
196.1
1
857.7
131.4
734.7
114.3+80.8+1
Less Current Liabilities
Creditors
96
10
106
Working Capital
761.7
121.4
628.7
2102.2
254.4
2102.2
Capital
1200 112+670.8+119.4 1200
Retained profit
902.2
902.2
Head Office Current
254.4
212.2
254.4
2102.2
24

Goods Sent to Branch at Mark-up

25

Goods Sent to Branch at a Mark Up

The head office supplies goods to its branch
with an invoice price at cost plus profit
Goods Sent to Branch a/c and Goods Receive
d from HO a/c are valued at invoice price.
If there is unsold stock at the end of the acco
unting period, the unrealized profit-in-stock
must be eliminated from the consolidated fin
al accounts
A Provision for Unrealized Profit a/c will be o
pened to measure unearned profit included
in the closing stock of the branch and reflect
in the HOs book
26

Provision for Unrealized Profit

=Stock at mark up* Mark up
100%+Mark up
Stock mark up= Closing stock at branch sent from HO + Goods in tra
nsit
Closing stock of branch include goods directly purchased from suppl
iers will not be concerned in the calculation of the provision of unre
alized profit

27

Account entries
Increase in Provision Dr P/L
Cr Provision for unrealized profit
Decrease in Provision Dr Provision for unrealized profit
Cr P/L
The increase or decrease in the provision should be
entered
in the profit and loss a/c
The balance should be appear in the balance sheet
under
Current Liabilities
The total stock= stock in HO+stock in branch+stock in
transit
28
- provision for unrealized profit

Example 3

29

Goods sent form the head office are charged to the branch
At cost plus 10% the closing stock was valued as follows:

Date
HO
31 Dec 1991
80000
(1st year of business)
31 Dec 1992
96000
31 Dec 1993
84000
31 Dec 1994
108000

Branch
66000

Goods in transit
22000

86900
71500
75900

5500
4950
550

Required
Prepare Provision for unrealized profit account for 1992-1994

30

Provision for unrealized profit

91
$
91
Dec 31 Bal c/d
8000Dec 31
(66000+22000*10/110

$
8000

P/L

92
92
Bal b/d
Dec 31 Bal c/d
8400Jan 1
Dec 31
P/L
(869000+5500)*10/110

8000
400

8400
93

8400
93

Dec 31
P/L
1450Jan 1
Dec 31 Bal c/d
6950
(71500+4950)*10/110
8400
94
94
Dec 31 Bal c/d
6950Jan 1
(75900+550)*10/110

Bal b/d

8400
8400

Bal b/d

6950

31

Stock Loss
Normal stock loss

Abnormal stock loss

Related to the ordinary

activities of the business
e.g. Obsolete stock,
damaged stock
No entry needed

Caused by an
exceptional
events
e.g. fire loss, burglary
loss
Accounting recorded
needed

32

Accounting entries abnormal Loss

Events

HOs book

Branchs
book

Total
column

Stock loss in
the HO

Dr P/L
Cr Trading (cost)

No entry

Dr P/L
Cr Trading
(Cost)

Stock loss in
transit

Dr Goods sent to No entry

Branch
Cr Branch
Current (Mark
up)
Dr P/L
Cr Trading (Cost)

Dr P/L
Cr Trading
(cost)

Stock loss in
Branch

NO entry

Dr P/L
Dr P/L
Cr Trading Cr Trading
(cost)
(cost)
33

Example 4

34

Colour Toys Ltd. has its head office in Central and a branch in
Shatin and separate final accounts are prepared for HO and
Branch. All goods sold by branch are supplied by the HO
at cost plus 10%
Trial Balance as at 31 December as at 31 Dec 1997
HO
Branch
$
$
$
$
Share Capital
260000
Profit and loss account
125000
HO Current
79500
Branch Current
85000
Fixed assets
345000
70000
Stock,1Jan 1997
48500
15400
Debtors/Creditors
60400 35000 14700
37200
Prov. For dep
13700
16400
Remittances to HO
26000
Remittances from Branch
22000
35

HO

Branch
$
$
$
$
ank and cash
15900
3100
urchases and Sales
255000 229700 44600 199700
ood sent to branch
154000
ood from HO
148500
ovision for unrealized profit
1400
dministrative Expenses
31000
10500
840800 840800 332800 332800

dditional information:
Stock as at 31 Dec 1997 excluding goods in transit was valued
followings:
Head office, at cost
$32600
Branch, at cost to branch
- received from HO $16500
- own purchases
$8000
The branch stock at 31 Dec 1996 consisted wholly of goods
received from the head office
36

On 20 Nov 1997 some goods received by the branch from the

head office were destroyed by fire. No entry has been made for
his loss. The cost of these goods to the branch was $11000

Depreciation is to be provided on fixed asset at 2% per

annum on cost

uired
pare final accounts for HO and Branch separately as at 31 Dec
7

37

Trading and profit and loss a/c for the year ended 31 Dec 1997
HO
Branch
Total
$000
$000
$000
$000
$000
$000
Sales
Good Sent to Branch
Less COGS
Opening Stock (WK1) 48.5
Purchases
255
Goods from HO
303.5
Less:Fire loss (WK2) Less Closing stock(WK3)32.6
Gross profit
137.9
Less:
Depreciation
Fire loss
Administrative
Prov for
Unrealized profit
(1.5+5)-1.4

229.7
154
383.7
429.4

16.5+8

270.9

199.7
199.7
15.4
44.6
148.5
208.5
11
24.5

112.8
6.9
31
0.6

62.5
299.6
362.1
10
173

74.3

60.6 291.5

26.7
1.4
11
10.5

38.5

429.4
-

8.3
10
41.5
22.9
38

3.8

59.8
78.1

K1:
O and Branch value stock on different bases in this case. HO
ock is valued at cost; while Branchs stock is valued at mark
tal opening stock should be recorded at cost price

HO+Branch(at mark up) Opening prov. for unrealized profi

48.5+15.4+1.4
62.5

K2:
e loss in total column should be recorded at cost price rather
an mark-up price
nvoice price = Cost + Profit
Cost = Invoice Price Profit
= 1.1 1.1*10/110
= 10
Back
39

WK3:
Total closing stock should be included HOs stock, Branchs
Stock and Goods in transit

HOs stock and Branch (own purchases)s stock are valued a

cost;while Branch (received from HO)s stock and Goods in
transit are valued at mark-up. Those goods should be adjust
at cost price
Total closing stock should be included:
32.6+8+(16.5-16.5*10/110)+(1.1-1.1*10/110)
= 60.6

Back
40

WK
4:

Provision for unrealized profit

Bal b/f
Bal c/f
2000 P/L
(16500+5500)*10/110

1400
600

2000

2000

Back
41

Balance Sheet as at 31 Dec 1997

HO
Branch
$000
$000
$000
$000
Fixed Assets
Less provision for Dep

345
20.6
324.4

70
17.8
52.2

Total
$000
$000
415
38.4
376.6

Current Assets
Stock
32.6
24.5
60.6
Goods in Transit
5.5
Branch Current(WK1) 57.3
Debtors
60.4
14.7
Cash
15.9
3.1
23
75.1and Bank
Cash in Transit
1
175.7
42.3
158.7
15.9+31+4
Less Current Liabilities
Creditors
35
37.2
72.2
Prov for unrealized
2
profit
Working Capital
138.7
5.1
86.5
463.1
57.3
463.1
Capital
260 12.5+74.3+3.8
260
Retained profit
203.1
203.1
Head Office Current WK2)
57.3
42
463.1
57.3
463.1

WK1:
HOs book:

Branch Current
Bal b/f
85000 Goods in transit
5500
Branch net profit 3800Remittance from branch22000
Cash in transit
(26000-22000)
4000
Bal c/f
57300
88800
88800

Wk2:
Branchs book:
Remittance to HO
Bal c/f
Back

HO Current
26000Bal b/f
57300 Branch net profit
833000
43

79500
3800

833000

Account kept by Head Office

44

Account kept by HO
The branch do not keep their won reco
rds, the HO will keep all accounting rec
ords for the branch transactions

45

Goods are invoiced to the Bra

nch at cost plus profit
Cost

Goods Sent to
Branch a/c

Profit

Branch Stock
Adjustment a/c

Invoiced price

Branch Stock a/c

The gross profit will be calculated in Branch Stock

Adjustment account
46

Transactions
Opening stock
balance

Accounting entries

Goods sent to
branch

Dr Branch Stock [cost+profit]

Cr Goods sent to Branch [cost]
Cr Branch stock adjustment
[profit]

Goods returned by
Branch to HO

Dr Goods sent to Branch [cost]

Dr Branch stock adjustment
[profit]
Cr Branch Stock [cost+profit]

Branch stock a/c-opening

debit balance recorded as
cost plus profit
Branch Stock Adjustment a/cOpening Credit balance
recorded as Profit portion
only

47

Transactions
Credit Sales at the
Branch

Accounting entries

Cash Sales at the

Branch
Goods returned by
customer to Branch
Bad debts, Discount
Allowed to customer
Branch expenses

Dr Branch Cash (selling price)

Cr Branch Stock

Branch income

Dr Cash/Bank
Cr Branch Profit and loss

Dr Branch Debtors (selling

price)
Cr Branch Stock

Dr Branch Stock (selling price)

Cr Branch Debtors
Dr Branch Profit and loss
Cr Branch Debtors
Dr Branch Profit and loss
Cr Cash/Bank

48

Transactions
Treatment of closing
stock

Accounting entries
Branch Stock a/c- actual stock+
GIT
recorded as cost plus profit will
be entered on the credit side as
closing debit balance
Branch stock adjustment a/cactual stock + GIT recorded as
Profit portion will be entered on
debit side as closing credit balance

Net amount of Goods

Dr Goods sent to Branch [cost]
sent to Branch deducted Cr Head Office Purchases/Trading
from HO Purchases a/c
and transfer to trading
a/c
Branch transferred
Stock adjustment to
branch P/L

Dr Branch Stock Adjustment

Cr Branch Profit and loss
49

Treatment of Branch net Dr Branch Profit and loss

Example 5

50

Sino Ltd. Sends goods at the selling price to the

branch. The selling price is cost plus 10 per cent.
The branch accounts are maintained by the head
office. Transactions between the head office and the
branch for the year ended 31 December 1997 were
as follows:
$
Opening stock at branch at selling price
110,000
Goods sent to branch at cost
Goods returned to the head office at cost
50,000
Credit sales by branch
Cash sales by branch
Goods returned to branch at selling price
33,000
51

750,000
354,000
350,000

Branch Stock(SP)
$
Return to HO (50000*1.1)
Bal b/f
110000
Gd sent to branch
Branch debtors
(750000*1.1)
825000
Branch cash
Branch debtors-return 33000
Bal c/f (171500+37500)
968000

$
55000
354000
350000
209000
968000

Branch Adjustment(Profit)
$

Return to HO
Bal b/f (110000*10/110)
(55000*10/110)
5000
Branch stock (75000*0.1)
Branch P/L
61000
Bal c/f(209000*10/110)
19000
85000

$
10000
75000
85000

Goods Sent to Branch(cost)

Branch stock
HO Purchase
700000

$
50000
Branch stock
750000

$
750000
52

750000

Transactions
Stock Loss in Branch

Accounting entries

Dr Branch Stock Adjustment

-Normal Loss
[cost+profit]
event related to
Cr Branch Stock
ordinary activities of
the business e.g.
pilferage, stock
wastage, unaccounted
stock
Dr Branch Profit & Loss [cost]
-Abnormal Loss
Dr Branch Stock Adjustment [profit]
caused by exceptional
Cr Branch Stock [cost+profit]
event e.g. fire,
burglary etc
-Goods lost in transit

Dr Branch adjustment [profit]

Dr Profit & Loss [cost]
Cr Branch Stock [cost+profit]
53

Transactions
Stock transfer from
branch A to branch B

Accounting entries
Dr Goods sent branch A [cost]
Dr Branch A Adjustment [profit]
Cr Branch A Stock [cost+profit]
Dr Branch B Stock [cost+profit]
Cr Good sent to branch B [cost]
Cr Branch B stock [cost+profit]

Branch Stock Valuation

-reduction in selling
price
Addition mark up

Dr Branch Adjustment
Cr Branch Stock [with the total
reduction off the selling price]

-Goods are sent to the

branch at mark up lower
than selling price

Dr Branch Stock [cost+profit]

Cr Branch adjustment [profit]
Cr Goods sent to branch [cost]

-Goods are sold to

customers with an
additional mark up

Dr Branch Stock
Cr Branch adjustment
[profit]
54

Transactions
Cash Misappropriation
-loss from the theft of
the cash takings

Accounting entries
Dr Cash Misappropriated
Cr Cash
Dr Branch profit and loss
Cr Cash Misappropriated

55

Example 6

56

Joyce Ltd. Has a head office in Central and two

branches, one in Shatin and the other in Tsuen Wan.
Branch accounts are maintained by the head office.
Goods are invoiced to Shatin at cost plus 20 per
cent. This is the selling price. Joyce Ltd. Sent goods
at cost plus 25 per cent to Tsuen Wan. The selling
price in this branch was cost plus 30 per cent.
The head office books showed the following balances
related to transactions between the head office and
its two branches for the year ended 31 December
1997:
Shatin Tsuen Wan
Opening stock at cost
56,000
Credit sales by branches

$
$
100,000
57

800,000

Shatin Tsuen Wan

$
Goods sent to branches at cost
400,000

806,000

Goods returned by branches at cost

80,000

--

Stock lost in first at cost

64,000

--

Reduction in selling price

13,500

--

Cash received from debtors

345,320

340,200

Discount allowed
3,000

2,000

Bad debts written off

800
Returns by debtors
--

500

58

2,400

Shatin Tsuen Wan

$
Closing stock at selling price
117,000

91,680

Goods in transit from head office to Shatin

At selling price
Expenses
34,500

4,800
26,800

Any stock unaccounted for may be regarded as pilferage

and normal wastage.

59

Branch Stock(SP)
$
Branch debtors
Bal b/f (100000*1.2) 120000
Gd sent to branch
Return to HO (80000*1.2)
Fire loss (64000*1.2)
(806000*1.2)
967200
Branch adj.-reduction in
selling price

Shatin Branch

Branch Adjustment (Profit)

$
Return to HO(80000*0.2) 16000
Bal b/f (100000*0.2)
Fire loss (64000*0.2)
12800
Branch stock (806000*0.2)
Branch adj.-reduction in
selling price
13500
Goods Sent to Branch(cost)
$
Gd return to HO
80000
Branch stock

$
800000
96000
76800
13500
$
20000
161200

$
806000

Branch Debtors(SP)
$
$
Branch stock
800000
Branch profit and loss account for the year ended 31 Dec 1997
$
$
60
Fire loss
64000

Branch Stock
$
Branch debtors
Bal b/f (100000*1.2) 120000
Gd sent to branch
Return to HO (80000*1.2)
(806000*1.2)
967200
Fire loss (64000*1.2)
Branch adj.-reduction in
Branch debtors-return
2400
selling price

Shatin Branch

$
800000
96000
76800
13500

Branch Debtors
$
$
Branch cash
340200
Branch stock
800000
Discount allowed
2000
Bad debts
500
Branch stock-return
2400
Branch profit and loss account for the year ended 31 Dec 1997
$
$
Fire loss
64000
Discount allowed
2000
Bad debts
500

61

Branch Stock
$
Branch debtors
Bal b/f (100000*1.2) 120000
Gd sent to branch
Return to HO (80000*1.2)
(806000*1.2)
967200
Fire loss (64000*1.2)
Branch adj.-reduction in
Branch debtors-return
2400
selling price
Branch transfer

Shatin Branch

Branch Adjustment
$
Return to HO(80000*0.2) 16000
Bal b/f (100000*0.2)
Fire loss (64000*0.2)
12800
Branch stock (806000*0.2)
Branch adj.-reduction in
selling price
13500
Branch transfer
160
(960*20/120)

Gd return to HO
Branch transfer
(960*100/120)

Goods Sent to Branch

$
80000
Branch stock

$
800000
96000
76800
13500
960
$
20000
161200

$
806000

800
62

Branch Stock
$
$
Branch debtors
800000
Bal b/f (100000*1.2) 120000
Gd sent to branch
Return to HO (80000*1.2)
96000
(806000*1.2)
967200
Fire loss (64000*1.2)
76800
Branch adj.-reduction in
Branch debtors-return
2400
selling price
13500
Branch transfer
960
Pilferage & wastage(Bal fig)
5860
Bal
c/f (91680+4800)
96480
1089600
1089600
Branch
Adjustment
$
$
Return to HO(80000*0.2) 16000
Bal b/f (100000*0.2)
20000
Fire loss (64000*0.2)
12800
Branch stock (806000*0.2)
161200
Branch adj.-reduction in
selling price
13500
Branch transfer
160
(960*20/120)
Pilferage & wastage
5860
Branch P/L(Bal fig)
Bal c/f(96480*20/120)
116800
63
16080
181200
181200

Shatin Branch

Goods Sent to Branch

$
80000
Branch stock

Gd return to HO
Branch transfer
(960*100/120)
800
HO Purchase(bal.fig.)
725200
806000

$
806000

806000

Branch Debtors
$
$
Branch cash
340200
Branch stock
800000
Discount allowed
2000
Bad debts
500
Branch stock-return
2400
Bal c/f
454900
800000
800000
Branch profit and loss account for the year ended 31 Dec 1997
$
$
Branch Adj.- gross profit
116800
Fire loss
64000
Discount allowed
2000
Bad debts
500
Expense
26800
Net profit
23500
64
116800
116800

Tsuen Wan Branch

65

Tsuen Wan Branch

Bal b/f (56000*1.3)
Gd sent to branch
(400000*1.25)
Branch adj
(400000*0.05)

Branch Stock
$
Branch debtors
72800

$
476840

500000
20000

Branch Adjustment
$
$
Bal b/f (56000*0.3)
16800
Branch stock (400000*0.25) 100000
Branch stock (400000*0.05) 20000
Goods Sent to Branch
$
$
Branch stock
400000

Branch stock

Branch Debtors
$
Branch cash
476840

$
345320
66

Branch stock

Branch Debtors
$
Branch cash
476840
Discount allowed
Bad debts

$
345320
3000
800

Branch profit and loss account for the year ended 31 Dec 1997
$
$
Discount allowed
3000
Bad debts
800

67

Tsuen Wan Branch

Branch Stock
$
Branch debtors
72800

$
476840

Bal b/f (56000*1.3)

Gd sent to branch
(400000*1.25)
500000
Branch adj
(400000*0.05)
20000
Gd sent to branch
(800*1.25)
1000
Branch adj.(800*0.05)
40
Branch Adjustment
$
$
Bal b/f (56000*0.3)
16800
Branch stock (400000*025) 100000
Branch stock (400000*0.05) 20000
Branch stock-branch transfer
(800*0.25)
200
Branch stock (800*0.05)
40
Goods Sent to Branch
$
$
Branch stock
400000
68
Branch stock-branch transfer
800

Tsuen Wan Branch

Branch Stock
$
Branch debtors
72800
Bal c/f
500000

$
476840
117000

Bal b/f (56000*1.3)

Gd sent to branch
(400000*1.25)
Branch adj
(400000*0.05)
20000
Gd sent to branch
(800*1.25)
1000
Branch adj.(800*0.05)
593840
40
593840Adjustment
Branch
$
$
Bal b/f (56000*0.3)
16800
Branch P/L(Bal fig)
110040
Branch stock (400000*025) 100000
Bal c/f(117000*30/130)
27000
Branch stock (400000*0.05) 20000
Branch stock-branch transfer
(800*0.25)
200
Branch stock (800*0.05)
40
137040

69

137040

Goods Sent to Branch

$
$
Branch stock
400000
HO Purchase(bal.fig.)
400800
Branch stock-branch transfer
800

Branch stock

400800
Branch Debtors
$
Branch cash
476840
Discount allowed
Bad debts
Bal c/f

400800
$
345320
3000
800
127720

476840
476840
Branch profit and loss account for the year ended 31 Dec 1997
$
$
Branch Adj.- gross profit
110040
Discount allowed
3000
Bad debts
800
Expense
34500
Net profit
71740
110040

70

110040

Preparation of the Final Accou

nts for the Head Office
After calculating the branch profits or l
osses, the overall profit and loss for the
head office can be computed

71

Account entries
Transactions
Balance transferred
from goods sent to
branch account to the
head office purchases
account
Branch net profit
transferred to head
office profit and loss
account

Accounting
Entries
Dr Goods sent to
branch
Cr HO
purchases/tradin
g
Dr Branch Profit
and loss
Cr HO P/L
72

Example 7

73

The following trial balalnce was extracted from the books of

Joyce Ltd
Trial Balance as at 31 December as at 31 Dec 1997
$

Share Capital
Profit and loss account
Fixed assets
Stock at Head Office,1Jan 1997
Debtors/Creditors
Prov. for dep
Purchases
Sales
Administrative expenses
Selling expenses
Bank and cash

1656000
300900
800000
250000
774600
200000
3800000

950000
3463200

225000
108000
456500
74

$
Branch stock 1 Jan 1997-Shatin

250000

- Tsuen Wan 120000

Branch adjustment- Shatin
20000
- Tsuen Wan

16800
onal information:
6606900
31 Dec 1997, stock in the HO was valued at $180000
6606900
e branches paid local expenses and remitted all the
mianing cash received from debtors to the HO. NO entry
d been made about the remittances from the branches.
preciation is to be charged on the fixed asset at 10% per
num on cost.
re final account for Joyce Ltd for the year ended
31 Dec1997
75

Joyce Ltd.
Trading and Profit and Loss Account for the year ended 31 December 1997
$
Opening Stock
3,800,000

Less Goods sent to Branch

1,126,000

Less Closing Stock

Cost of Goods Sold
Gross Profit

250,000 Sales

Purchases
($725,200 + $400,800)

3,463,200

2,674,000
2,924,000
180,000
2,744,000
719,200
3,463,200

3,463,200

Provision for Depreciation

80,000 Gross Profit

719,200

Administrative Expenses

225,000 Branch Profit

Selling Expenses

108,000 - Shatin

23,500

Net Profit

401,440 -Tsuen Wan

71,740

814,440

814,440
76

Joyce Ltd.
Balance Sheet as at 31 December 1997
$

Fixed Assets

800,000 Share Capital

1,656,000

Less Provision for Depreciation

280,000 Profit & Loss Account ($300,900 + $401,440)

702,340

520,000
Current Assets
Stock

Current Liabilities
350,400 Creditors

Debtors ($774,600 + $454,900 + $127,720)

1,357,220

Bank and Cash (W1)

1,080,720

950,000

3,308,340

3,308,340
77

Workings:
W1.

Branch Cash
Shatin
$

Branch Debtors

340,200

Tsuen Wan

Shatin

$
345,320 Expenses
Remittances to HO

340,200

345,320

Note
Total Stock:
HO
Shatin
Tsuen Wan
Goods in transit
Provision for Unrealized Profit

$
180,000
91,680
117,000
4,800
(43,080)
350,400
78

Tsuen Wan

26,800

34,500

313,400

310,820

340,200

345,320