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Branch Account

1
Branch
A trading company may try to
expand its business by opening
BRANCHES as another
establishment of the company in
different locations

2
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

4
Account Kept by Branch
Head office and Branch will open a
full set of books to record their won
transactions instead of branch
books are kept by the Head office

5
In Head Office books:
Branch Current Account is opened
to record transactions between the
Head Office and the Branch
In Branch books:
Head Office Current Account is
opened to record transactions
between them

6
HOs Book: Branch Current
$ $
Bal b/f X Goods in Transit X
Remittance from branch X
Branch net profit X Cash in Transit X
Bal c/f X

X X

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

7
Goods in Transit (GIT)
Goods were sent by the Head
Office before 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

8
Remittances/Cash in
Transit (CIT)
The remittance or cash was
remitted by the branch before the
end of the financial period, but was
received by the Head office after
the end of the financial period
CIT= Remittance to Head Office
Remittance from Branch

9
Preparation of the Final
Accounts
Separate trading and profit and
loss accounts and balance sheets
would be prepared for the head
office and the branch(es)

10
Transactions Head office Branch books
(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]
2 Goods Dr No entry
purchased Purchase(Trading)
directly from HO Cr Creditors
suppliers[at cost]
3 Goods NO entry Dr
purchased Purchase(trading
directly from )
Branch suppliers 11
Cr Creditors
Transactions Head office Branch books
(HO) books
4 Goods sent Dr Branch Dr Good received
from HO to Current from HO
Branch Cr Goods sent to Cr HO Current
[cost+profit] Branch
5 Goods returned Dr Goods sent Dr HO Current
from Branch to to branch Cr Good received
HO Cr Branch from HO
Current
6 Cash Dr HO Dr Branch cash/
sales/Credit sales Cash/Debtors debtors
Cr HO Sales Cr Branch sales

12
Transactions Head office Branch books
(HO) books
7 Closing stock Dr Dr Stock (Closing)
Stock(Closing) Cr Branch Trading
Cr HO Trading good purchased
directly from Branch
suppliers [at cost] &
goods received from
HO [cost+profit]
8 Gross profit on Dr HO Trading Dr Branch Trading
trading Cr HO profit and Cr Branch profit
loss and loss
9 HO expenses Dr Expenses No entry
paid by HO (P&L)
Cr Cash/Bank
13
Transactions Head office Branch books
(HO) books
10 Branch Dr Branch Dr Expenses (P&L)
expenses paid by Current Cr HO Current
Head Office Cr Cash/Bank

11 Branch No entry Dr Expenses (P&L)


expenses paid by Cr Cash/Bank
Branch

12 Administrative Dr Branch Dr Branch P&L


charges for Current Cr HO Current
services rendered Cr HO P&L
by HO to Branch (Income)

14
Transactions Head office Branch books
(HO) books
13 Provision for Increase in provision No entry
Unrealized Profit Dr HO P&L
(Branch & Goods Cr Prov. For
in Transit) Unrealized profit
[cost+profit] Decrease in
provision
Reverse
14 Goods in Dr Goods in NO entry
Transit(GIT) Transit
Cr Branch
Current
15 Cash in Transit Dr Cash in Transit No entry
(CIT) Cr Branch
Current 15
Transactions Head office Branch books
(HO) books
16 Profit made Dr Branch Dr Branch P&L
by the branch Current Cr HO Current
Cr Retained
profit
17 Profit made Dr P&L No entry
by HO Cr Retained
profit
18 Cash Dr Bank Dr HO Current
remittances Cr Branch Current Cr Bank
from the branch Or 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
Inter-company
transactions
It would not be transferred to the total
column of the trading and profit and
loss account and the balance sheet
For example, goods sent to the branch,
goods from the head office, service
overheads charged by the head office to
the branch, head office 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
Shatin and separate final accounts are prepared for HO an
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 1000
Prov. For dep 38300 380
Remittances to HO 11000
Remittances from Branch 10000
Capital 1200000
19
HO Branch
$ $ $ $
Retained Profits 112000
Purchases and Sales 900000 1400000 860
Good sent to branch 664000
Good from HO 616000
Selling Expenses 120000 48000
Service Charged Received 5000
Administrative Expenses 245000 36000
3525300 3525300 1019800 1019
Additional information:
1. Goods purchased by the HO are sent to the branch at cost
2. Stock at 31 Dec 1997: HO $80000; Branch $10600
3. Depreciation is to be provided at 10% on cost per annum
4. Administrative expenses include an annual charge of $500
for services rendered by the head office
Required:
Prepare final accounts of HO and Branch for the year ended 3
1997 20
Trading and profit and loss a/c for the year ended 31 Dec 1997
HO Branch Total
$000 $000 $000 $000 $000 $00
Sales 1400 860 226
Good Sent to Branch 664 - -
2064 860 2260
Less COGS
Opening Stock 60 36 96
Purchases 900 - 900
Goods from HO - 616 80+10.6+48 -
960 652 996
Less Closing stock(WK1)80 880 10.6 641.4 138.6
Gross profit 1184 218.6 140
Add: Service charges received 5 -
Less: Depreciation 153.2 15.2 168.4
Selling expense 120 48 168
Admin. Exp.(WK2)245 518 36 99.2 276 6
Net profit 670.8 119.4 79
245+36-5
21
WK1:
The total closing stock should be included Goods in tran
as GIT are still unsold goods at year end but those good
transported on the way
=> 80+10.6+48 = 138.6

Wk2:
The total administrative expenses should deduct the int
Company 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 1000
Cash in Transit
(11000-10000) 1000
Bal c/f 254400
313400 313400
Branchs Book:
HO Current
$ $
Remittance to HO Bal b/f 146000
11000
Bal c/f 254400 Net profit 119400
265400 265400

23
Balance Sheet as at 31 Dec 1997
HO Branch Total
$000 $000 $000 $000 $000 $00
Fixed Assets 1532 152 1684
Less provision for Dep 191.5 19 210
Current Assets 1340.5 133
Stock 80 1437.5 10.6 138.6
Goods in Transit 48 - -
Branch Current 254.4 - 80+10.6+48 -
Debtors 360 40 400
Cash and Bank 114.3 80.8 196.1
Cash in Transit 1 - -
857.7 131.4 734.7
Less Current Liabilities 114.3+80.8+1
Creditors 96 10 106
Working Capital 761.7 121.4 628.
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
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 Received
from HO a/c are valued at invoice price.
If there is unsold stock at the end of the
accounting period, the unrealized profit-in-stock
must be eliminated from the consolidated final
accounts
A Provision for Unrealized Profit a/c will be opened
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 transit
Closing stock of branch include goods directly purchased
from suppliers will not be concerned in the calculation of the
provision of unrealized 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
- provision for unrealized profit 28
Example 3

29
Goods sent form the head office are charged to the branc
At cost plus 10% the closing stock was valued as follows:

Date HO Branch Goods in tran


31 Dec 1991 80000 66000 22000
(1st year of business)
31 Dec 1992 96000 86900 5500
31 Dec 1993 84000 71500 4950
31 Dec 1994 108000 75900 550

Required
Prepare Provision for unrealized profit account for 1992-1

30
Provision for unrealized profit
91 $ 91 $
Dec 31 Bal c/d 8000Dec 31 P/L 8000
(66000+22000*10/110

92 92
Dec 31 Bal c/d 8400Jan 1 Bal b/d 8000
(869000+5500)*10/110 Dec 31 P/L 400
8400 8400
93 93
Dec 31 P/L 1450Jan 1 Bal b/d 8400
Dec 31 Bal c/d 6950
(71500+4950)*10/110
8400 8400
94 94
Dec 31 Bal c/d 6950Jan 1 Bal b/d 6950
(75900+550)*10/110

31
Stock Loss
Normal stock loss Abnormal stock loss
Related to the ordinary Caused by an
activities of the business exceptional
e.g. Obsolete stock, events
damaged stock e.g. fire loss, burglary
No entry needed loss
Accounting recorded
needed

32
Accounting entries abnormal Loss
Events HOs book Branchs Total
book column
Stock loss in Dr P/L No entry Dr P/L
the HO Cr Trading (cost) Cr Trading
(Cost)
Stock loss in Dr Goods sent to No entry Dr P/L
transit Branch Cr Trading
Cr Branch (cost)
Current (Mark
up)
Dr P/L
Cr Trading (Cost)
Stock loss in NO entry Dr P/L Dr P/L
Branch Cr Trading Cr Trading
(cost) (cost)
33
Example 4

34
Colour Toys Ltd. has its head office in Central and a branch
Shatin and separate final accounts are prepared for HO an
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 37
Prov. For dep 13700 1640
Remittances to HO 26000
Remittances from Branch 22000
35
HO Branch
$ $ $ $
Bank and cash 15900 3100
Purchases and Sales 255000 229700 44600 19970
Good sent to branch 154000
Good from HO 148500
Provision for unrealized profit 1400
Administrative Expenses 31000 10500
840800 840800 332800 332800
Additional information:
1. Stock as at 31 Dec 1997 excluding goods in transit was val
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
2. On 20 Nov 1997 some goods received by the branch from
head office were destroyed by fire. No entry has been mad
this loss. The cost of these goods to the branch was $1100

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


annum on cost

Required
Prepare final accounts for HO and Branch separately as at 31
1997

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 229.7 199.7 429.4
Good Sent to Branch 154 - -
383.7 199.7
Less COGS 429.4
Opening Stock (WK1) 48.5 15.4 62.5
Purchases 255 44.6 299.6
Goods from HO - 148.5 -
303.5 208.5 362.1
Less:Fire loss (WK2) - 16.5+8 11 10

Less Closing stock(WK3)32.6 270.9 24.5 173 60.6 2


Gross profit 112.8 26.7
137.9
Less: Depreciation 6.9 1.4 8.3
Fire loss - 11 10
Administrative 31 10.5 41.5
Prov for
Unrealized profit 0.6 38.5 - 22.9 - 59.8
(1.5+5)-1.4 38
74.3 3.8 78.1
WK1:
HO and Branch value stock on different bases in this case.
Stock is valued at cost; while Branchs stock is valued at m
Total opening stock should be recorded at cost price

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


= 48.5+15.4+1.4
= 62.5

WK2:
Fire loss in total column should be recorded at cost price ra
than mark-up price
Invoice 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, Branc
Stock and Goods in transit

HOs stock and Branch (own purchases)s stock are valu


cost;while Branch (received from HO)s stock and Goods
transit are valued at mark-up. Those goods should be ad
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 1400
Bal c/f 2000 P/L 600
(16500+5500)*10/110
2000 2000

Back
41
Balance Sheet as at 31 Dec 1997
HO Branch Total
$000 $000 $000 $000 $000 $00
Fixed Assets 345 70 415
Less provision for Dep 20.6 17.8 38
324.4 52.2 376.6
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 and Bank
75.1 15.9 3.1 23
Cash in Transit 1 - -
175.7 42.3 158.7
Less Current Liabilities 15.9+31+4
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:
HO Current
Remittance to HO 26000Bal b/f 79500
Bal c/f 57300 Branch net profit 3800
Back 833000 83300
43
Account kept by Head
Office

44
Account kept by HO
The branch do not keep their won
records, the HO will keep all
accounting records for the branch
transactions

45
Goods are invoiced to the
Branch at cost plus profit
Cost + Profit = Invoiced price

Goods Sent to Branch Stock Branch Stock a/c


Branch a/c Adjustment a/c

The gross profit will be calculated in Branch Stock


Adjustment account
46
Transactions Accounting entries
Opening stock Branch stock a/c-opening
balance debit balance recorded as
cost plus profit
Branch Stock Adjustment a/c-
Opening Credit balance
recorded as Profit portion
only
Goods sent to Dr Branch Stock [cost+profit]
branch Cr Goods sent to Branch [cost]
Cr Branch stock adjustment
[profit]
Goods returned by Dr Goods sent to Branch [cost]
Branch to HO Dr Branch stock adjustment
[profit]
Cr Branch Stock [cost+profit]

47
Transactions Accounting entries
Credit Sales at the Dr Branch Debtors (selling
Branch price)
Cr Branch Stock
Cash Sales at the Dr Branch Cash (selling price)
Branch Cr Branch Stock

Goods returned by Dr Branch Stock (selling price)


customer to Branch Cr Branch Debtors

Bad debts, Discount Dr Branch Profit and loss


Allowed to customer Cr Branch Debtors
Branch expenses Dr Branch Profit and loss
Cr Cash/Bank
Branch income Dr Cash/Bank
Cr Branch Profit and loss

48
Transactions Accounting entries
Treatment of closing Branch Stock a/c- actual stock+
stock GIT
recorded as cost plus profit will
be entered on the credit side as
closing debit balance

Branch stock adjustment a/c-


actual 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 Dr Branch Stock Adjustment
Stock adjustment to Cr Branch Profit and loss
branch P/L 49
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 750,000
Goods returned to the head office at cost
50,000
Credit sales by branch 354,000
Cash sales by branch 350,000
Goods returned to branch at selling price
33,000 51
Branch Stock(SP)
$ $
Bal b/f 110000Return to HO (50000*1.1) 55000
Gd sent to branch Branch debtors 354000
(750000*1.1) 825000Branch cash 350000
Branch debtors-return 33000Bal c/f (171500+37500) 209000
968000 968000
Branch Adjustment(Profit)
$ $
Return to HO Bal b/f (110000*10/110) 10000
(55000*10/110) 5000
Branch stock (75000*0.1) 7500
Branch P/L
Bal c/f(209000*10/110)
61000
19000 85000 85000
Goods Sent to Branch(cost)
$ $
Branch stock 50000
Branch stock 750000
HO Purchase
700000 750000 750000
52
Transactions Accounting entries
Stock Loss in Branch
-Normal Loss Dr Branch Stock Adjustment
event related to [cost+profit]
ordinary activities of Cr Branch Stock
the business e.g.
pilferage, stock
wastage, unaccounted
stock

Dr Branch Profit & Loss [cost]


-Abnormal Loss
Dr Branch Stock Adjustment [profit]
caused by exceptional
event e.g. fire, Cr Branch Stock [cost+profit]
burglary etc

-Goods lost in transit Dr Branch adjustment [profit]


Dr Profit & Loss [cost]
Cr Branch Stock [cost+profit]
53
Transactions Accounting entries
Stock transfer from Dr Goods sent branch A [cost]
branch A to branch B 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 Dr Branch Adjustment
-reduction in selling Cr Branch Stock [with the total
reduction off the selling price]
price
Addition mark up
-Goods are sent to the Dr Branch Stock [cost+profit]
branch at mark up lower Cr Branch adjustment [profit]
than selling price Cr Goods sent to branch [cost]

-Goods are sold to Dr Branch Stock


customers with an
54
Transactions Accounting entries
Cash Misappropriation Dr Cash Misappropriated
-loss from the theft of Cr Cash
the cash takings
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 100,000
56,000 57
Shatin Tsuen Wan
$ $
Goods sent to branches at cost 806,000
400,000
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 340,200
345,320
Discount allowed 2,000
3,000
Bad debts written off 500
800
58
Returns by debtors 2,400
Shatin Tsuen Wan
$ $
Closing stock at selling price 91,680
117,000
Goods in transit from head office to Shatin
At selling price 4,800
Expenses 26,800
34,500

Any stock unaccounted for may be regarded as pilferage


and normal wastage.

59
Shatin Branch Branch Stock(SP)
$ $
Branch debtors
Bal b/f (100000*1.2) 120000 800000
Gd sent to branch Return to HO (80000*1.2) 96000
(806000*1.2) Fire loss (64000*1.2)
967200 76800
Branch adj.-reduction in
selling price 13500

Branch Adjustment (Profit)


$ $
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) 16120
Branch adj.-reduction in
selling price 13500
Goods Sent to Branch(cost)
$ $
Gd return to HO 80000Branch stock 806000
Branch Debtors(SP)
$ $
Branch stock 800000
Branch profit and loss account for the year ended 31 Dec 1997
$ 60$
Fire loss 64000
Shatin Branch Branch Stock
$ $
Bal b/f (100000*1.2) 120000Branch debtors 800000
Gd sent to branch Return to HO (80000*1.2) 96000
(806000*1.2) 967200
Fire loss (64000*1.2) 76800
Branch debtors-return Branch adj.-reduction in
2400
selling price 13500

Branch Debtors
$ $
Branch stock 800000Branch cash 340200
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
Shatin Branch Branch Stock
$ $
Bal b/f (100000*1.2) 120000Branch debtors 800000
Gd sent to branch Return to HO (80000*1.2) 96000
(806000*1.2) 967200
Fire loss (64000*1.2) 76800
Branch debtors-return Branch adj.-reduction in
2400
selling price 13500
Branch transfer 960
Branch Adjustment
$ $
Return to HO(80000*0.2) 16000 Bal b/f (100000*0.2) 20000
Fire loss (64000*0.2) 12800Branch stock (806000*0.2) 161200
Branch adj.-reduction in
selling price 13500
Branch transfer 160
(960*20/120)
Goods Sent to Branch
$ $
Gd return to HO 80000Branch stock 806000
Branch transfer
(960*100/120) 800
62
Shatin Branch Branch Stock
$ $
Bal b/f (100000*1.2) 120000 Branch debtors 800000
Gd sent to branch Return to HO (80000*1.2) 96000
(806000*1.2) 967200
Fire loss (64000*1.2) 76800
Branch debtors-return Branch adj.-reduction in
2400
selling price 13500
Branch transfer 960
Pilferage & wastage(Bal fig)
Bal c/f (91680+4800)
5860 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)
116800
Bal c/f(96480*20/120)
16080 63
181200 181200
Goods Sent to Branch
$ $
Gd return to HO 80000Branch stock 806000
Branch transfer
(960*100/120) 800
HO Purchase(bal.fig.)
725200 806000 806000
Branch Debtors
$ $
Branch stock 800000Branch cash 340200
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
$ $
Fire loss 64000Branch Adj.- gross profit 116800
Discount allowed 2000
Bad debts 500
Expense 26800
Net profit 23500
64
116800 116800
Tsuen Wan Branch

65
Tsuen Wan Branch Branch Stock
$ $
Bal b/f (56000*1.3) Branch debtors
72800 476840
Gd sent to branch
(400000*1.25) 500000
Branch adj
(400000*0.05) 20000
Branch Adjustment
$ $
Bal b/f (56000*0.3) 16800
Branch stock (400000*0.25) 10000
Branch stock (400000*0.05) 20000
Goods Sent to Branch
$ $
Branch stock 400000

Branch Debtors
$ $
Branch stock Branch cash
476840 345320

66
Branch Debtors
$ $
Branch stock Branch cash
476840 345320
Discount allowed 3000
Bad debts 800

Branch profit and loss account for the year ended 31 Dec 19
$ $
Discount allowed 3000
Bad debts 800

67
Tsuen Wan Branch Branch Stock
$ $
Bal b/f (56000*1.3) Branch debtors
72800 476840
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
$ $
Bal b/f (56000*1.3) Branch debtors
72800 476840
Gd sent to branch Bal c/f 117000
(400000*1.25) 500000
Branch adj
(400000*0.05) 20000
Gd sent to branch
(800*1.25) 1000
Branch adj.(800*0.05)
40 593840
593840
Branch Adjustment
$ $
Branch P/L(Bal fig) 110040Bal b/f (56000*0.3) 16800
Bal c/f(117000*30/130) Branch stock (400000*025) 100000
27000 Branch stock (400000*0.05) 20000
Branch stock-branch transfer
(800*0.25) 200
Branch stock (800*0.05) 40

137040 137040
69
Goods Sent to Branch
$ $
HO Purchase(bal.fig.) Branch stock 400000
400800 Branch stock-branch transfer 800

400800 400800
Branch Debtors
$ $
Branch stock Branch cash
476840 345320
Discount allowed 3000
Bad debts 800
Bal c/f 127720

476840
476840
Branch profit and loss account for the year ended 31 Dec 1997
$ $
Discount allowed Branch Adj.- gross profit
3000 110040
Bad debts 800
Expense 34500
Net profit 71740
70
110040 110040
Preparation of the Final
Accounts for the Head
Office
After calculating the branch profits
or losses, the overall profit and loss
for the head office can be
computed

71
Account entries
Transactions Accounting
Entries
Balance transferred Dr Goods sent to
from goods sent to branch
branch account to the Cr HO
head office purchases purchases/tradin
account g
Branch net profit Dr Branch Profit
transferred to head and loss
office profit and loss Cr HO P/L
account
72
Example 7

73
The following trial balalnce was extracted from the books
Joyce Ltd
Trial Balance as at 31 December as at 31 Dec 1997

$ $
Share Capital 16560
Profit and loss account 3009
Fixed assets 800000
Stock at Head Office,1Jan 1997 250000
Debtors/Creditors 774600 9500
Prov. for dep 200000
Purchases 3800000
Sales 346320
Administrative expenses 225000
Selling expenses 108000
Bank and cash 456500

74
$ $
Branch stock 1 Jan 1997-Shatin 250000
- Tsuen Wan 120000
Branch adjustment- Shatin
20000
- Tsuen Wan
16800
Additional information:
1. On 31 Dec 1997, stock in the HO was6606900
valued at $180000
2. 6606900
The branches paid local expenses and remitted all the
remianing cash received from debtors to the HO. NO ent
had been made about the remittances from the branche
3. Depreciation is to be charged on the fixed asset at 10% p
annum on cost.
Prepare final account for Joyce Ltd for the year ended7531 De
Joyce Ltd.
Trading and Profit and Loss Account for the year ended 31 December 1997
$ $ $
Opening Stock 250,000 Sales 3,463,200
Purchases 3,800,000
Less Goods sent to Branch 1,126,000 2,674,000
($725,200 + $400,800) 2,924,000
Less Closing Stock 180,000
Cost of Goods Sold 2,744,000
Gross Profit 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 Current Liabilities
Stock 350,400 Creditors 950,000
Debtors ($774,600 + $454,900 + $127,720) 1,357,220
Bank and Cash (W1) 1,080,720
3,308,340 3,308,340
77
Workings:
W1. Branch Cash
Shatin Tsuen Wan Shatin Tsuen Wan
$ $ $ $
Branch Debtors 340,200 345,320 Expenses 26,800 34,500
Remittances to HO 313,400 310,820
340,200 345,320 340,200 345,320

Note
Total Stock:
$
HO 180,000
Shatin 91,680
Tsuen Wan 117,000
Goods in transit 4,800
Provision for Unrealized Profit (43,080)
350,400
78