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CH 12 Branch Accounting
CH 12 Branch Accounting
CH 12 Branch Accounting
Unit carries merchandise obtained from the home office, makes sales,
approves customers’ credit, and makes collections from it’s customers.
~ 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
5
Branches & Divisions
Cash receipts of the branch may be deposited in a bank account belonging
to the home office.
Branch expenses are paid from an imprest cash fund or bank account
provided by home office.
Common practice for a large branch to maintain its own bank accounts.
Balance Sheet
Cash 25,000 5,000 30,000
Trade accounts receivable (net) 39,000 18,000 57,000
Inventories 45,000 15,000 60,000
Investment in Branch 26,000 (26,000)
Equipment 150,000 150,000
Accumulated depreciation of equipment (10,000) (10,000)
Trade accounts payable (20,000) (20,000)
Home office (26,000) 26,000
Common stock, $ 10 par (150,000) (150,000)
Retained earnings (from statement of retained
earnings above) (117,000)
Totals 0 0 0 0
SBH COMPANY
Working Paper for Combined Financial Statements of Home Office and Branch
For Year Ended December 31, 2002
(Perpetual Inventory System: Billings above Cost)
Balance Sheet
Cash 25,000 5,000 30,000
Trade accounts receivable (net) 39,000 18,000 57,000
Inventories 45,000 22,500 (7,500) 60,000
Investment in Branch 56,000 (56,000) 0
Allowance for Overvaluation of Inventories:
Branch (30,000) 30,000
Equipment 150,000 150,000
Accumulated depreciation of equipment (10,000) (10,000)
Trade accounts payable (20,000) (20,000)
Home office (56,000) 56,000 0
Common stock, $ 10 par (150,000) (150,000)
Retained earnings (from statement of retained
earnings above) (117,000)
Totals 0 0 0 0