Accounting for Branches Including Foreign Branches

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1
 Financial Accounting

Chapter : 1

Accounting for Branches Including Foreign

Branches
1. Meaning of Branch
Branch can be defined as a segment of an enterprise normally controlled by head office being located
in different geographical position. In practice, the branches are playing a vital role to put the original
establishment in the existence.
In order to cover wide range of market and thus wide clientele, an organization generally opens
branches.
2. Branch Accounting
is an accounting system in which separate accounts are maintained for each branch of a corporate
entity or organization. The primary objectives of branch accounting are better accountability and
control, since profitability and efficiency can be closely tracked at the branch level.
3. Types of branches-
 Domestic branches / Inland Branches / Home branches
 Foreign branches
3.1 Domestic Branches
are those which are opened in the different parts of the nation, where the original undertaking being
registered are called inland branches. Domestic branches may further be classified into –
 Dependent branches &
 Independent branches
3.2 Dependent branches
Are the branches that do not keep their records but all the records are maintained by head office.
They are not authorized to act solely without the prior permission of the head office.
All the plans, policies, rules and regulations of these branches are totally formulated and executed by
the head office.
In other words, all the functions of dependent branch are totally controlled by head office.
Dependent branches do not maintain separate books of account and wholly depend on Head Office.
The result of the operation, i.e., profit or loss, is ascertained by Head Office. In other words Head
Office maintains and opens a Branch Account in its book in order to find out the result of the operation.
Branches supply some related information to the Head Office, i.e., position of cash, debtors stocks,
etc.
3.3 Independent branches
are those which maintain complete system of accounting. This particularly happens when their sizes
are very large due to various functional complexities.
In short, they prepare their accounts independently, i.e., they also purchase and sell goods for cash
and credit independently in addition to the goods that are supplied by the Head Office.
They may supply goods to Head Office, pay expenses and deposit cash in their own account like an
independent unit. Thus, they maintain their own accounts under Double Account System. That is why
they are called Independent Branch.
4. Accounting Systems under Dependent Branches
Under dependent branches accounts are prepared only in the head office books and generally
following accounting systems are found in it-
a] debtor system
b] Stock and debtor system
c] Whole sale branch system

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 Accounting for Branches Including Foreign Branches

Section - 1 - Debtor System

This system of accounting is suitable for the small-size branches. Under this, a Branch Account is opened for
each branch in the head office ledger. All transactions are recorded in this account. The Branch Account is
prepared in such a way that it discloses the profit or loss of the branch. Branch Account is a Nominal Account
in nature. Head office may send goods to branch either at “Cost price” or “Selling price”
Journal Entries Under Debtor Method
For recording opening balances of Branch Assets: Branch A/c Dr.
To Branch Assets
For recording opening balances of Branch Liabilities Branch Liabilities Dr.
To Branch A/c
When goods are supplied by the Head Office/another branch Branch A/c Dr.
to branch To Goods sent to Branch A/c
When goods are returned by the branch/ branch customers Goods Sent to Branch A/c Dr.
directly to the Head Office
To Branch A/c
When goods are supplied by the branch to another branch Goods Sent to Branch A/c Dr.
under instructions of Head Office To Branch A/c
When goods are supplied by the head office but not received Goods-in Transit A/c Dr.
by the branch
To Branch A/c
When the Head Office meets the branch expenses or sends Branch A/c Dr.
cash to the branch for meeting its expenses: To Cash/Bank A/c
When remittances are received by the Head Office from the Cash/Bank A/c Dr.
Branch/ Branch Customers To Branch A/c
When remittances are sent by the branch but not received by Cash in-transit A/c Dr.
the Head Office:
To Branch A/c
When the balance in goods sent to Branch Account is Goods sent to Branch A/c Dr.
transferred To Purchases A/c (in case of Trading
concerns) or,
To Trading A/c (in case of manufacturing
concerns)
For recording the closing balances of Branch Assets: Branch Assets A/c To Branch A/c
For recording the closing balances of Branch Liabilities Branch A/c Dr. To Branch Liabilities
For recording Profit or Loss: Branch A/c Dr. To General Profit & Loss A/c
(i)If credit side exceeds the debit side. General Profit & Loss A/c Dr. To Branch A/c
(ii)If debit side exceeds the credit side
Format of branch account in the books of Head office

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 Financial Accounting

Branch account
Details Amount Details Amount
To Op Bal B/D By bal b/d-
Stock xxx o/s salaries xxx
Debtors xxx creditors xxx
Prepaid Expenses xxx By remittances
Petty Cash xxx cash sales xxx
Furniture xxx cash realized from debtors xxx
Computer xxx sale of plant or any asset xxx
Plant And Machinery xxx - expenses paid by BO xxx
To Goods Sent To Branch A/C xxx - amount spent on purchase
To Cash-Sent Towards Petty xxx of an asset by the branch xxx xxx
Expenses
To Cash-Sent Towards by goods sent to branch[returns] xxx
-Rent xxx by goods in transit xxx
-Wages And Salaries xxx by loading on
-Advertising xxx goods sent to branch a/c xxx
-Carriage And Freight xxx opening stock xxx
-Purchase Of Asset xxx by bal c/d :
To Loading On: stock xxx
-Goods Sent To Branch[Returns] xxx debtors xxx
-Goods In Transit xxx prepaid expenses xxx
-Closing Stock xxx petty cash
To Balance c/d op bal xxx
Creditors xxx +cash sent by HO towards
Outstanding expenses xxx petty expenses xxx
To Net Profit [B.F.] xxx -petty expenses xxx xxx
Furniture xxx
-depreciation xxx xxx
Computer xxx
-depreciation xxx xxx
Plant op bal xxx
Less: Dep. Xxx xxx

Significant points:
 The following items are to be ignored while preparing Branch Account under this method:
 Bad debts, discount allowed, credit sales, sales returns by customers to branch, cash received by
Branch from Branch Debtors, , since the debtors at the end appear at the adjusted figure.
 Depreciation and Profit/Loss on sale of fixed assets since fixed assets at the end appear at the
adjusted figure.
 Abnormal Losses since stock at the end appears at the adjusted figure.
 Expenses met by Branch out of cash, since either reduced cash balance at the end is decreased or
the liability at the end is increased.
 Purchase of Goods/Fixed Assets by Branch, since book value of Goods/Fixed assets at the end is
increased and either the amount of remittances is reduced or the Creditors at the end are increased.
 Sale of Goods/Fixed Assets by Branch since book value of Goods/ Fixed assets at the end is
decreased and either the amount of remittances is increased or the Debtors at the end are increased.
 Petty Cash Expenses paid by the Branch. The Branch Account is debited with the .opening balance
of Petty Cash and the amount of petty cash sent by the head office and is credited with the closing
petty cash. For calculating closing petty cash, all expenses paid by the branch are taken into
consideration. Therefore it should be ignored for preparation of Branch Account.

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 Accounting for Branches Including Foreign Branches

Invoice Price:
Sometimes, the Head Office does not want to reveal the cost of the goods to the Branch and therefore,
invoices goods at a price which is higher than the Cost Price (CP). Such price is known as „Invoice Price‟ (IP).
The difference between the Invoice Price UP) and the Cost Price (CP) is called `Loading‟.
How to Eliminate/Remove Loading:
When goods are sent at invoice price, for ascertaining correct profit/loss on Branch, the items recorded at
invoice price should be brought down to cost price level. For this purpose, the loading including in the various
items should be eliminated by passing the following adjusting entries
1. For loading on Opening Stock
Stock Reserve A/c Dr.
To Branch A/c
2. For loading (Net) on goods sent to Branch (i.e., Goods sent to Branch less Returns by Branch or Branch
customers) to H.0.] :
3. Goods Sent to Branch A/c Dr.
To Branch A/c
4. For loading on closing stock
Branch A/c Dr.
To Stock Reserve A/c

1.1
Mister 007 of City -X has a branch at City -Y. Goods are supplied to the branch at cost. The expenses of the
branch are paid from HO and the branch keeps a Sales Journal and the Debtors Ledger only. From the
following information supplied by the branch, prepare Branch Account and Branch Debtors Account in the
books of Head Office.
st
Opening Stock (1 April 2021) 24,000
st
Closing Stock (31 March 2022) 18,000
Credit Sales 41,000
Cash Sales 17,500
Receipt from debtors 37,900
st
Sundry debtors on 31 March 2022 9,160
Goods sent from Head Office 30,000
st
Goods in transit from Head Office on 31 March 2022 3,600
Expenses paid by the Head Office for the branch 10,400
Solution :
Books of Head Office
Branch Account
Details Amount Details Amount
Opening stock 24,000 Remittances:
Opening debtors 6,060 Cash from debtors 37,900
Goods sent to branch a/c 30,000 Cash sales 17,500
Cash – expenses 10,400 Goods in transit 3,600
Net profit 15,700 Bal c/d :
Debtors 9,160
Stock 18,000
Branch Debtors Account
Details Amount Details Amount
Op bal b/d – B.F 6,060 Cash from debtors 37,900
Credit sales 41,000
Bal c/d 9,160

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 Financial Accounting

1.2
Big Brothers are having their Head Office at Delhi and Branch at Kolkata. The following are transactions of
st
the Head Office with branch for the year ended 31 December 2020.
Stock at branch as on 1-1-2020 30,800
Debtors at the branch as on 1-1-2020 16,500
Petty cash as on 1-1-2020 500
Goods supplied to the branch 1,51,200
Remittance from branch:
Cash sales 10,500
Realisation of debts 1, 57,740 1,68,240
Amount sent to branch:
Salary 7,440
Rent 2,400
Petty Cash 3,000 12,840
Petty expenses of branch Manager 2750
Stock at branch as on 31-12-2020 23,150
Sundry debtors at the branch as on 31-12-2020 50,460
Show the branch account in the books of the Head Office.
Solution:
Books of Head Office
Branch Account
Details Amount Details Amount
Opening stock 30,800 Remittances:
Opening debtors 16,500 Cash from debtors 37,900
Petty Cash a/c 500 Cash sales 1,57,740
Goods Sent to Branch a/c 1,51,200 Goods in transit 3,600
Cash : amount sent for 15,700 Bal c/d :
Salary 7,440 + rent 2,400+Petty 12,840 Petty Cash : op. balance 500 + 750
Cash 3,000 sent 3,000 - amount spent by
branch Manager 2,750
Debtors 50,460
Net Profit 30,760 Stock 23,150

Branch Debtors Account

Details Amount Details Amount
Op bal b/d – 16,500 Cash from debtors 1,57,740
Credit Sales - Bal. Fig. 1,91,700
Bal c/d 50,460

1.3
From the following particulars prepare a Branch Account showing the profit or loss from the branch.
Opening Stock at branch 15,000
Goods sent to branch 45,,000
Sales 60,000
Expenses:
Salaries 5,000 7,000
Other expenses 2,000
Closing Stock at Branch 10,000

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 Accounting for Branches Including Foreign Branches

The Branch Manager is entitled to a commission of 5% on the profit of the Branch after charging such
commission.
Solution:
Books of Head Office
Branch Account
Details Amount Details Amount
Opening stock 15,000 Remittances:
Opening debtors - Cash from debtors -
Goods sent to branch a/c 45,000 Cash sales 60,000
Cash –
Salaries 5,000 Bal c/d :
Other expenses 2,000 Debtors -
Net profit before commission 3,000 Stock 10,000
Branch manager‟s commission 143
3,000x 5 / 105
Net profit after commission 2,857

1.4
st
Five O‟ Five Co. Bangalore opened a branch at Hyderabad on 1 January 2022. The following information is
available in respect of the branch for the year 2022.
Rs.
Goods sent to the Branch 75,000
Cash sales at the Branch 50,000
Credit sales at the Branch 60,000
Salaries of the Branch Staff paid by the Head Office 15,000
Office expenses of the branch paid by the Head Office 12,000
Cash remittances to Branch towards petty cash 6,000
Petty expense of branch manager 5,500
Debtors of Branch at 31-12-2022 5,000
Stock at the Balance Oil 31-12-2022 27,000
Prepare Branch Account and show the Profit/ Loss from the Branch for the year 2022.
Solution:
Books of Head Office
Branch Account
Details Amount Details Amount
Opening stock - Remittances:
Opening debtors - Cash from debtors# 55,000
Goods sent to branch a/c 75,000 Cash sales 50,000
Cash –
Salaries 15,000 Bal c/d :
Office expenses 12,000 Debtors 5,000
Petty cash 6,000 Stock 27,000
Net profit 29,500 Petty cash ( 6,000- 500
5,500)
Branch Debtors Account
Details Amount Details Amount
Op bal b/d – - Cash from debtors – Bal. fig. 55,000
Credit sales 60,000
Bal c/d 5,000

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 Financial Accounting

1.5
From the following details, prepare a Branch Account in the books of the Head Office. Show your working
clearly. Rs.
Goods sent to Branch at cost 50,000
Goods returned by branch at cost 3,000
Branch credit Sales 51,000
Cash Sales at Branch 2,500
Cash remitted to the Head Office by branch 45,000
Expenses paid by Head Office 10,000
Discount allowed to customers by Branch 1,800
Closing Stock with branch at cost 17,000
Branch debtors (Closing balance) 7,700
Solution:
Books of Head Office
Branch Account
Details Amount Details Amount
Opening stock - Remittances:
Opening debtors 1,000# Cash from debtors#
42,500
Goods sent to branch a/c 50,000 Cash sales 45,000
2,500
Cash – Expenses 10,000
GSTB- Returns 3,000
Bal. c/d.
Debtors 7,700
Net profit 29,500 Stock 17,000

Branch Debtors Account

Details Amount Details Amount
Op bal b/d – bal. fig. 1,000 Cash from debtors – 42,500
Credit sales 60,000 Discount 1,800
Bal c/d 7,700

1.6
Seven ltd. with its Head Office in Calcutta has a Branch at Delhi. You are given the following particulars
th
relating to Delhi Branch for the year ended 30 June, 2022

st
Stock at Branch on 1 July, 2022 15,700
Goods sent to branch the year 45,600
Total sales at Branch (including Rs. 19,700 for cash sales) 73,300
Cash received from debtors 52,200
st
Branch debtors on 1 July, 2022 16,900
Goods returned by the Branch 3,900
st
Petty cash at branch on 1 July, 2022 110
Cash sent to Branch for expenses:
Salary 12,800
Petty Cash 2,600
Rent 3,000

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 Accounting for Branches Including Foreign Branches
th
Stock at Branch on 30 June, 2022 18,800
th
Petty cash at branch on 30 June, 2022 90
Prepare Delhi Branch Account and a Branch Trading & Profit & Loss Account in the books of Head Office.
Solution:
Books of Head Office
Branch Account
Details Amount Details Amount
Opening stock 15,700 Remittances:
Petty cash 110 Cash from debtors# 52,200
Opening debtors 16,900 Cash sales 19,700
Goods sent to branch a/c 45,600 Goods sent to branch- returns 3,900
Cash – Bal c/d :
Salaries 12,800 Debtors 18,300
Rent 3,000 Stock 18,800
Petty cash 2,600 Petty cash ( 110 +2,600 – 90
2,620)
Net profit 16,280
Branch Debtors Account
Details Amount Details Amount
Op bal b/d – 16,900 Cash from debtors – Bal. fig. 52,200
Credit sales 53,600
Bal c/d 18,300

Q– 1.7 -
Fine Morning trading firm has a retail branch, which is supplied goods from the Head Office and which keeps
its own sales ledger and remits all cash received daily to the Head Office. The branch expenses being paid
by the Head Office by cheque. From the following particulars, draw up the Branch Account as they would
st
appear in the Head Office books for the six months ending 31 December 2020.
Rs.
Six months credit sales 2,485
Cash Sales 1,460
Returns inwards 30
Cash received on ledger accounts 2,387
Debtors on 1-7-2020 1,345
Stock on 1-1-2020 840
Stock on 31-12-2020 1,280
Goods received from Head Office 2,276
Bad debts at the branch 65
Wages 415
Rent 402
Solution:
Books of Head Office
Branch Account
Details Amount Details Amount
Opening stock 840 Remittances:
Petty cash - Cash from debtors# 2,387
Opening debtors 1,345 Cash sales 1,460
Goods sent to branch a/c 2,276 Goods sent to branch- returns -

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 Financial Accounting

Cash – Bal c/d :

Wages 415 Debtors 1,348
Rent 402 Stock 1,280
Petty cash - Petty cash -
Net profit 1,197
Branch Debtors Account
Details Amount Details Amount
Op bal b/d – 1,345 Cash from debtors – Bal. fig. 2,387
Credit sales 2,485 Bad debts 65
Returns inwards 30
Bal c/d – B.F. 1,348
3,830 3,830

1.8 -
Messer‟s V and Co. has a small branch at Tumbaktoo and you are required to prepare Tumbaktoo branch a/c
in the books of the HO for calculating profit made at the said branch with the help of following information.
Stock at cost in the beg. 4,000
Furniture in the beg. 2,000
Goods sent to branch at cost 60,000
Cash sales made by the branch 90,000
Furniture purchased by the branch on permission from the HO 1,200
Stock at the end 3,500
Expenses paid by the HO 5,300
It was required to write off furniture at 10% per annum however no depreciation is necessary for purchases
made during the year.
Solution:
Books of Head Office
Branch Account
Details Amount Details Amount
Opening stock 4,000 Remittances:
Opening furniture 2,000 Cash from debtors -
Opening debtors - + Cash sales 90,000
Goods sent to branch a/c 60,000 - amount of furniture Purchased 1,200 88,800
by BO by taking permission
from HO
Cash – expenses 5,300
Bal c/d :
Debtors -
Stock 3,500
Furniture : opening balance 2,000
+ purchased 1,200
Net Profit 24,000 - depreciation 200 3,000

1.9
From the following particulars, prepare Branch Account showing the profit or loss of the Branch
Rs.
Op. Stock at Branch 30,000
Goods sent to Branch 90,000
Sales (cash) 1,20,000

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 Accounting for Branches Including Foreign Branches

Expenses:
Salaries 10,000
Other expenses 4,000
Closing stock could not be ascertained but it is known that the branch usually sells at cost plus 20%. The
Branch Manager is entitled to a commission of 5% on the profit of the Branch before charging such
commission.
Solution:
Books of Head Office
Branch Account
Details Amount Details Amount
Opening stock 30,000 Remittances:
Petty cash - Cash from debtors -
Opening debtors - Cash sales 1,20,000
Goods sent to branch a/c 90,000 Goods sent to branch- returns -
Cash – Bal c/d :
salaries 10,000 Debtors -
Other expenses 4,000 Stock ; as per working 20,000
Petty cash - Petty cash -
Net profit before commission 6,000
Branch mgr. commission 5% 300
Net profit after commission 5,700
Workings :
1.Total sales as given = 1,20,000
Less Profit margin 1/6 on sales = 20,000
Cost of the goods sold = 1,00,000
2.
Op stock = 30,000
+ goods sent to branch = 90,000
Total available goods at cost = 1,20,000
Less cost of goods sold = 1,00,000
Closing stock = 20,000

1.10 – Past Examinations

A company with HO at City X has a branch in City Z. The branch receives all goods from HO who remits
cash for all expenses. Total sales by Branch for the year ended 31.03.22 amounted to Rs. 6,50,000 out of
which 75% on credit. Other details for City Z Branch were as under:
Rs.
Opening Stock at Branch 4,000
Closing stock at Branch 30,000
Opening Debtors 45,000
Closing Debtors 30,000
Petty cash in the beginning 250
Petty cash sent by HO 3,000
Petty cash spent 2,500
Expenses actually spent by branch 45,000
All sales are made by the branch at cost plus 25%.
You are required to prepare the City Z branch account in the books of HO for the year ended 31.03.22.
Detailed Solution
Given in the question that all sales are made by the branch at cost plus 25%.

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 Financial Accounting

It means out of total sales of 6,50,000

Profit Margin is 25/125 = 1,30,000
Cost of goods Sold must be = 6,50,000 - 1,30,000 = 5,20,000
Now Branch is having opening stock of stock of Rs. 4,000
and closing stock of Rs. 30,000
so Goods sent to branch at cost must be :
Opening stock at cost 4,000 Sale of stock at cost 5,20,000
GSTB at Cost = B.F 5,46,000 Closing stock 30,000
Net Profit Rs. 82,500
Petty cash a/c Balance Rs. 750
Cash collected from debtors 5,02,500
Credit sales 6,50,000 x 75% = 4,87,500
Cash sales 6,50,000 x 25% = 1,62,500
Branch Account
Details Amount Details Amount
b/d Remittances :
Petty Cash 250 Cash sales 25% of 6,50,000 1,62,500
= 1,62,500
Debtors 45,000 Cash from customers 5,02,500
Stock : 4,000

Bank :Cash sent for petty expenses 3,000

Bank – expenses 45,000
Goods sent to branch from HO at cost 5,46,000 Bal c/d :
Debtors 30,000
Stock : 30,000
Net profit 82,500 Petty Cash : op. Bal. 250 + petty 750
cash sent 3,000 less petty cash
spent 2,500

Branch Debtors A/c

Details Amount Details Amount
Bal b/d 45,000 Cash from debtors - B.F 5,02,500
Credit sales 75% of 6,50,000 4,87,500 Bal c/d 30,000
5,32,500 5,32,500

Invoicing
1.11 - Invoicing
A Head Office at Jaipur has a branch at Kolkata to which goods are invoiced by the Head Office at cost plus
25%. All cash received by the branch is daily remitted to the Head Office. All expenses are paid from Jaipur.
From the following particulars, show how the branch account will appear in the Head Office books.
Rs.
Stock on January 1, 2016 (invoice price) 12,000
Petty Cash in hand on January 1, 2016 3,000
Debtors on January 1, 2016 30,000
Goods invoiced from Jaipur 80,000
Cash Sales 35000
Credit Sales 52000
Goods returned by debtors 3,000

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 Accounting for Branches Including Foreign Branches

Discount allowed to debtors 300

Cheques received from Jaipur
Wages & Salaries 11,000
Rent 4,000
Office Furniture 1,500 16,500
Cheques remitted by HO to BO towards Petty Expenses 4,000
Branch manager‟s expenses( amount spent by Branch 6,900
manager out of petty cash)
Balance of stock on December 31, 2016 (invoice price) 20,000
Balance of debtors on December 31, 2016 27,000
Solution:
Books of Head Office
Branch Account
Details Amount Details Amount
Opening stock 12,000 Remittances:
Cash (Petty cash) 200 Cash from debtors# 51,700
Opening debtors 30,000 Cash sales 35,000
Goods sent to branch a/c 80,000 Load on Opening stock 2,400
Cash – Load on GSTB a/c 16,000
Salaries 11,000 Goods sent to branch- -
returns
Rent 4,000 Bal c/d :
Office furniture 1,500 Office furniture 1,500
Petty Cash ( amount remitted by - Debtors 27,000
HO to BO for Petty Expenses)
Load on closing stock 4,000 Stock 20,000
Net profit 11,100 Petty cash ( op. Bal. 200 + 200
sent by HO : Nil – amount
spent by Branch Manager:
Nil)

Branch Debtors Account

Details Amount Details Amount
Op bal b/d – 30,000 Cash from debtors – Bal. fig. 51,700
Credit sales 52,000 Sales Return that is Goods 3,000
returned by Debtors to Branch
Discount 300
Bal c/d 25,230

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 Financial Accounting

Load
Opening stock 2.Closing stock 3. Goods sent to branch Account 4. Goods sent to Branch Returns 5. Goods
transferred 6. Goods in transit

HO BO
Customers

Load No Load (Sales Return)

Goods are sent at

A margin of 25% on cost at a margin of say 25% on Sales or Invoice Price

Presume cost to be 100 presume Invoice Price as 100
Cost + margin = IP cost + margin = IP
100 + 25 = 125 75 + 25 = 100

1.12 - Invoicing - Past Examinations

K-55 Limited has a branch at City F. Goods are invoiced to the branch at 20% profit on sales. The branch
having been instructed to send all cash daily to the Head Office. All the expenses are paid by the Head
Office except petty expenses which are met by the branch manager. From the following particulars you are
required to draw up branch accounts as it would appear in the books of the Head Office.
Rs.
Stock on January 1, 2022 (invoice price) 15,000
Sundry Debtors on January 1,2022 9,000
Cash in hand on January 1, 2022 400
Office furniture on January 1, 2022 1,200
Goods supplied by the Head Office (invoice price) 80,000
Goods returned to Head Office 1,000
Goods returned by Debtors 480
Cash received from debtors 30,000
Cash Sales 50,000
Credit Sales 30,000
Discount Allowed 300
Expenses paid by Head Office:
Rent 1,200
Salary 2,400
Stationery & Printing 300 3,900
Petty expenses paid by Branch Manager 280
Provide depreciation on furniture by 10% p.a.
Stock on 31-12-2022 (invoice price) 14,000
Solution:
Books of Head Office
Branch Account
Details Amount Details Amount
Opening stock 15,000 Remittances:

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 Accounting for Branches Including Foreign Branches

Petty cash 400 Cash from debtors# 30,000

Opening debtors 9,000 Cash sales 50,000
Furniture 1,200
Goods sent to branch a/c 80,000 Load on Opening stock 3,000
Cash – Load on GSTB a/c 16,000
Salaries 2,400 Goods sent to branch- returns 1,000
Rent 1,200 Bal c/d :
Stationery and printing 300 Debtors 8,220
Load on ; GSTB-R 200 Stock 14,000
closing stock 2,800
Net profit 10,920 Petty cash ( 400 - 280) 120
Furniture 1,200 - 120 1,080

Branch Debtors Account

Details Amount Details Amount
Op bal b/d – 9,000 Cash from debtors – 30,000
Credit sales – 30,000 SR 480
Bal c/d - Bal. fig. 8,220

1.13 – Past Examinations

Western Terrain Enterprises is having their Head Office at City K and a branch at City M. The Head Office
invoices the goods to the branch at cost plus 25%.
The following are the transactions of the Head Office with the branch for the year ended 31-3-2022.
Stock at Branch as on 1-4-21 (at invoice price) 27,500
Debtors at Branch as on 1-4-21 15,000
Petty cash as on 1-4-21 1,000
Goods supplied to the Branch (at invoice price) 3,60,000
Goods returned to HO 25,000
Cash Sales 54,000
Cash received from debtors 2,30,000
Bad debts 2,000
Allowances to customers 1,000
Return Inward 1,000
Rates and Taxes 5,000
Salaries 18,000
Miscellaneous Expenses 4,000
Stock at Branch as on 31-03-2022 31,500
Sundry Debtors at the Branch as on 31-03-2022 74,000
Petty cash as on 31-03-2022 5,000
Net Profit Rs. 55,200

1.14 – Past Examinations

Eastern winds is having their Head Office at City K and a branch at City M. The Head Office invoices the
goods to the branch at cost plus 25%.
The following are the transactions of the Head Office with the branch for the year ended 31-3-2022.
Stock at Branch as on 1-4-21 (at invoice price) 12,500
Debtors at Branch as on 1-4-21 5,000

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 Financial Accounting

Petty cash as on 1-4-21 1,000

Goods supplied to the Branch (at invoice price) 40,000
Goods returned to HO 5,000
Cash Sales 12,000
Cash received from debtors 30,000
Bad debts 2,000
Allowances to customers 1,000
Return Inward 1,000
Rates and Taxes 3,000
Salaries 8,000
Miscellaneous Expenses 1,000
Stock at Branch as on 31-03-2022 15,000
Sundry Debtors at the Branch as on 31-03-2022 4,000
Petty cash as on 31-03-2022 1,000
Net Profit Rs. 3000

1.15 – Past Examinations

Highland Enterprises is having their Head Office at City X and a branch at City Y. The Head Office invoices
1
the goods to the branch at cost plus 33 %.
3
The following are the transactions of the Head Office with the branch for the year ended 31-3-2022. You are
required to prepare branch account.
Stock at Branch as on 1-4-21 (at invoice price) 40,000
Goods sent to the Branch (at invoice price) 2,50,000
Goods returned to HO 10,000
Cash Sales 1,00,000
Credit Sales 3,00,000
Discount / Allowances to customers 10,000
Stock at Branch as on 31-03-2022 60,000
It is estimated that 2% of the goods received are lost through natural wastage.
Detailed Hints :
Net Profit Rs. 2,25,000
Normal Loss shall be ignored.
In the Books of HO
Branch Account
Opening Stock 40,000 Loading on opening stock 40,000 x 10,000
1/4
GSTB 2,50,000 Loading on GSTB -2,50,000 x 1/4 62,500
GSTB- R 10,000
Remittances:
Loading GSTB-R 10,000 x 1/4 2,500 Cash Sales 1,00,000
Cash from Debtors 2,90,000
Loading on Closing stock 60,000 15,000
x 1/4
Net Profit 2,25,000 Balance c/d
Stock 60,000
Branch Debtors Account
Details Amount Details Amount
Op bal b/d – - Cash from debtors B.F 2,90,000
Credit sales – 3,00,000 Discount / Allowances 10,000

16
 Accounting for Branches Including Foreign Branches

Details Amount Details Amount

Cl. Balance -

1.16 – Past Examinations

Spectrum Limited has a branch at City K. You are required to calculate the invoice price of goods sent to
branch and profit included thereon, from the following details:
Goods received from HO – Rs. 1,00,000
Goods in transit – Rs. 50,000
Goods are invoiced to branch at cost plus 25%.
Detailed Solution:
Invoice value of goods received Rs.1,00,000
Add: Goods in transit Rs. 50,000
Invoice value of the goods sent Rs. 1,50,000
Profit Margin = 25/125 x 1,50,000 = Rs. 30,000

1.17 - Invoicing
A Head Office in City K-4 has a Branch in City F-5 to whom goods are invoiced by the Head Office at cost
plus 25%. All cash received by the branch is daily remitted to the Head Office. All expenses are paid from
Delhi. From the following particulars, show how the Branch Account will appear in the Head Office books
(entries to be made at invoice price)
Rs.
st
Stock on 1 July, 2022 (at invoice price) 12,500
st
Debtors on 1 July, 2022 12,000
Goods invoiced from Delhi 40,000
Remittances to Delhi:
Cash Sales 16,000
Cash received from debtors 29,500 45,500
Goods returned to Delhi 2,400
Cheque received from Delhi:
Wages and Salaries 12,000
Rent, rates etc. 4,000
Sundry expenses 1,200 17,200
st
Stock on 31 March, 2023 (invoice price) 16,000
st
Debtors on 31 March, 2023 25,000
Solution:
Books of Head Office
Branch Account
Details Amount Details Amount
Opening stock 12,500 Remittances:
Petty cash - Cash from debtors# 29,500
Opening debtors 12,000 Cash sales 16,000
Goods sent to branch a/c 40,000 Goods sent to branch- returns 2,400
Cash – Load on GSTB a/c 8,000
Wages and Salaries 12,000 Load on opening stock 2,500
Rent and rates 4,000 Bal c/d :
Sundry expenses 1,200 Debtors 25,000
Load on: GSTB-R- 2,400 x 1/5 480 Stock 16,000
Closing stock:16,000 x 1/5 3,200
Net profit 14,020 Petty cash -

17
 Financial Accounting

Branch Debtors Account

Details Amount Details Amount
Op bal b/d – 12,000 Cash from debtors 29,500
Credit sales 42,500
Bal c/d 25,000

1.18 - Invoicing – Past Examination – 8 Marks

Breeze and Company is having its Branch at City X. goods are invoiced to the branch at 25% profit on sale.
Branch has been instructed to send all cash daily to head office. All expenses are paid by head office except
petty expenses which are met by the Branch Manager. From the following particulars prepare branch account
in the books of Head Office.
Stock on 1.4.2019 40,000
Sundry Debtors on 1.4.2019 25,000
Cash in hand on 1.4.2019 1,000
Office furniture on 1.4.2019 4,000
Goods invoiced from head office at invoice price 1,80,000
Goods returned to head office 6,000
Goods returned by debtors 1,250
Cash sales 1,20,000
Credit sales 70,000
Cash received from debtors 65,000
Discount allowed to debtors 300
Expenses paid by head office:
Staff welfare 750
Salary 4,000
Telephone Expenses 1,200
Other Miscellaneous expenses paid by branch 700
Depreciation to be provided on branch furniture at 10% p.a.
Stock on 31.03.2020 at invoice price 35,000
Solution:
Branch Account in the Books of Head Office
Balance b/d : Loading on opening stock 10,000
Stock 40,000 Remittances :
Debtors 25,000 Cash sales 1,20,000
Cash in hand 1,000 Cash from debtors 65,000
Furniture 4,000 Goods sent to branch - load 45,000
Goods sent to branch 1,80,000 Goods returned by branch to 6,000
HO
Goods returned by branch- 1,500
Loading
Bank (expenses paid by HO)
Staff welfare 750 Balance c/d :
Salary 4,000 Stock 35,000
Telephone 1,200 Debtors 28,450
Load on closing stock 8,750 Petty Cash 1,000 - 700 300
Profit T/F To General P&L 47,150 Furniture 4,000 - 400 3,600
3,13,350 3,13,350

18
 Accounting for Branches Including Foreign Branches

1.19 - Invoicing
st
From the details given below relating to Nainital Branch for the year ending 31 Mar 2020 prepare Nainital
Branch Account in the books of HO .Goods are sent at a profit margin of 20% on selling price.
Stock on 1.4.2019 5,000
Debtors on 1.4.2019 2,000
Furniture on 1.4.2019 1,000
Petty cash on 1.4.2019 200
Insurance prepaid on 1.4.2019 50
Salaries due on 1.4.2019 1,000
Goods sent to branch 40,000
Cash sales 55,000
Total sales 70,000
Cash received from debtors 16,000
Goods returned by branch 500
Goods returned by the debtors 200
Cash sent to branch for-
Rent 3,600
Salaries 10,200
Petty cash 600
Insurance [up to June 2020] 400
Petty cash expenses incurred by the branch 500
st
Stock on 31 march 2020 3,000
Depreciation on furniture by 20%
Solution:
Books of Head Office
Branch Account
Details Amount Details Amount
Opening bal b/d: Opening bal b/d :
Stock 5,000 Salaries due 1,000
Debtors 2,000 Remittances:
Furniture 1,000 Cash from debtors 16,000
Petty cash 200 Cash sales 55,000
Prepaid Insurance 50
Goods sent to branch a/c 40,000 Load on opening stock 1,000
Load on GSTB – Returns 100 Load on goods sent to Branch 8,000
a/c
Load on closing stock 600 Goods sent to branch- returns
GSTB- Returns 500
Cash –
Rent 3,600 Bal c/d :
Salaries 10,200 Petty cash 200 + 600 - 500 300
Petty Cash 600 Stock 3,000
Insurance 400 Furniture : 1,000 less 20% 800
Depreciation
Net profit 22,750 Debtors* 800
Insurance Prepaid 400 x 3 / 100
12

19
 Financial Accounting

Branch Debtors Account

Details Amount Details Amount
Op bal b/d – 2,000 Cash from debtors – 16,000
Credit sales 15,000 Sales Returns 100
70,000 – 55,000 Bal c/d * 800

1.20 - Invoicing
Zero –Zero- Nine Co. Ltd., of City X, has a branch at City Y. Goods are invoiced to the branch at selling
price, being cost plus 25%. The branch sends all cash received to the Head Office, all expenses being paid
from Surat. From the following particulars, prepare Branch Account in the books of the Head Office and
st
make necessary adjustments to arrive at the actual branch profit or loss for the year ended 31 March,
2022:
Invoice value of stock on 1-4-2021 25,000
Invoice value of stock on 31-3-2022 30,000
Sundry debtors 24,000
Bad debts 2,000
Cash sales 108,000
Credit sales 70,000
Goods supplied from Head Office 180,000

Salaries 9,600
Rent and rates 4,800
Sundry expenses 1,800
Cash received from customers 64,000
Solution:
Books of Head Office
Branch Account
Details Amount Details Amount
Opening stock 25,000 Remittances:
Petty cash 24,000 Cash from debtors 64,000
Opening debtors - Cash sales 1,08,000
Goods sent to branch a/c 1,80,000 Load on opening stock 5,000
Cash – Load on Goods sent to 36,000
branch- returns
Salaries 9,600 Bal c/d :
Rent 4,800 Debtors 28,000
Sundry Expenses 1,800 Stock 30,000
Petty cash - Petty cash -
Load on closing stock 6,000
Net profit 19,800

Branch Debtors Account

Details Amount Details Amount
Op bal b/d – 24,000 Cash from debtors. 64,000
Credit sales 70,000 Bad debts 2,000
Bal c/d – B.F. 28,000

20
 Accounting for Branches Including Foreign Branches

1.21 - Invoicing –Past Examination – 4 Marks

Following is the information of Jammu Branch of Best limited, New Delhi for the year ending 31.03.2020:
 Goods invoiced to the branch at cost plus 20%
 The sale price is cost plus 50%
Other information: Rs.
(a) Stock as on 01.04.2019 2,20,000
(b) Goods sent during the year 11,00,000
(c) Sales during the year 12,00,000
(d) Expenses incurred at the branch 45,000
Ascertain:
 The profit earned by the branch during the year
 Branch stock reserve in respect of unrealised profit
Solution:
In the books of Head office
Jammu Branch Account
Opening stock 2,20,000 Loading on opening stock : 36,667
2,20,000 x 20 / 120
Goods sent to branch 11,00,000 Sales (presumed all sales are on 12,00,000
cash basis)
Expenses 45,000 Loading on GSTB: 1,83,333
11,00,000 x 20/120
Loading on closing stock : 60,000
3,60,000 x 20/120
Net profit 3,55,000 Balance c/d :
Closing stock (as per working 3,60,000
note)
17,80,000 17,80,000

Opening stock at IP 2,20,000

+ GSTB : 11,00,000
Total goods available at invoice price 13,20,000
Less: invoice price of goods sold
Sales 12,00,000
Less 30/150 of 12,00,000 (2,40,000) 9,60,000
Closing stock at invoice price 3,60,000

How Much profit branch has earned from its own point of view:
Jammu Branch Trading Account
Opening stock 2,20,000
Goods sent to branch 11,00,000 Sales 12,00,000
Expenses 45,000

Net profit 1,95,000 Balance c/d :

Closing stock (as per working 3,60,000
note)
15,60,000 15,60,000

21
 Financial Accounting

1.22 - Invoicing
Twist stores Bombay has a branch at Poona. Goods are generally invoiced to the branch at selling price
being cost plus 25%. The branch keeps its own sales ledger and deposits all cash received by it to credit of
the HO account located at Poona. All expenses are paid by cheque from Bombay. From the following details
prepare branch account in the books of the HO
Stock in the beg 75,000
Stock at the end 90,000
Sundry debtors at the beg 42,000
Sundry debtors at the end 54,000
Goods invoiced from the HO 5,46,000
rates and taxes 24,000
Sundry expenses 4,800
Cash sales 3,24,000
Cash received from ledger balances 1,98,000
credit sales 2,10,000
wages paid 20,400
wages still owing 2,000
Solution:
Books of Head Office
Branch Account
Details Amount Details Amount
Opening bal b/d: Opening bal b/d :
Stock 75,000 Salaries due -
Debtors 42,000 Remittances:
Furniture - Cash from debtors 1,98,000
Petty cash - Cash sales 3,24,000
Prepaid Insurance -
Goods sent to branch a/c 5,46,000 Load on opening stock 15,000
Load on GSTB – Returns - Load on goods sent to Branch 1,09,200
a/c
Load on closing stock 18,000 Goods sent to branch- returns -

Cash – Bal c/d :

Rent and taxes 24,000 Petty cash 200 + 600 - 500
Sundry expenses 4,800 Stock 90,000
Wages paid 20,400 Furniture : 1,000 less 20%
Depreciation
Wages outstanding / owing 2,000 Debtors 54,000
Net profit 58,000 Insurance Prepaid 400 x 3 / 12

Branch Debtors Account

Details Amount Details Amount
Op bal b/d – 42,000 Cash from debtors 1,98,000
Credit sales – bal. fig 2,10,000
Bal c/d 54,000

1.23 - Invoicing
1/3
SX Co has a branch at Delhi; goods are invoiced from HO at cost plus 33 %. Find out profit at the branch
according to debtors system

22
 Accounting for Branches Including Foreign Branches

Opening balances-
Debtors 10,000
Petty cash 1,000
Furniture 2,000
Stock 8,000
Cash sent by HO for petty expenses 2,000
Branch expenses and losses:
Freight and advertisement 5,600
Bad debts 50
Depreciation 80
Petty expenses 1,500
Cash sales 50,000
Credit sales 36,000
Goods returned by debtors 800
Goods returned by branch to HO 2,000
Cash received from debtors 20,000
Stock at the end at invoice price 7,800
Goods invoiced by HO during the year 88,000
Solution:
Books of Head Office
Branch Account
Details Amount Details Amount
Opening bal b/d: Opening bal b/d : -
Stock 8,000
Debtors 10,000 Remittances:
Furniture 2,000 Cash from debtors 20,000
Petty cash 1,000 Cash sales 50,000
Prepaid expenses -
Goods sent to branch a/c 88,000 Load on opening stock 2,000
Load on GSTB – Returns 500 Load on goods sent to Branch 22,000
a/c
Load on closing stock 1,950
Goods sent to branch- returns 2,000
Cash – Bal c/d :
Freight and advg. 5,600 Petty cash 1,000 + 2,000 – 1,500
1,500
Cash : petty cash sent by HO 2,000 Stock 7,800
Furniture : 1,000 less 1,920
Depreciation 80
Debtors# 25,150
Net profit 13,320

Branch Debtors Account

Details Amount Details Amount
Op bal b/d – 10,000 Cash from debtors 20,000
Credit sales 36,000 Sales return 800
Bad debts 50
Bal. c/d # 25,150

23
 Financial Accounting

1.24 – Invoicing – Past Examination - 8 Marks

XYZ Company is having its Branch at City X. goods are invoiced to the branch at 20% profit on sale. Branch
has been instructed to send all cash daily to head office. All expenses are paid by head office except petty
expenses which are met by the Branch Manager. From the following particulars prepare branch account in
the books of Head Office.
Stock on 1.4.2019 30,000
Sundry Debtors on 1.4.2019 18,000
Cash in hand on 1.4.2019 800
Office furniture on 1.4.2019 3,000
Goods invoiced from head office at invoice price 1,60,000
Goods returned to head office 2,000
Goods returned by debtors 960
Cash received from debtors 60,000
Cash sales 1,00,000
Credit sales 60,000
Discount allowed to debtors 160
Expenses paid by head office:
Rent 1,800
Salary 3,200
Stationery and printing 800
Petty expenses paid by branch 600
Depreciation to be provided on branch furniture at 10% p.a.
Stock on 31.03.2020 at invoice price 28,000
Solution:
Branch Account in the Books of Head Office
Balance b/d : Loading on opening stock 6,000
Stock 30,000 Remittances :
Debtors 18,000 Cash sales 1,00,000
Cash in hand 800 Cash from debtors 60,000
Furniture 3,000 Goods sent to branch - load 32,000
Goods sent to branch 1,60,000 Goods returned by branch to 2,000
HO
Goods returned by branch- 400
Loading
Bank (expenses paid by HO)
Rent 1,800 Balance c/d :
Salary 3,200 Stock 28,000
Stationery and printing 800 Debtors 16,880
Load on closing stock 5,600 Petty Cash 800-600 200
Profit T/F To General P&L 24,180 Furniture 3,000 - 300 2,700
2,47,780 2,47,780

1.25 - Local Purchases by Branch

HO of a company invoices goods to its branch X at cost plus 20%. The branch purchases goods from local
parties also for which payments are made by the HO. All cash collected by the branch is banked on the same
day to the credit of the HO a/c and all expenses are paid directly by the HO except petty expenses as petty
cash a/c is maintained by the BO. From the following information show the branch a/c as it would appear in
the HO books

Imprest cash in the beg 2,000

Imprest cash at the end 1,850

24
 Accounting for Branches Including Foreign Branches

Debtors on first day of the accounting year 25,000

Stock in the beg-
Transferred from HO at invoice price 24,000
Direct purchases made by the branch 16,000
Cash sales 45,000
credit sales 130,000
Direct purchases made by the branch 45,000
Goods returned by the customers 3,000
Goods sent to branch from HO at invoice price 60,000
Cash transferred from HO to branch for petty expenses 2,500
Bad debts 1,000
Discount allowed 2,000
Cash received from customers 125,000
Branch expenses 30,000
Stock at the end:
t/f from HO at invoice price 18,000
direct purchases made by the branch 12,000

Solution:
Branch A/c
Details Amount Details Amount
b/d Remittances :
Imprest Cash 2,000 Cash sales 1,30,000
Debtors 25,000 Cash from customers 1,25,000
Stock : Load on opening stock of
Transferred from HO at invoice price 24,000 Transferred goods from HO 4,000
Direct purchases made by the branch 16,000 24,000 x 1/6
Bank :Direct purchases made by the 45,000 Load on Goods sent to 10,000
branch branch a/c60,000 x 1/6
Bank – expenses 30,000
Goods sent to branch from HO at 60,000 Bal c/d :
invoice price
Bank : Cash transferred from HO to 2,500 Imprest cash 1,850
branch for petty expense
Load on Closing stock of 3,000 Stock :
Transferred goods from HO 18,000 t/f from HO at invoice price 18,000
x 1/6 direct purchases made by the 12,000
branch
Net profit 32,350

Branch Debtors A/c

Details Amount Details Amount
Bal b/d 25,000 Cash from debtors 1,25,000
Credit sales 1,30,000 Discount allowed 2,000
Bad debts 1,000
Sales returns 3,000
Bal c/d : Bal. Fig. 24,000

1.26 – Past Examinations

F-1 & Co. of Delhi has a branch at Jaipur. Goods are invoiced to the branch at cost plus 25%. The branch
is instructed to deposit the receipts everyday in the head office account with the bank. All the expenses

25
 Financial Accounting

are paid through cheque by the head office except petty cash expenses which are paid by the Branch.
From the following information, you are required to prepare Branch Account in the books of Head office:
Rs.
Stock at invoice price on 1.4.18 1,64,000
Stock at invoice price on 31.3.19 1,92,000
Debtors as on 1.4.18 63,400
Debtors as on 31.3.19 84,300
Furniture & fixtures as on 1.4.18 46,800
Cash sales 8,02,600
Credit sales 7,44,200
Goods invoiced to branch by head office 12,56,000
Expenses paid by head office 2,64,000
Petty expenses paid by the branch 20,900
Furniture acquired by the branch on 1.10.18 (payment was made by the branch from cash sales and
collection from debtors) 5,000
Depreciation, to be provided on branch furniture & fixtures @ 10% p.a. on WDV basis
Solution: Branch A/c
Details Amount Details Amount
Op. Stock at IP 1,64,000 Remittances :
Op. Debtors 63,400 Cash sales 8,02,600
Op. Furniture a/c 46,800 Collection from debtors 7,23,300
Less furniture acquired by 5,000
branch
Goods sent to branch a/c 12,56,000 Less Petty expenses 20,900 15,00,000
Bank ( expenses) 2,64,000
Load on closing stock 38,400 Load on :
Profit and loss a/c 2,74,570 Op. stock 32,800
GSTB a/c 2,51,200

Closing balances:
Stock at IP 1,92,000
Debtors 84,000
Furniture :
Op. Bal. 46,800
+ acquired by Branch 5,000
- depreciation : 4,680 + 250 4,930 46,870

Branch Debtors A/c

Details Amount Details Amount
Bal b/d 63,400 Cash from debtors : Bal. fig. 7,23,300
Credit sales 7,44,200 Discount allowed -
Bad debts -
Sales returns -
Bal c/d 46,870

26
 Accounting for Branches Including Foreign Branches

1.27 – Adapted from Module

Buckingham Bros, Bombay have a branch at Nagpur. They send goods at cost to their branch at Nagpur.
However, direct purchases are also made by the branch for which payments are made at head office. All the
daily collections are transferred from the branch to the head office.
From the following, prepare Nagpur branch account in the books of head office by Debtors method:
Rs. Rs.
Opening balance (1-1-2022) Bad Debts 1,000
Imprest Cash 2,000
Sundry Debtors 25,000 Discount to Customers 2,000
Stock: Transferred from H.O. 24,000 Remittances to H.O.
Direct Purchases 16,000 (recd. by H.O.) 1,65,000
Cash Sales 45,000 Remittances to H.O.
Credit Sales 1,30,000 (not recd. by H.O. so far) 5,000
Direct Purchases 45,000 Branch Exp. directly paid by H.O. 30,000
Returns from Customers 3,000 Closing Balance (31-12-2022)
Goods sent to branch from H.O. 60,000 Stock: Direct Purchase 10,000
Transfer from H.O. for Petty 4,000 Transfer from H.O. 15,000
Cash expenses Debtors ?
Imprest Cash ?
Petty Cash expenses 4,000
Solution:
In the Books of Buckingham Bros, Bombay
Nagpur Branch Account
Rs. Rs.
To Opening Branch Assets By Bank - Remittances
received from branch
Stock (24,000+16,000) 40,000 Cash Sales 45,000
Debtors 25,000 Cash from Debtors 1,20,000
Imprest Cash 2,000 Cash from Debtors in 5,000 1,70,000
transit
To Goods sent to Branch A/c 60,000 By Stock:
To Creditors (Direct Purchases) 45,000 Transfer from H.O. 15,000
To Bank (Sundry exp.) 30,000 Direct Purchase 10,000
To Bank (Petty cash exp.) 4,000 By Sundry Debtors (W.N. 2) 24,000
To Net Profit transferred to By Imprest Cash (W.N. 3) 2,000
General Profit & Loss A/c 15,000
2,21,000 2,21,000
Working Notes:
(1) Collections from debtors:
Rs.
Total remittances (Rs. 1,65,000 + Rs. 5,000) 1,70,000
Less: Cash sales (45,000)
1,25,000
(2) Calculation of Sundry Debtors closing Balance:
Rs.
Opening Balance 25,000
Add: Credit Sales 1,30,000
1,55,000
Less: Returns, Discount, Bad debts & collections (1,31,000)

27
 Financial Accounting

(3,000 + 2,000 + 1,000 + 1,25,000)

Closing balance 24,000
(3) Calculation of closing balance of Imprest Cash:
Rs.
Opening Balance 2,000
Add: Transfer from H.O. 4,000
6,000
Less: Expenses (4,000)
Closing balance 2,000

Section - 2 - Stock And Debtor System

This method is applicable particularly adopted by organisations where there are large numbers of transaction.
This method helps the Head Office to make efficient control.
Under this system, in the books of Head Office following accounts are prepared
A] Branch stock account
B] Branch debtors account
C] Branch adjustment account
D] Branch profit or loss account
Sometimes question may ask for, besides aforementioned accounts, branch expenses account and petty
expenses a/c Also.
Demonstration - branch stock account
Details amount Details amount
Opening stock xxx Cash sales xxx
Goods sent to branch a/c xxx Credit sales xxx
Surplus xxx Goods sent to branch[returns] xxx
Sales return Abnormal losses xxx
[goods return by debtors] xxx Normal losses xxx
Goods in transit xxx
Goods t/f by this br to some other br. xxx
Allowances off selling price xxx
Deficiency/shortage/spoilage xxx
Closing stock xxx
Demonstration branch adjustment account
Details Details
amount amount
Loading on- loading on-
Goods sent to br. a/c [returns] xxx Opening stock xxx
Goods in transit xxx Goods sent to branch a/c xxx
Closing stock xxx Surplus[full amt] xxx
Goods t/f xxx
Abnormal losses xxx
Normal losses[full amt] xxx
Allowances off selling price xxx
Direct expenses like wages,
carriage, freight xxx
Gross profit xxx

28
 Accounting for Branches Including Foreign Branches

Branch Debtors Account

Details Amount Details Amount
Cash recd. from debtors xxx
Opening balance b/d xxx Bad debts xxx
Credit sales xxx Discount allowed to debtors xxx
Sales return [goods returned by
debtors] xxx
Balance carried down xxx

Demonstration Branch profit and loss account

Details Amount Details Amount
Bad debts xxx Gross profit b/f xxx
Discount allowed xxx Insurance claim recd xxx
Abnormal loss at cost xxx
Rent xxx
Salary xxx
Advertising xxx
Promotional expenses xxx
Insurance xxx
Net profit [b/f] xxx
Important points
1] If balancing figure in the branch stock account appears on the debit side then preference order is-
a] opening stock [if not given]
b] Goods sent to branch a/c [if not given]
c] Surplus [provided there is no deficiency]
d] Sales return that is goods returned by the debtors
2] If balancing figure in the branch stock account appears on the credit side then preference order shall be:
a] closing stock provided it is not given
b] deficiency/shortage / spoilage
3] Treatment of abnormal loss-
first write the full amount on the credit side of branch stock account then write the loading amount on the
debit side of the branch adjustment a/c and finally take the abnormal loss at cost towards debit side of
the P&L a/c.
4] Treatment of deficiency-
Same as above.
5] Treatment of normal losses –
first write the full amt on the credit side of the branch stock a/c and then write full amount on the debit
side of the branch adjustment a/c.
6] If goods are returned directly by branch debtors to the HO
In this case presume –goods first have been returned by the debtors to the branch and then branch has
returned the goods to the HO. That is one need to split the transaction into two parts-a] goods returned
by debtors to the branch and b] goods returned by the branch to the HO and now accordingly do the
treatment. For the part [a] first write the amount on the credit side of the debtor‟s a/c and then put the
figure on the debit side of branch stock a/c. For the part [b] first write the figure as “goods sent to branch
a/c [returns]” on the credit side of the branch stock a/c and then take its loading towards debit side of the
branch adjustment a/c.

29
 Financial Accounting

Illustrative Studies
2.1: Past Examinations
On Feb. 1, 2022, goods costing Rs. 33,000 were invoiced by Calcutta Head Office to its branch at Kanpur
and charged at a selling price designed to produce a gross profit of 25 percent on the selling price. At the end
of the month the return from Kanpur Branch showed that the sales were Rs. 30,000. Goods invoiced at Rs.
600 to Kanpur Branch had been returned to Calcutta Head Office. The closing stock at Kanpur Branch was
Rs. 12,300 at selling price. Record the above transactions in Kanpur Branch Stock Account, Kanpur Branch
Adjustment Account and Goods sent to Kanpur Branch Account in the Head Office Ledger and Balance the
said accounts on February 28, 2022
Solution:
Branch Stock A/c
Details Amount Details Amount
Bal B/D - Sales 30,000
Goods Sent To Branch A/C : GSTB- Returns 600
33,000 + 1/3 Of 33,000
Goods T/F From Lucknow Branch A/C
Deficiency / Shortage – B.F. 1,100
Bal. c/d : Bal. Fig. 12,300
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock –12,300 x 1/4 3,075 Load on opening stock –
Load on shortage 1,100 x 1/4 275 Load on GSTB a/c : 44,000 x 1/ 4 11,000
Load on GSTB- Returns 600 x 1/4 150
Gross profit – bal Fig. 7,500

Branch Profit and Loss A/c

Details Amount Details Amount
Branch expenses a/c - Branch adjustment a/c- Gross 7,500
Profit
Shortage of stock at cost 1,100-275 825
Discount -
Net profit bal. fig. 6,675

2.2 – Past Examinations

On January 1, 2022 the goods invoiced by Calcutta Head Office to its Chennai Branch were Rs. 48,000 at
1
selling price, being 33 percent over cost price. For six months ended June 30, 2020 the branch return
3
showed that the sales were Rs. 29,000. The goods invoiced at Rs. 2,000 were returned by the branch to the
Head Office. The closing stock at Chennai Branch on June 30, 2020 was Rs. 16,800 at selling price. Record
the above transactions showing Chennai Branch Stock A/C & Adjustment a/c.
Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d - sales 29,000
Goods sent to branch a/c 48,000
Goods sent to Branch - 2,000
Returns
Deficiency / shortage / 200
spoilage – B.F.
Bal. c/d : 16,800

30
 Accounting for Branches Including Foreign Branches

Branch Adjustment A/c

Details Amount Details Amount
Load on closing stock –16,800 x 4,200 Load on opening stock -
1/4
Load on shortage 200 x 1/ 4 50 Load on GSTB a/c 48,000 x 12,000
1/ 4
Load on GSTB- Returns 2,000 x 500
1/4
Gross profit – bal Fig. 7,250

Branch Profit and Loss A/c

Details Amount Details Amount
Branch expenses a/c - Branch adjustment a/c- Gross 7,250
Profit
Discount -
Bad debts -
Shortage of stock at cost 200-50 150
Net profit bal. fig. 7,100

2.3 - Past Examinations

Lakes Ltd. sent goods to its Rutland Branch at cost plus 25%. From the following particulars prepare Branch
Stock Account, Branch Adjustment Account and Branch Profit and Loss Account.
Rs.
Opening Stock at Branch (invoice price) 5,000
Goods sent to Branch 20,000
Loss- in- transit at invoice price 2,500
Theft at invoice price 1,000
Loss in weight (normal) at invoice price 500
Sales 25,500
Expenses 8,000
Closing Stock at branch at invoice price 6,000
Claim received from insurance company for loss in transit by Head Office 2,000
Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d Cash sales
Goods sent to branch a/c Credit Sales –
Goods sent to Branch - Returns
Deficiency / shortage / spoilage
– B.F.
Bal. c/d : bal. fig.
Branch Debtors A/c
Details Amount Details Amount
Bal b/d Cash from debtors
Credit sales – bal fig Discount allowed
Bal c/d- bal. Fig.

31
 Financial Accounting

Branch Adjustment A/c

Details Amount Details Amount
Load on closing stock - Load on opening stock
Load on shortage Load on GSTB a/c
Load on GSTB- Returns Load on goods t/f
Gross profit – bal Fig.
Branch Profit and Loss A/c
Details Amount Details Amount
Branch expenses a/c Branch adjustment a/c- Gross Profit
Shortage of stock at cost
Discount
Net profit bal. fig.

2.4. – Past Examinations

Fit and Fine Traders Ltd. sends goods to its Rudrapur Branch at cost plus 25%. The following particulars are
st
available in respect of the branch for the year ended 31 March, 2022.
Rs.
Opening Stock at branch at cost of branch 20,000
Goods sent to branch at invoice price 1,00,000
Loss in transit at invoice price 10,000
Pilferage at invoice price 4,000
Sales 1,22,000
Expenses 22,000
Closing Stock at branch at cost to branch 24,000
Recovered from insurance company against loss in transit 6,000
Show Ledger Accounts in the Head Office books for;
(a) Branch Stock Account
(b) Goods sent to Branch Account and
(c) Branch Adjustment Account
(d) Branch Profit & Loss Account
Solution -
Branch Stock a/c
Bal. B/D – Op. Stock 20,000 Credit Sales 1,22,000
GSTB A/C 1,00,000 Loss In Transit 10,000
Surplus – Excess Of Sale Price 40,000 Pilferage 4,000
Over I.P
Cl. Stock 24,000
1,60,000 1,60,000
Branch Adjustment a/c
Load on cl. Stock 4,800 Load on op.. Stock 4,000
Load on abnormal loss – loss in 2,800 Load on GSTB a/c [gross] 20,000
transit + Pilferage
Gross profit 56,400 Load on GSTB a/c 40,000
64,000 64,000
Branch Profit and Loss a/c
Branch expenses a/c 22,000 Gross profit 56,400
Abnormal Loss at cost 11,200 Insurance Company 6,000
Net profit 29,200
62,400 62,400

32
 Accounting for Branches Including Foreign Branches

2.5 – Past Examinations

Indian Traders Ltd. sends goods to its Chennai Branch at cost plus 25%. The following particulars are
st
available in respect of the branch for the year ended 31 March, 2016.
Rs.
Opening Stock at branch at cost to HO 64,000
Goods sent to branch at invoice price 12,00,000
Loss in transit at invoice price 15,000
Pilferage at invoice price 6,000
Sales 12,19,000
Expenses 60,000
Closing Stock at branch at cost to HO 32,000
Recovered from insurance company against loss in transit 10,000
Show Ledger Accounts in the Head Office books for;
(a) Branch Stock Account
(b) Goods sent to Branch Account and
(c) Branch Adjustment Account
(d) Branch Profit & Loss Account
Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d 64,000 + ¼ of 64,000 80,000 Sales 12,19,000
Goods sent to branch a/c 12,00,000
Surplus – B.F. --- Abnormal loss : loss in transit + 21,000
Pilferage
Normal loss ---
Bal. c/d : 32,000 + ¼ of 32,000 40,000
12,80,000 12,80,000
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock –40,000 x 1/5 8,000 Load on opening stock 80,000 x 16,000
1/5
Load on shortage --- Load on GSTB a/c 12,00,000 x 2,40,000
1/5
Load on A .Loss- Returns21,000 x 4,200 Surplus ---
1/5
Normal loss ---
Gross profit – bal Fig. 2,43,800

Branch Profit and Loss A/c

Details Amount Details Amount
Branch expenses a/c 60,000 Branch adjustment a/c- Gross 2,43,800
Profit
Petty cash : amount spent --- Insurance claim 10,000
Discount ---
Bad debts ---
Shortage of stock ,at cost 16,800
Net profit bal. fig. 1,77,000

33
 Financial Accounting

2.6 – Past Examinations

Golden Traders Ltd. sends goods to its City X Branch at cost plus 25%. The following particulars are available
st
in respect of the branch for the year ended 31 March, 2022.
Rs.
Opening Stock at branch at cost of branch 60,000
Goods sent to branch at invoice price 1,30,000
Loss in transit at invoice price 20,000
Goods Pilferage at invoice price 6,000
Normal Loss at invoice price 3,000
Sales 2,20,000
Expenses 35,000
Closing Stock at branch at cost to branch 80,500
Recovered from insurance company against loss in transit 12,000
Show Ledger Accounts in the Head Office books for;
(a) Branch Stock Account
(b) Goods sent to Branch Account and
(c) Branch Adjustment Account
(d) Branch Profit & Loss Account
(e) Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d 60,000 Sales 2,20,000
Goods sent to branch a/c 1,30,000
Surplus – B.F. 1,39,500 Abnormal loss : loss in transit + 26,000
Pilferage
Normal loss 3,000
Bal. c/d 8,500
3,29,500 3,29,500
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock –80,500 x 1/5 20,125 Load on opening stock 60,000 x 15,000
1/4
Load on shortage --- Load on GSTB a/c 2,20,000 x 1/5 32,000
Load on A .Loss- Returns 6,500 Surplus 1,39,500
26,000 x 1/4
Normal loss 3,000
Gross profit – bal Fig. 1,57,375

Branch Profit and Loss A/c

Details Amount Details Amount
Branch expenses a/c 35,000 Branch adjustment a/c- Gross 1,57,375
Profit
Abnormal loss at cost 26,000 -6,500 19,500 Insurance claim 12,000

Net profit bal. fig. 1,14,875

34
 Accounting for Branches Including Foreign Branches

2.7 – Past Examinations

Boss Ltd., having HO at City H, sends goods to its City K Branch at cost plus 25%. The following particulars
st
are available in respect of the branch for the year ended 31 March, 2022.
Rs.
Opening Stock at branch at cost of branch 4,00,000
Goods sent to branch at invoice price 60,00,000
Loss in transit at invoice price 75,000
Pilferage at invoice price 30,000
Sales 60,95,000
Expenses 3,00,000
Closing Stock at branch at cost to HO 1,60,000
Recovered from insurance company against loss in transit 50,000
Show Ledger Accounts in the Head Office books for;
(a) Branch Stock Account
(b) Goods sent to Branch Account and
(c) Branch Adjustment Account
(d) Branch Profit & Loss Account
Detailed Hints:
No surplus or deficiency
Gross Profit Rs. 12,19,000
Net Profit Rs. 8,85,000
2.8
Link limited with head office in Bangalore opened on 1sy Jan 2023 a branch at Mysore where all sales were
on credit basis. All goods required by the branch were supplied by the HO and were invoiced to the branch at
20% above cost.
st
During the year ended 31 December 2023, the following transaction took place.
Goods sent to Mysore at cost HO 22,000
Returns to Bangalore office at cost to HO 840
Sales as shown by branch a/c 19,670
Cash received from debtors and remitted to Bangalore 15,190
Debtors balances written off as bad debts 640
Loss of goods at branch through theft is estimated at one per cent of the goods received. The stock of goods
st
held by the branch on 31 December 2023 amounted to rupees 5,820 at invoice price. You are required to
record the above transactions in the appropriate ledger accounts of the HO books.
Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d Cash sales -
Goods sent to branch a/c 22,000 + 26,400 Credit Sales – 19,670
1 / 5 i.e. 4,400
Surplus : B.F. 362 Goods sent to Branch – Returns 1,008
840 + 1/ 5 i.e 168
Abnormal Loss 26,400 x 1 % 264
Bal. c/d 5,820
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock –5,820 x 1/6 970 Load on opening stock -
Load on Abnormal Loss 264 x 1/6 44 Load on GSTB a/c 26,400 x 1/6 362
Load on GSTB- Returns 1,008 x 168
1/6
Gross profit – bal Fig.

35
 Financial Accounting

Branch Profit and Loss A/c

Details Amount Details Amount
Branch expenses a/c - Branch adjustment a/c- Gross Profit 3,580
Discount -
Bad debts 640
Shortage of stock at cost264-44 220
Net profit bal. fig. 2,720
Branch Debtors A/c
Details Amount Details Amount
Bal b/d - Cash from debtors 15,190
Credit sales – bal fig 19,670 Discount allowed -
Bad debts 640
Sales returns -
Bal c/d 3,840

2.9 –
White line of city X has a branch at city Y and in order to maintain a strict control on stocks, invoices to goods
1
to branch at selling price which is cost plus 33 %. From the following transactions prepare branch stock a/c
3
branch adjustment a/c branch debtors a/c and goods sent to branch a/c to show gross and net profit made
there.
st
Stock on 1 Jan 2021 at invoice price 15,000
st
Debtors as on 1 Jan 2021 11,400
Goods sent to branch during the year at invoice price 67,000
Sales at the branch :
Cash sales 31,000
Credit sales 37,400
Cash received from debtors 40,000
Bad written off 250
Discount allowed to customers 300
Expenses at the branch 6,700
st
Stock on 31 Dec 2021 at invoice price 13,400
Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d 15,000 Cash sales 31,000
Goods sent to branch a/c 67,000 Credit Sales – 68,400
Goods sent to Branch - Returns -
Deficiency / shortage / spoilage – B.F. 200
Bal. c/d 13,400
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock –13,400 x 3,350 Load on opening stock 15,000 x 1/4 3,750
1/ 4
Load on shortage 200 x 1/ 4 50 Load on GSTB a/c 67,000 x 1/ 4 16,750
Load on GSTB- Returns 5,000 x -
1/4
Gross profit – bal Fig. 17,100

36
 Accounting for Branches Including Foreign Branches

Branch Profit and Loss A/c

Details Amount Details Amount
Branch expenses a/c 6,700 Branch adjustment a/c- Gross Profit 17,100
Discount 300
Bad debts 250
Shortage of stock at cost 200- 50 150
Net profit bal. fig. 9,700
Branch Debtors A/c
Details Amount Details Amount
Bal b/d 11,400 Cash from debtors 40,000
Credit sales 37,400 Discount allowed 300
Bad debts 250
Sales returns -
Bal c/d* 8,250

2.10
City- F HO supplied goods to its Branch at City-H in Uttaranchal at an invoice price, which is cost plus 50 %
and further all cash received by the branch is remitted to Delhi and all branch expenses are paid by the HO-
From the following particulars you are required to prepare- Branch Stock A/C, Branch Adjustment A/C And
Branch Profit And Loss A/C
Stock with branch at 1.1.21 60,000
Branch debtors at the 1.1.21 12,000
Petty cash at the 1.1.21 100
Goods received from the HO at invoice price 186,000
Goods returned to HO 3,000
Credit sales 84,000
Allowances to customers off selling price all ready adjusted while invoicing 2,000
Cash received from debtors 2,400
Expenses[ cash paid by HO]
Rent 2,400
Salaries 24,000
Petty cash 1,000
Cash sales 1,04,000
st
Stock with branch on 31 Dec 2021 54,000
st
Petty cash on 31 Dec 2021 100
Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d 60,000 Cash sales 1,04,000
Goods sent to branch a/c 1,86,000 Credit Sales – 84,000
Surplus – B.F. 1,000 Goods sent to Branch - Returns 3,000
Normal loss 2,000
Bal. c/d 54,000
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock – 54,000 x 1/3 18,000 Load on opening stock 60,000 x 20,000
1/3
Load on shortage - Load on GSTB a/c 1,86,000 x 1/ 3 62,000
Load on GSTB- Returns 1,000 Surplus 1,000
3,000 x 1/3

37
 Financial Accounting

Normal loss 2,000

Gross profit – bal Fig. 62,000
Branch Profit and Loss A/c
Details Amount Details Amount
Branch expenses a/c salaries 24,000 + 26,400 Branch adjustment a/c- Gross Profit 62,000
rent paid 2,400
Petty cash : amount spent 1,000
Discount -
Bad debts -
Shortage of stock ,at cost -
Net profit bal. fig. 34,600
Branch Debtors A/c
Details Amount Details Amount
Bal b/d 12,000 Cash from debtors 2,400
Credit sales 84,000 Discount allowed -
Bad debts -
Sales returns -
Bal c/d : Bal. Fig. 93,600

2.11
Triple Seven Mills Ltd. has two branches at Kolkata and at Chennai. Goods are invoiced to branches at cost
plus 50%. From the following particulars prepare the necessary accounts on Stock and Debtors system to
reveal the profit earned at the branches
Kolkatta Chennai
Stock on 1-4-2022 at invoice price 9,300 15,600
Debtors on 1-4-2022 6,800 8,700
Goods invoiced to branches (Cost Price) 34,000 36,000
Cash Sales 25,010 35,000
Credit Sales 31,000 30,100
Cash collected from debtors 30,400 29,800
Goods returned by debtors 1,200 1,500
Goods returned by branch to H.O. 1,500 -
Goods transferred from Chennai to Kolkata 2,100 2,100
Surplus in stock - 300
Shortage in stock 450 -
Discount allowed to customers 200 350
Expenses at branches 5,400 6,700

Solution:
Branch stock account
Details Kolkata Chennai Details Kolkatta Chennai
Bal b/d – op. Stock 9,300 15,600 Cash sales 25,010 35,000
GSTB a/c : cost + margin 51,000 54,000 Credit sales 31,000 30,100
Sales returns 1,200 1,500 GSTB a/c – Returns 1,500 -
GSTB – goods recd from 2,100 - GSTB – Goods t/f to - 2,100
Chennai Kolkata
Surplus - 300 Shortage 450 -
Bal. c/d – cl. Stock ; bal. 5,640 4,200
fig.
63,600 71,400 63,600 71,400

38
 Accounting for Branches Including Foreign Branches

Branch expenses a/c

Kolkatta Chennai Kolkata Chennai
Discount 200 350 Profit and loss a/c bal. fig. 5,600 7,050
Cash 5,400 6,700
5,600 7,050 5,600 7,050
Branch adjustment a/c
Kolkata Chennai Kolkata Chennai
Load on shortage 150 - Load on op. Stock 3,100 5,200
Load on cl. Stock 1,880 1,400 Load on goods sent a/c – 17,200 17,300
goods returned by branch±
goods received from
Chennai or goods sent to
Kolkatta
Gross profit 18,270 21,400 Surplus as Given - 300
20,300 22,800 20,300 22,800
Branch profit and loss a/c
Kolkata Chennai Kolkata Chennai
Shortage at cost 300 - Gross profit 18,270 21,100
Branch Expenses 5,600 7,050
Profit and loss a/c 12,370 14,350
18,270 21,400 18,270 21,400

2.12
1
Five- X limited invoices goods to its branch at cost plus 33 %. From the following particulars, prepare the
3
Branch Stock Account and the Branch Stock Adjustment Account as they would appear in the books of the
Head Office.
Rs.
Stock at commencement at branch invoice price 1,50,000
Stock at close at branch at invoice price 1,20,000
Goods sent to branch during the year at invoice price (including goods invoiced at Rs.
20,000 to the branch on 31-3-2022 but not received by branch before the close of the year) 10,10,000
Return of goods to Head Office (invoice price) 50,000
Cash sales at Branch 9,00,000
Credit sales at Branch 50,000
Invoice value of goods pilfered 10,000
Normal loss at Branch 15,000
st
Madras Ltd. close its books on 31 March 2022
Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d 1,50,000 Cash sales 9,00,000
Goods sent to branch a/c 10,10,000 Credit Sales – 50,000
Surplus – B.F. 5,000 Goods in transit 20,000
Goods t/f -
Goods returned 50,000
Abnormal loss 10,000
Normal loss 15,000
Bal. c/d 1,20,000

39
 Financial Accounting

Branch Adjustment A/c

Details Amount Details Amount
Load on closing stock – 30,000 Load on opening stock 37,500
Load on abnormal loss 2,500 Load on GSTB a/c 2,52,500
Load on GIT 5,000 Surplus 5,000
Load on GSTB- Returns 12,500
Normal loss 15,000
Gross profit – bal Fig. 2,30,000
Branch Profit and Loss A/c
Details Amount Details Amount
Branch expenses a/c - Branch adjustment a/c- Gross Profit 2,30,000
Petty cash : amount spent -
Discount -
Bad debts -
Abnormal loss of stock ,at cost 7,500
Net profit bal. fig. 2,22,500
Branch Debtors A/c
Details Amount Details Amount
Bal b/d - Cash from debtors -
Credit sales 9,00,000 Discount allowed -
Bad debts -
Sales returns -
Bal c/d : Bal. Fig. 9,00,000

2.13
X limited of Kolkata operates a branch at Chennai and goods are sent to the branch at selling price which is
cost plus 50% and further branch expenses are paid out of an imprest which is reimbursed by the HO. All
st
transactions are recorded in the books of the HO. On 1 Jan 2022 stock in trade at Chennai branch, at selling
price was rupees 27,690 and debtors at rupees 5,480. During the year 2022 the following transaction took
place at the branch.
Goods received from Kolkatta, at selling price 93,720
Cash sales 52,100
Credit sales 43,190
Goods returned to HO at selling price 1,440
Cash received from debtors 39,860
Discount allowed to debtors 970
Bad debts 480
expenses 14,380
st
On 31 .12 2022 stock in trade at Chennai branch amounted to rupees 24,510. You are required to prepare
branch stock a/c, branch debtors‟ a/c, branch adjustment a/c and branch profit and loss a/c.
Answer-shortage 170, gross profit-31,763 and net profit -15,820
Solution:
Branch Stock a/c
Bal. b/d 27,690 GSTB- Returns 1,440
GSTB a/c 93,720 Cash sales 52,100
Credit sales 43,190
Shortage- deficiency, bal. fig. 170
cl. Stock 24,510

40
 Accounting for Branches Including Foreign Branches

Branch Adjustment a/c

GSTB A/c load on GSTB- Returns 480 Load on op.. Stock 9,230
Load on shortage 57 Load on GSTB a/c [gross] 31,240
Load on cl. Stock 8,170
Gross profit 31,763
40,470 40,470
Branch Profit and Loss a/c
Branch expenses a/c 14,380 Gross profit 31,763
Shortage at cost 113
Bad debts 480
Discount 970
Net profit 15,830
31,763 31,763

2.14
Triple five of Assam has a branch at Siliguri to which goods are invoiced at cost plus 25%.the branch makes
sales both for cash and credit. Branch expenses are paid direct from HO and the branch is supposed to remit
all such received to the HO.
From the following particulars, relating to calendar year 2022 prepare relevant accounts in the books of HO.
Goods received from HO 120,000
Returns to HO 2,400
Stock in the beg 12,000
Sales during the year:
Cash sales 40,000
credit sales 72,000
Debtors in the beg 14,400
Cash received from the debtors 64,000
Discount allowed to the debtors 1,200
Bad debts 800
Sales returns 1,600
Salaries and wages 12,000
Rent and rates 3,600
Office expenses 1,200
Stock at branch at the end of the year 24,000
Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d 12,000 Cash sales 40,000
Goods sent to branch a/c 1,20,000 Credit Sales – 72,000
Sales return 1,600 Goods sent to Branch - Returns 2,400
Surplus – B.F. 4,800 Normal loss ---
Bal. c/d 24,000
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock – 4,800 Load on opening stock 2,400
Load on shortage --- Load on GSTB a/c 24,000
Load on GSTB- Returns 480 Surplus 4,800
Normal loss ---
Gross profit – bal Fig. 25,920

41
 Financial Accounting

Branch Profit and Loss A/c

Details Amount Details Amount
Branch expenses a/c: salaries and 16,800 Branch adjustment a/c- Gross Profit 25,920
wages 12,000 + rent and rates
3,600 + office expenses 1,200
Petty cash : amount spent ---
Discount 1,200
Bad debts 800
Shortage of stock ,at cost ---
Net profit bal. fig. 7,120
Branch Debtors A/c
Details Amount Details Amount
Bal b/d 14,400 Cash from debtors 64,000
Credit sales 72,000 Discount allowed 1,200
Bad debts 800
Sales returns 1,600
Bal c/d : B.F. 18,800

2.15
Sing song limited of Nagaland has a branch at Sikkim to which goods are invoiced at Cost Plus 25%. The
branch sells both for cash and credit. Branch expenses are paid by the HO and branch is expected to remit all
cash received to the HO. From the information given below for the year 2021-22 prepare the accounts in the
books of HO applying stock and debtor system.
Goods received from the HO 600,000
Returns to HO 12,000
Stock in the beg 60,000
Cash sales 200,000
Credit sales 360,000
Sundry debtors in the beg 72,000
Cash received from the debtors 320,000
Discount allowed to the debtors 6,000
Bad debts 4,000
Sales returns 8,000
Rent rates and taxes 24,000
Office expenses 60,000
Stock at the branch at the end 120,000
Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d 60,000 Cash sales 2,00,000
Goods sent to branch a/c 6,00,000 Credit Sales – 3,60,000
Sales Return 8,000 Goods sent to Branch - Returns 12,000
Surplus – B.F 24,000 Normal loss ---
Bal. c/d 1,20,000

42
 Accounting for Branches Including Foreign Branches

Branch Adjustment A/c

Details Amount Details Amount
Load on closing stock – 24,000 Load on opening stock 12,000
Load on shortage --- Load on GSTB a/c 1,20,000
Load on GSTB- Returns 2,400 Surplus 24,000
Normal loss ----
Gross profit – bal Fig. 1,29,600

Branch Profit and Loss A/c

Details Amount Details Amount
Branch expenses a/c: office 84,000 Branch adjustment a/c- Gross Profit 1,29,600
expenses 60,000 + rent , rates
and taxes 24,000
Petty cash : amount spent ---
Discount 6,000
Bad debts 4,000
Shortage of stock ,at cost ---
Net profit bal. fig. 35,600
Branch Debtors A/c
Details Amount Details Amount
Bal b/d 72,000 Cash from debtors 3,20,000
Credit sales 3,60,000 Discount allowed 6,000
Bad debts 4,000
Sales returns 8,000
Bal c/d : Bal. Fig. 94,000

2.16 – Past Examinations

Natures Pride limited of Nagaland has a branch at Sikkim to which goods are invoiced at
1
33 % above cost. The branch sells both for cash and credit. Branch expenses are paid by the HO and
3
branch is expected to remit all cash received to the HO. From the information given below for the year 2021-
22 prepare the accounts in the books of HO applying stock and debtor system.
Goods sent to branch at IP 18,00,000
Goods Returned to Branch by HO 20,000
Stock in the beginning 2,40,000
Branch Debtors in the beginning 2,15,000
Cash sales 5,80,000
Credit sales 11,40,000
Cash received from the debtors 10,45,000
Discount allowed to the debtors 14,800
Bad debts 9,200
Sales returns at branch 25,000
Salaries and wages at branch 1,80,000
Rent, Rates and Taxes 42,000
Sundry Expenses at Branch 15,000
Stock at the branch at the end 3,60,000
Detailed Solution Hints:
Surplus Rs. 35,000
Balance in Debtors Rs. 2,61,000

43
 Financial Accounting

Gross Profit Rs. 4,50,000

Net Profit Rs. 1,89,000

2.17
st
Nine O Nine limited , which carried-on a retail business opened a Branch X on January 1 , 2022 where all
sales were on credit basis. All goods required by the branch were supplied from the Head Office and were
invoiced to the branch at 10% above cost.
The following were the transactions:
January February March
(Rs.) (Rs.) (Rs.)
Goods sent to Branch (purchase price) 40,000 50,000 60,000
Sales as shown by the branch 38,000 42,000 55,000
Cash received from debtors & remitted to H.O. 20,000 51,000 35,000
Return to H.O. (invoice price to branch) 1,200 600 2,400
st
The stock held by the branch on 31 march 2015 amounted to rupees 53,400 at invoice price. Record these
transactions in the books of HO as per Stock and Debtor System, showing result of the operations of the
transactions
Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d : --- Cash sales ---
Goods sent to branch a/c Cost 1,65,000 Credit Sales – 1,35,000
1,50,000 + 1/10 of 1,50,000
Surplus – B.F. 27,600 Goods sent to Branch - Returns 4,200

Bal. c/d :at IP 53,400

Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock –53,400 x 4,855 Load on opening stock ---
1/11
Load on shortage --- Load on GSTB a/c 1,65,000 x 1/ 11 15,000
Load on GSTB- Returns4,200 x 1/11 382 Surplus 27,600
Normal loss ---
Gross profit – bal Fig. 37,363
Branch Profit and Loss A/c
Details Amount Details Amount
Branch expenses - Branch adjustment a/c- Gross Profit 37,363
Petty cash : amount spent -
Discount -
Bad debts -
Shortage of stock ,at cost -
Net profit bal. fig. 37,363
Branch Debtors A/c
Details Amount Details Amount
Bal b/d - Cash from debtors 1,06,000
Credit sales 1,35,000 Discount allowed -
Bad debts -
Sales returns -
Bal c/d : Bal. Fig. 29,000

44
 Accounting for Branches Including Foreign Branches

2.18
Classic limited has a branch at city X. Goods are sent by the HO to the branch at selling price which is cost
plus 25%. All the expenses of the branch are paid by the HO. All the cash collected from the customers
and cash sales is deposited in the HO a/c. from the following transactions of the HO and branch prepare
accounts in the books of the HO as per stock and debtor system.
Opening debtors 12,000
Debtors at the end 14,000
Inventory in the beg of the year 16,000
Inventory at the end of the year 17,000
Cash sales during the year 60,000
Total amount deposited in the HO account by the branch during the year 127,000
Returns of goods to HO 5,000
Salaries paid 6,000
Rent paid 4,000
Discount to customers 2,000
Bad debts written off 1,000
Spoilage 2,000

Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d 16,000 Cash sales 60,000
Goods sent to branch a/c 1,40,000 Credit Sales – 72,000
Goods sent to Branch - Returns 5,000
Deficiency / shortage / spoilage – B.F. 2,000
Bal. c/d : bal. fig. 17,000
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock – 3,400 Load on opening stock 3,200
17,000 x 1/5 16,000 x 1/5
Load on shortage 400 Load on GSTB a/c 28,000
2,000 x 1/ 5 1,40,000 x 1/ 5
Load on GSTB- Returns 1,000
5,000 x 1/5
Gross profit – bal Fig. 26,400

Branch Profit and Loss A/c

Details Amount Details Amount
Branch expenses a/c salaries 10,000 Branch adjustment a/c- Gross Profit 26,400
6,000 + rent paid 4,000
Discount 2,000
Bad debts 1,000
Shortage of stock at cost 1,600
2,000-400
Net profit bal. fig. 11,800
Branch Debtors A/c
Details Amount Details Amount
Bal b/d 12,000 Cash from debtors 67,000

45
 Financial Accounting

Credit sales – bal fig 72,000 Discount allowed 2,000

Bad debts 1,000
Sales returns -
Bal c/d 14,000

cash Sales given cash from Debtors : HO Account given Rs.

60,000 B.F 67,000 1,27,000

2.19
st
Following are the transactions related with Kohima branch of the HO for the year ended 31 March 2022 and
you are required to furnish proper accounts in the books of the HO presuming HO follows stock and debtor
system.
Stock at branch in the beg 20,000
Debtors in the beg 9,000
Goods sent to branch during the year 110,000
Cash sales 30,000
credit sales 60,000
Cash remitted to the branch for expenses 8,000
Cash collected from the debtors 57,000
Discount allowed to the debtors 1,100
Stock at the end of the year 38,000
The branch remits all the cash collected to the HO and has instructions to sell the goods at the invoice price
of cost plus 25%.the opening and closing stocks and goods sent to branch are all at invoice price.
Solution –
Branch Stock A/c
Details Amount Details Amount
Bal b/d 20,000 Cash sales 30,000
Goods sent to branch a/c 11,000 Credit Sales – 60,000
Surplus – B.F. --- Goods sent to Branch - Returns ---
Shortage / deficiency / Spoilage B.F. 2,000
Bal. c/d 38,000
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock – 7,600 Load on opening stock 4,000
Load on shortage 400 Load on GSTB a/c 22,000
Load on GSTB- Returns - Surplus
Normal loss -
Gross profit – bal Fig. 18,000
Branch Profit and Loss A/c
Details Amount Details Amount
Branch expenses a/c 8,000 Branch adjustment a/c- Gross Profit 18,000
Petty cash : amount spent ---
Discount 1,100
Bad debts ---
Shortage of stock ,at cost 1,600
Net profit bal. fig. 7,300

46
 Accounting for Branches Including Foreign Branches

Branch Debtors A/c

Details Amount Details Amount
Bal b/d 9,000 Cash from debtors 57,000
Credit sales 60,000 Discount allowed 1,100
Bad debts -
Sales returns -
Bal c/d : Bal. Fig. 10,900

2.20
Hills Corporation has two branches one at Jaipur and another at Lucknow. Goods are invoiced to branches at
cost plus 50%. Branches remit all cash received to Head Office and all expenses are met by the H.O. From
the following particulars, prepare the necessary accounts on the ‘Stock and Debtors System’ to show the
profit earned at the Jaipur Branch.
Rs.
Stock on January, 2000 9,300
Debtors on January 1, 2000 6,800
Goods sent to branch (at cost) 34,000
Sales at Branch:
Cash 25,010
Credit 31,000
Cash collected from Debtors 30,400
Goods returned by branch to Head Office 1,200
Goods transferred from Lucknow Branch to Jaipur Branch 1,500
Shortage of Stock 450
Discount allowed to customers 200
Expenses at Branch 5,400
Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d 9,300 Cash sales 25,010
Goods sent to branch a/c : 34,000 + 51,000 Credit Sales – 31,000
1/3
.goods Transferred 1,500 Goods sent to Branch - Returns 1,200
Shortage (given) 450
Bal. c/d : B.F. 4,140
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock – 1,380 Load on opening stock 3,100
Load on shortage 150 Load on GSTB a/c 17,000
Load on GSTB- Returns 400 Load on goods transferred 500
Gross profit – bal Fig. 18,670
Branch Profit and Loss A/c
Details Amount Details Amount
Branch expenses a/c 5,400 Branch adjustment a/c- Gross Profit 18,670
Petty cash : amount spent --
Discount 200
Bad debts --
Shortage of stock ,at cost 300
Net profit bal. fig. 12,770

47
 Financial Accounting

Branch Debtors A/c

Details Amount Details Amount
Bal b/d 6,800 Cash from debtors 30,400
Credit sales 31,000 Discount allowed 200
Bad debts --
Sales returns --
Bal c/d : Bal. Fig. 7,200

2.21
st
Finley India Textiles opened a branch on 1 January 2019. Goods are invoiced at selling price which was
fixed by adding 25% to the cost. From the following particulars relating to 2021, ascertain the profit or loss
made at the branch under the Stock and Debtors System.
Rs.
Goods sent to Branch (invoice price) 1,40,000
Cash Sales 50,000
Credit Sales 70,000
Cash received from Debtors 62,400
Discount allowed to customers 1,600
Goods returned by customers 2,000
Cash remitted to Branch for:
Rent 1,200
Salaries 6,000
Sundry Expenses 800
Defective cloth found in the sales written off 200
Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d --- Cash sales 50,000
Goods sent to branch a/c 1,40,000 Credit Sales – 70,000
Sales return – B.F. 2,000 Spoilage : Defective cloth found in 200
sales w/off: given
Normal loss ---
Bal. c/d : B.f 4,140
Note : in this question , credit side is bigger and thence balancing figure shall is appear on the debit side
which cannot be taken as opening stock (as it is a new branch) or surplus ( as spoilage is given and spoilage
and surplus cannot co-exist) thus only alternative left is to consider it as Sales Return.
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock – 4,360 Load on opening stock ---
Load on shortage 40 Load on GSTB a/c 28,000
Load on GSTB- Returns --- Surplus ---
Normal loss ---
Gross profit – bal Fig. 23,600

Branch Profit and Loss A/c

Details Amount Details Amount
Branch expenses a/c:salaries + rent 8,000 Branch adjustment a/c- Gross 23,600
+ sundry expenses Profit
Petty cash : amount spent ---
Discount 1,600

48
 Accounting for Branches Including Foreign Branches

Bad debts ---

Shortage of stock ,at cost 160
Net profit bal. fig. 13,840
Branch Debtors A/c
Details Amount Details Amount
Bal b/d - Cash from debtors 62,400
Credit sales 70,000 Discount allowed 1,600
Bad debts -
Sales returns 2,000
Bal c/d : Bal. Fig. 4,000

2.22
Kings - Crown Industries Mumbai has a branch at Madurai to which goods are invoiced at cost plus 25%. The
branch makes sales both for cash and credit. Branch expenses are paid direct from Head Office and the
branch remits all cash to Head Office. From the following details, prepare the necessary ledger accounts in
the books of Head Office to calculate branch profits as per the Stock and Debtors System.
Rs.
Goods received from H.O. at invoice price 60,000
Return to Head Office at invoice price 1,200
Branch stock on April 1, 2021 at invoice price 6,000
Cash sales 20,000
Credit sales 36,000
Branch Debtors on April 1,2021 7,200
Cash collected from debtors 32,000
Discount allowed to Debtors 600
Bad debts in the year 400
Goods returned by debtors to branch 800
Rent, rates and taxes at branch 1,800
Branch office expenses 600
Branch stock at invoice price on March 31,2022 12,000
Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d 6,000 Cash sales 20,000
Goods sent to branch a/c 60,000 Credit Sales – 36,000
Sales Return 800 Goods sent to Branch - Returns 1,200
Surplus – B.F. 2,400 Abnormal/Normal loss ---
Bal. c/d 12,000
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock – 2,400 Load on opening stock 1,200
Load on shortage --- Load on GSTB a/c 12,000
Load on GSTB- Returns 240 Surplus 2,400
Normal loss ---
Gross profit – bal Fig. 12,960
Branch Profit and Loss A/c
Details Amount Details Amount
Branch expenses a/c: rent paid + 2,400 Branch adjustment a/c- Gross 12,960
O. Expenses Profit
Petty cash : amount spent ---

49
 Financial Accounting

Details Amount Details Amount

Discount 600
Bad debts 400
Shortage of stock ,at cost ---
Net profit bal. fig. 9,560
Branch Debtors A/c
Details Amount Details Amount
Bal b/d 7,200 Cash from debtors 32,000
Credit sales 36,000 Discount allowed 600
Bad debts 400
Sales returns 800
Bal c/d : Bal. Fig. 9,400

2.23
Triple Seven of Hyderabad has a branch at Warangal. All purchases are made by the Head Office and goods
sent to branch are invoiced at selling price which is 20% above cost. All sales by the branch are on credit
terms. Branch expenses are paid by Head Office and all cash received by the branch is remitted to the Head
Office. All Branch transactions are recorded in the Head Office books. The balance relating to the branch in
the Head Office Ledger on 1-1-2022 were as follows,
Rs.
Branch Stock Account (Invoice Price) 36,000
Branch Debtors Account 25,750
Transactions during the year to 31-12-2022 were:
Goods sent to branch at invoice price 3,24,600
Return from branch to Head Office at invoice price 6,420
Cash received from debtors 3,10,000
Discount allowed to debtors 5,750
Branch expenses paid by Head Office 30,000
Branch Debtors 31-12-2022 10,000
B.R. Stock at IP on 31-12-2022 48,180
Prepare in the Head Office Book
(a) Branch Account
(b) Branch Debtors Account
(c) Branch Expenses Account
(d) Branch Adjustment Account
Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d 36,000 Cash sales ---
Goods sent to branch a/c 3,24,600 Credit Sales – ( through Debtors a/c) 3,00,000
Goods sent to Branch - Returns 6,420
Deficiency – B.F. 6,000
Bal. c/d 48,180
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock – 8,030 Load on opening stock 6,000

Load on shortage 1,000 Load on GSTB a/c 54,100

Load on GSTB- Returns 1,070 Surplus
Gross profit – bal Fig. 50,000

50
 Accounting for Branches Including Foreign Branches

Branch Profit and Loss A/c

Details Amount Details Amount
Branch expenses a/c 30,000 Branch adjustment a/c- Gross Profit 50,000
Petty cash : amount spent ---
Discount 5,750
Bad debts ---
Shortage of stock ,at cost 5,000
Net profit bal. fig. 9,250
Branch Debtors A/c
Details Amount Details Amount
Bal b/d 25,750 Cash from debtors 3,10,000
Credit sales – Bal. Fig. 3,00,000 Discount allowed 5,750
Bad debts -
Sales returns -
Bal c/d : Bal. Fig. 10,000

2.24 - Manager's Commission

A Head Office at Mumbai has a Branch at Chennai in charge of a manager. The ratio of gross profit on
turnover at the branch was 25% constant throughout the year.
The branch manager is entitled to a commission of 10 %, but subject to a deduction from such commission a
sum equal to 50% of any ascertained deficiency of branch stock. All goods were supplied to the branch by the
Head Office. From the following figures extracted from the branch books, calculate the commission due to the
Manager for the year ended Dec. 31, 2022

Rs.
Stock on 1-1-2012 (at cost) 90,000
Goods received from Head Office at cost 3,00,000
Sales 4,00,000
Establishment exp. 10,000
Drawings by Manager against commission 1,000
Stock on 31-12-2022 (at selling price) 1,00,000

Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d cost 1,20,000 Sales 4,00,000
90,000 + 1/3 i.e 30,000
Goods sent to branch a/c : cost Deficiency – B.F. 20,000
3,00,000 + 1/3 i.e. 1,00,000 4,00,000
. Closing stock 1,00,000
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock –1,00,000 x 25,000 Load on opening stock 30,000
1/4 1,20,000 x 1/4
Load on GSTB- R - Load on GSTB a/c 1,00,000
4,00,000 x 1/4
Load on G.I.T -
Load on Goods T/F -
Load on deficiency 20,000 x 1/4 5,000
Normal loss ( full) -
Gross profit – bal Fig. 1,00,000

51
 Financial Accounting

Branch Profit and Loss A/c

Details Amount Details Amount
Establishment expenses a/c 10,000 Branch adjustment a/c- Gross 1,00,000
Profit
Petty cash : amount spent - Insurance claim -
Discount -
Bad debts -
Abnormal loss at cost -
Deficiency at cost 20,000 – 5,000 15,000
Net profit bal. fig. 75,000
Managerial Commission:
paid (drawings against
commission) 1,000
+ O/S 6,500 7,500
Net profit after commission 67,500
Notes :
Rates C.P + margin = I .P/ Sales
75 + 25 = 100
1/3 1/4
Calculation of Commission due:
Commission : 75,000 x 20 / 100 15,000
Less 50% of deficiency that is 50% of 15,000 7,500
Manager‟s Commission 7,500
Less: drawings against commission that is 1,000
commission already paid
Commission due 6,500

2.25
st
Messer‟s Nine O‟ Clock limited of City Y opened a branch at City X on 1 April 2022. Goods are sent to the
BO at selling price which is cost plus 25 %.
The following transactions took place during the year
Goods sent to branch at cost to the HO 2,80,800
Cash sales 1,25,000
Credit sales 1,75,000
Cash collected from debtors 1,56,000
Discount allowed to the debtors 4,000
Cash sent to branch for :
Wages 3,000
Freight 11,000
Other expenses 6,000
Spoilage w/off 500
st
Stock on 31 March, 2022 55,500
Find out the result of the aforementioned transactions between HO and BO applying stock and debtor
system.
Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d --- Cash sales 1,25,000
Goods sent to branch a/c 2,80,800 + 1/4 3,51,000 Credit Sales – 1,75,000

52
 Accounting for Branches Including Foreign Branches

Details Amount Details Amount

Sales Return – B.F. 5,000 Goods sent to Branch - Returns -
Spoilage : Given 500
Bal. c/d 55,500
Note : in this question , credit side is bigger and thence balancing figure shall is appear on the debit side
which cannot be taken as opening stock (as it is a new branch) or surplus ( as spoilage is given and spoilage
and surplus cannot co-exist) thus only alternative left is to consider it as Sales Return.
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock – 11,100 Load on opening stock -
Load on GSTB- R - Load on GSTB a/c 70,200
Load on G.I.T -
Load on Spoilage 100
Load on Abnormal Loss -
Normal loss ( full) -
Gross profit – bal Fig. 59,000
Branch Profit and Loss A/c
Details Amount Details Amount
Branch expenses a/c 20,000 Branch adjustment a/c- Gross Profit 59,000
Petty cash : amount spent - Insurance claim -
Discount 4,000
Bad debts -
Abnormal loss at cost -
Shortage of stock ,at cost 400
Net profit bal. fig. 34,600
Branch Debtors A/c
Details Amount Details Amount
Bal b/d - Cash from debtors 1,56,000
Credit sales 1,75,000 Discount allowed 4,000
Bad debts -
Sales returns 5,000
Bal c/d : Bal. Fig. 10,000

2.26 – Past Examinations

st
Messer‟s eleven O‟ Clock limited of City Y opened a branch at City X on 1 April 2021. Goods are sent to the
BO at selling price which is 125 % of the cost price.
The following transactions took place during the year
Goods sent to branch at cost to the HO 4,50,000
Cash sales 2,10,000
Credit sales 3,20,000
Cash collected from debtors 2,85,000
Returns from Debtors 10,000
Discount allowed to the debtors 8,500
Cash sent to branch for :
Freight 30,000
Salaries 8,000
Other expenses 12,000
Spoilage of goods w/off at Invoice Price 10,000
Normal Loss estimated at 15,000
Find out the result of the aforementioned transactions between HO and BO applying stock and debtor
system.

53
 Financial Accounting

Detailed solution Hints:

Branch stock account closing Balance Rs. 17,500
Debtors a/c closing Balance Rs. 16,500
Gross Profit Rs. 92,000
Net Profit Rs. 25,500

2.27
Clips and Co. operates a branch at Chandigarh. All purchases are made by the HO in Delhi and goods are
charged at a selling price which is cost plus 50% and further cash received by the branch is to remitted to the
HO. Branch expenses are to borne by HO and branch maintains only sales ledger and subsidiary book but
otherwise all branch transactions are recorded in the books of the HO.
In the beginning of the accounting year that is 1.4.20, at branch there was stock worth rupees 2,76,900 and
debtors amounting to rupees 54,800.
During the year the following transactions took place at the branch:
Goods received from HO at selling price 937,200
Cash sales 521,000
Credit sales 423,700
Goods returned to HO by the branch 14,400
Agreed allowances to the customers 8,200
Cash received from the debtors 398,600
Discount allowed to the debtors 9,700
Bad debts w/off 4,800
Expenses 143,800
st
On 31 March 2021, end of current accounting year, stock in trade at the BO, was found to be of rupees
2,45,100.
You are required to write the relevant accounts under stock and debtor system.
Solution:
Branch Stock A/c
Details Amount Details Amount
Bal b/d 2,76,900 Cash sales 5,21,000
Goods sent to branch a/c 9,37,200 Credit Sales – 4,23,700
Surplus – B.F. Goods sent to Branch - Returns 14,400
Normal loss 8,200
Shortage Bal. Fig. 1,700
Bal. c/d 2,45,100
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock – 81,700 Load on opening stock 92,300
Load on GSTB- R 4,800 Load on GSTB a/c 3,12,400
Load on G.I.T -
Load on Shortage 567
Load on Abnormal Loss -
Normal loss ( full) 8,200
Gross profit – bal Fig. 3,09,433
Branch Profit and Loss A/c
Details Amount Details Amount
Branch expenses a/c 1,43,800 Branch adjustment a/c- Gross Profit 3,09,433
Petty cash : amount spent -- Insurance claim -
Discount 9,700
Bad debts 4,800
Abnormal loss at cost -

54
 Accounting for Branches Including Foreign Branches

Details Amount Details Amount

Shortage of stock ,at cost 1,133
Net profit bal. fig. 1,50,000
Branch Debtors A/c
Details Amount Details Amount
Bal b/d 54,800 Cash from debtors 3,98,600
Credit sales 4,23,700 Discount allowed 9,700
Bad debts 4,800
Sales returns -
Bal c/d : Bal. Fig. 65,400

2.28 – Module adapted

Ken star limited has its branch at Chandigarh and Gwalior to where goods are invoiced at cost plus
25%.following information is available of the transactions at Chandigarh branch for the year ended 31.3.2022
Balances in the beg;
Stock 40,000
Debtors 12,000
Petty cash 150
Transactions during the year
-goods sent to branch 420,000
Goods returned to HO 15,000
Cash sales 105,000
Credit sales 180,000
Normal loss 350
Goods pilfered 3,000
Goods lost in fire 4,000
Insurance claim admitted by the insurance company 3,000
Cash sent for petty expenses 32,000
Bad debts 400
Goods t/f to Gwalior branch 12,000
Insurance charges 200
Goods returned by the debtors 500
Balances at the end
Petty cash 250
Debtors 11,000
Stock ?
Goods T/F to the Gwalior branch are still in the transit. Prepare relevant accounts under stock
& debtor system.
Solution:

Branch Stock A/c

Details Amount Details Amount
Bal b/d 40,000 Cash sales 1,05,000
Goods sent to branch a/c 4,20,000 Credit Sales – 1,80,000
Sales Return 500 Goods sent to Branch - Returns 15,000
Normal loss 350
Abnormal Loss - Pilfered + Loss in 7,000
transit
Goods Transferred 12,000
Bal. c/d -B.f 1,41,150

55
 Financial Accounting

Branch Adjustment A/c

Details Amount Details Amount
Load on closing stock – 28,350 Load on opening stock 8,000
Load on GSTB- R 3,000 Load on GSTB a/c 84,000
Load on Goods T/F 2,400
Load on Abnormal Loss 1,400
Normal loss ( full) 350
Gross profit – bal Fig. 56,620
Branch Profit and Loss A/c
Details Amount Details Amount
Insurance charges 200 Gross Profit 56,620
Petty cash : amount spent 31,900 Insurance claim 3,000
Op. Bal. 150 + sent 32,000 -cl. Bal.
250
Discount -
Bad debts 400
Abnormal loss at cost 5,600
Net profit bal. fig. 21,520
Branch Debtors A/c
Details Amount Details Amount
Bal b/d 12,000 Cash from debtors -b.f 1,80,000
Credit sales 1,80,000 Discount allowed -
Bad debts 400
Sales returns 500
Bal c/d : Bal. Fig. 11,000

2.29 - Past Examinations

Red and Company of Mumbai started a branch at Bangalore on 1.4.2021 to which goods were sent at 20%
above cost. The branch makes both cash sales and credit sales. Branch expenses are met from branch cash
and balance money remitted to HO. The branch does not maintain double entry books of account and
necessary accounts relating to branch are maintained in HO. Following further details are given for the year
ending on 31.3.2022 -
Cost of goods sent branch 100,000
Goods received by branch till 31.3.2022 at invoice price 108,000
Credit sales for the year 116,000
Closing debtors on 31.3.2022 41,600
Bad debts written off during the year 400
Cash remitted to HO 86,,000
Closing cash on hand at branch on 31.3.2022 4,000
Cash remitted by HO to branch during the year 6,000
Closing stock in hand at branch at invoice price 12,000
Expenses at branch 24,000
Draw up the necessary ledger accounts like branch debtors, branch stock, goods sent to branch,
branch adjustment a/c, and branch expenses.
Gross profit - 70,000, net profit – 45,600, cash sales – 34,000
Branch Stock A/c
Details Amount Details Amount
Bal b/d Cash sales # from cash account 34,000
Goods sent to branch a/c at IP: 1,20,000 Credit Sales – 1,16,000
cost 100,000+ 1/5
Surplus – B.F. 54,000 Goods in transit 1,20,000 – 1,08,000 12,000
Normal loss
Bal. c/d 12,000

56
 Accounting for Branches Including Foreign Branches

Branch Adjustment A/c

Details Amount Details Amount
Load on closing stock – 2,000 Load on opening stock -
Load on GSTB- R - Load on GSTB a/c 20,000
Load on G.I.T 2,000 Surplus 54,000
Load on Goods T/F -
Load on Abnormal Loss -
Normal loss ( full) -
Gross profit – bal Fig. 70,000
Branch Profit and Loss A/c
Details Amount Details Amount
Branch expenses a/c 24,000 Branch adjustment a/c- Gross Profit 70,000
Petty cash : amount spent - Insurance claim -
Discount -
Bad debts 400
Net profit bal. fig. 45,600
Branch Debtors A/c
Details Amount Details Amount
Bal b/d Cash from debtors : bal. fig. 74,000
Credit sales 1,16,000 Discount allowed -
Bad debts 400
Sales returns -
Bal c/d 41,600
Branch Cash account A/c
Details Amount Details Amount
Bal b/d - Expenses 24,000
Cash from debtors 74,000 HO ( Remittances 86,000
Head Office : cash received 6,000 Bal. c/d 4,000
Cash Sales : Bal. fig 34,000

2.30 – Past Examinations

Concept and company with its Head office at City One - has a branch at City Two - to which goods were sent
1
at 33 % above cost. Following further details are given for the year ending on 31.3.2022-
3
Goods sent branch 24,00,000
Stock at branch on 1.4.2021 1,20,000
Cash sales for the year 9,00,000
Return of goods by customers to the branch 30,000
Branch expenses –paid in cash 2,67,500
Branch debtors balance as on 1.4.2021 1,50,000
Discount allowed 5,000
Bad debts 7,500
Collection from debtors 13,50,000
Branch debtors Cheque returned dishonoured 25,000
Stock at branch on 31.3.2022 2,40,000
Branch debtors balance on 31.3.2022 1,82,500
Draw up the necessary ledger accounts like branch debtors, branch stock, branch adjustment a/c, and branch
expenses.
Answers :Net profit – 2,80,000, credit sales – 14,00,000

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 Financial Accounting

Branch Stock A/c

Details Amount Details Amount
Bal b/d 1,20,000 Cash sales 9,00,000
Goods sent to branch a/c 24,00,000 Credit Sales – 14,00,000
Sales returns 30,000 Goods sent to Branch - Returns -
Shortage B. F 10,000
Bal. c/d 1,82,500
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock – 60,000 Load on opening stock 30,000
Load on GSTB- R - Load on GSTB a/c 6,00,000
Load on G.I.T -
Load on Goods T/F -
Load on Shortage 2,500
Normal loss ( full) -
Gross profit – bal Fig. 5,67,500
Branch Profit and Loss A/c
Details Amount Details Amount
Branch expenses a/c 2,67,500 Branch adjustment a/c- Gross Profit 5,67,500
Petty cash : amount spent - Insurance claim -
Discount 5,000
Bad debts 7,500
Shortage at cost 7,500
Profit and loss a/c : net profit 2,80,000

Branch Debtors A/c

Details Amount Details Amount
Bal b/d 1,50,000 Cash from debtors 13,50,000
Credit sales – bal. fig. 14,00,000 Discount allowed 5,000
Bank- dishonour of cheque 25,000 Bad debts 7,500
Sales returns 30,000
Bal c/d 1,82,500

2.31 - Examination Question - 12 Marks:

F-88 Industries has its Head office in „West-view‟ State and branch office at City-Nine - to which goods were
invoiced at cost plus 25%. The branch sells both for cash and on credit. Branch expenses are paid direct from
HO and Branch has to remit all cash received to the HO Bank account. From the Following details relating to
calendar year 2021, prepare the accounts in the head office ledger and ascertain the branch profit. Branch
does not maintain any books of account, but sends weekly returns to the HO-
Goods received from HO at IP 6,00,000
Stock at branch on 1.1.2021 60,000
Cash sales for the year 1,80,000
Return of goods by customers to the branch 6,000
Branch expenses rent, rates, taxes, salaries, wages , 84,000
bonus , office expenses
Branch debtors balance as on 1.1.21 72,000
Discount allowed 8,000
Bad debts 6,000
Stock at branch on 31.12.2021 1,20,000
Credit sales 3,80,000
Goods returned by Branch to HO 12,000

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 Accounting for Branches Including Foreign Branches

Draw up the necessary ledger accounts like branch debtors, branch stock, goods sent to branch, branch
adjustment a/c, and branch expenses.
Answers: Gross profit Rs. 1,31,600, Net profit – 33,600, credit sales – 2,80,800, balancing figure in debtors
account: Cash received Rs. 4,32,000
Branch Stock a/c
Details Amount Details Amount
Bal b/d 60,000 Cash sales 1,80,000
Goods sent to branch a/c 6,00,000 Credit Sales – 3,80,000
Sales returns . 6,000 Goods sent to Branch - 12,000
Returns
Surplus 26,000 Bal. c/d 48,000

Branch Adjustment A/c

Details Amount Details Amount
Load on closing stock – 24,000 Load on opening stock 12,000
Load on GSTB- R 2,400 Load on GSTB a/c 1,20,000
Load on G.I.T - Surplus 26,000
Load on Goods T/F -
Load on Abnormal Loss/ Shortage -
Normal loss ( full) -
Gross profit – bal Fig. 1,31,600
Branch Profit and Loss A/c
Details Amount Details Amount
Branch expenses a/c 84,000 Branch adjustment a/c- Gross Profit 1,31,600
Petty cash : amount spent - Insurance claim -
Discount 8,000
Bad debts 6,000
Abnormal loss / shortage at cost -
Profit and loss a/c : net profit 33,600
1,31,600 1,31,600
Branch Debtors A/c
Details Amount Details Amount
Bal b/d 72,000 Cash from debtors B.F. 4,32,000
Credit sales – 2,80,000 Discount allowed 8,000
Bad debts 6,000
Sales returns 6,000
4,52,000 4,52,000

2.32 - Adapted from Study Module

The Bombay Traders invoiced goods to its Delhi branch at cost. Head Office paid all the branch expenses
from its bank account, except petty cash expenses which were met by the Branch. All the cash collected by
the branch was banked on the same day to the credit of the Head Office. The following is a summary of the
transactions entered into at the branch during the year ended December 31, 2022.
Rs. Rs.
Balances as on 1.1.2022:
Stock 7,000 Bad Debts 600
Debtors 12,600 Goods returned by customers 500
Petty Cash, 200 Salaries & Wages 6,200
Goods sent from H.O. 26,000 Rent & Rates 1,200
Goods returned to H.O. 1,000 Sundry Expenses 800
Cash Sales 17,500 Cash received from Sundry
Credit Sales 28,400 Debtors 28,500

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 Financial Accounting

Rs. Rs.
Allowances to customers 200 Balances as on 31.12.2022:
Discount to customers 1,400 Stock 6,500
Debtors 9,800
Petty Cash 100
Prepare:
(a) Branch Account (Debtors Method),
(b) Branch Stock Account, Branch Profit & Loss Account, Branch Debtors and Branch Expenses
Account by adopting the Stock and Debtors Method and
(c) Branch Trading and Profit & Loss Account to prove the results as disclosed by the Branch Account.
Solution
(a) Debtors Method
Delhi Branch Account
|2022 Rs. Rs. 2022 Rs. Rs.
Jan. To Balance b/d Dec. By Bank:
1 31
Stock 7,000 Cash Sales 17,500
Debtors 12,600 Cash from
Petty cash 200 Debtors 28,500 46,000
19,800
Dec. To Goods sent to 26,000 By Goods sent to
31 Branch A/c Branch A/c-
To Bank: Returns
Salaries & to H.O. 1,000
Wages 6,200 By Balance c/d
Rent & Rates 1,200 Stock 6,500
Sundry Exp. 800 8,200 Debtors 9,800
To Balance being Petty Cash 100 16,400
Profit carried 9,400
to (H.O.) P & L A/c
63,400 63,400
Jan. To Balance b/d 16,400
1,
2023
(b) Stock and Debtors Method
Branch Stock Account
2022 Rs. 2022 Rs. Rs.
Jan. 1 To Stock 7,000 Dec. 31 By Sales:
Dec. 31 To Goods Sent 26,000 Cash 17,500
to Branch A/c Credit 28,400
To Branch P & L Less: Return (500) 27,900 45,400
A/c 19,900 By Goods sent to 1,000
Branch A/c - Return
By Balance c/d 6,500
(Stock)
52,900 52,900
2020 Jan. 1 To Balance b/d 6,500
Delhi Branch Debtors Account
2022 Rs. 2022 Rs.
Jan. 1 To Balance b/d 12,600 Dec. 31 By Cash 28,500
Dec. 31 To Sales 28,400 By Returns 500
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 Accounting for Branches Including Foreign Branches

2022 Rs. 2022 Rs.

By Allowances 200
By Discounts 1,400
By Bad debts 600
By Balance c/d 9,800
41,000 41,000
2023 To Balance b/d 9,800
Jan. 1
Delhi Branch Expenses Account
2022 Rs. 2022 Rs.
Dec. 31 To Salaries & Wages 6,200 Dec. 31 By Branch P & L A/c 10,500
To Rent & Rates 1,200
To Sundry Expenses 800
To Petty Cash expenses 100
(200-100)
To Allowances to customers 200
To Discounts 1,400
To Bad Debts 600
10,500 10,500
Delhi Branch Profit & Loss Account
2022 Rs. 2022 Rs.
Dec. 31 To Branch Exp. A/c 10,500 Dec. 31 By Gross Profit b/d 19,900
To Net Profit to
General P & L A/c 9,400
19,900 19,900
(c)
Branch Trading and Profit and Loss Account
To Stock 7,000 By Sales:
To Goods sent Cash 17,500
from H.O. 26,000 Credit 28,400
Less: Returns to H.O. (1,000) 25,000 Less: Returns (500) 27,900 45,400
To Gross profit c/d 19,900 By Closing Stock 6,500
51,900 51,900
To Salaries & Wages 6,200 By Gross Profit b/d 19,900
To Rent & Rates 1,200
To Sundry Exp. 800
To Petty Cash Exp. 100
To Allowances to 200
Customers
To Discounts 1,400
To Bad Debts 600
To Net Profit 9,400
19,900 19,900

Section – 3 - List Price / Catalogue Price

3.1 - When goods are sold at Invoice Price and List Price
Mister Ever young of Heart land invoices goods to its branch located at Toyland at 20% less than the list price
which is cost plus 100% with the instructions to sell the goods to customers on cash at invoice price and on
credit at list price. From the following details prepare –branch stock account, branch adjustment account
branch debtor a/c and branch profit and loss a/c.

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 Financial Accounting

Stock in the beg 18,000

Debtors in the beg 10,000
Computer in the beg 50,000
Goods received from HO at invoice price 180,000
Cash sales 82,000
credit sales 120,000
Goods in transit as on the last day of the accounting year 10,000
Cash sent to branch for expenses 32,000
Actual expenses at the branch 30,000
Stock at the end 16,000
Bad debts w/off 400
Goods returned directly by the customers to the HO 1,500
Debtors at the end 8,100
Depreciation on computer by 20% -
Complete solution:
Note- 1
100 / 200 : L.P into C.P
Cost price Invoice price List Price
100 (200 less 20% of 200 ) = 160 100 + 100 = 200

60 / 160 40 / 200
3/8 1/5
IP into CP List price into Invoice Price
Note - 2
Cash sales at Invoice Price
Credit sales at List price

Note – 3
Goods directly returned by customers to Head office

2.Goods sent to Branch returns 1. Sales Return

HO BO customers
Note – 4
HO G.I.T BO
GSTB :1,90,000 (B.F) 10,000 (Given) Goods Received: 1,80,000 (Given)
Branch Stock A/c
Details Amount Details Amount
Bal b/d 18,000 Cash sales ( I.P) 82,000
Goods sent to branch a/c 1,90,000 Credit Sales – L.P 1,20,000
Excess of List Price over Invoice 24,000 Goods in transit 10,000
Price 1,20,000 x 1/5
Sales Return ( L.P) 1,500 Goods sent to branch- returns ( L.P) 1,500
Shortage : B.F. 4,000
Bal. c/d 16,000
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock – 16,000 x 6,000 Load on opening stock 18,000 x 3 / 8 6,750
3 /8
Load on GSTB- R - 1500 x 1/2 750 Load on GSTB a/c 1,90,000 x 3 /8 71,250
Load on G.I.T – 10,000 x 3/8 3,750 Excess of List price over invoice price 24,000

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 Accounting for Branches Including Foreign Branches

Details Amount Details Amount

Load on Goods T/F -
Load on Abnormal Loss -
Load on shortage 4,000 x 3 / 8 1,500
Gross profit – bal Fig. 90,000
Branch Profit and Loss A/c
Details Amount Details Amount
Branch expenses a/c 30,000 Branch adjustment a/c- Gross Profit 90,000
Depreciation on personal computer 10,000 Insurance claim -
Discount -
Bad debts 400
Abnormal loss at cost -
Shortage of stock ,at cost : 4,000 - 2,500
1,500
Net profit bal. fig. 47,100
Branch Debtors A/c
Details Amount Details Amount
Bal b/d 10,000 Cash from debtors 1,20,000
Credit sales 1,20,000 Discount allowed --
Bad debts 400
Sales returns 1,500
Bal c/d : Bal. Fig. 8,100

3.2 - When goods are sold at I.P and List Price – Past Examinations
R-777 enterprises invoice goods to its branch located at City Magnum at 20% less than the list price (
catalogue price) which is cost plus 50% with the instructions to sell the goods to customers on cash at invoice
price and on credit at list price and also to allow discount for prompt payments .
From the following details prepare –branch stock account, branch adjustment account branch debtor a/c and
branch profit and loss a/c.
Stock in the beg 4,50,000
Debtors in the beg 3,60,000
Branch furniture in the beg 1,20,000
Cash sales 13,60,000
Credit sales 21,50,000
Goods invoiced to Branch 32,10,000
Goods returned by Branch at I.P. 84,000
Expenses Paid by HO : Rent 1,25,000 , Salaries 1,80,000 3,05,000
Stock at the end 5,10,000
Petty expenses paid by branch 11,000
Cash received from branch debtors 18,65,000
Remittances by Branch to HO 32,00,000
Discount allowed to branch debtors 1,85,000
Branch Bad debts 15,800
Gods returned by branch debtors 12,600
It was decided to make a provision for discount of Rs. 42,500 on closing debtors for prompt payment.
Depreciate furniture @ 10% per annum.

3.3 - When goods are sold at I.P. and List Price – Past Examinations
G-force with its head office city X invoices goods to its Branch at City Y at 20% less than the catalogue price
which is cost plus 50% with instructions that cash sales are to be at Invoice price and credit sales at
catalogue price.
Details furnished are:

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 Financial Accounting

Stock in the begat branch at its cost 12,000

Goods sent to branch at cost to HO 1,40,000
Goods received by branch till close of the year 1,38,000
Cash sales 46,000
Credit sales 1,00,000
Stock lost by fire at cost 2,500
Calculate the amount of closing stock at branch.
Complete solution:
Note- 1

Cost price Invoice price List Price/ Catalogue Price

100 (150 less 20% of 150 = 120 100 + 50 = 150
L.P into C.P
20 / 120 30/ 150
1/6 1/5
IP into CP List price into Invoice Price

To LP into cost = 50/150 = 1/3

Note - 2
Cash sales at Invoice Price
Credit sales at List price

Branch Stock A/c

Details Amount Details Amount
Bal b/d 12,000 Cash sales ( I.P) 46,000
Goods sent to branch a/c 1,68,000 Credit Sales – L.P 1,00,000
1,40,000 + 1/5 of 1,40,000
GSTB is given at cost it need to be
brought up to IP therefore we need
rate of profit on cost which would
be 20/100
Excess of List Price over Invoice 20,000 Goods in transit 1,68,000 -1,38,000 30,000
Price 1,00,000 x 1/5
Stock lost by fire 2,500 + 1/5 of 2,500 3,000
Stock lost is given at cost it need to be
brought up to IP therefore we need rate
of profit on cost which would be 20/100
Bal. c/d – B.F. 51,000

3.4 - When goods are sold at I.P. and List Price

Dolphin computers limited with its HO in Delhi invoices goods to its branch at Rudrapur at 20% less than the
list price [also known as catalogue price] which is cost plus 50% with instructions to sell the goods on cash at
invoice price and on credit at catalogue price however a 15 % discount is to be given to the customers who
pay promptly. From the following information prepare relevant accounts under stock & debtor system.
Stock in the beg 24,000
Debtors in the beg 20,000
Goods received from HO 2,64,000
Cash sales 92,000
Credit sales 2,00,000
Cash received from debtors 1,71,270
Discount allowed to the debtors 26,730
Expenses at the branch 12,000

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 Accounting for Branches Including Foreign Branches

Debtors at the end 22,000

Stock at the end 30,000
It was further reported that a part of the stock was stolen –which was not covered by the insurance, during the
year and further a provision should be made for discount to be allowed to debtors as on the last day of the
accounting year on the basis of trend of prompt payments
Complete solution:
Note- 1
100 / 150 : L.P into C.P
Cost price Invoice price List Price
100 (150 less 20% of 150 ) = 120 100 + 50 = 150

20 / 120 30 / 150
1/6 1/5
IP into CP List price into Invoice Price
Note - 2
Cash sales at Invoice Price
Credit sales at List price
15% Discount to Prompt Paying That is , discount to debtors who pay before the specified due date
debtors
Ledgers :
Branch Stock A/c
Details Amount Details Amount
Bal b/d 24,000 Cash sales - IP 92,000
Goods sent to branch a/c 2,64,000 Credit Sales – LIP 2,00,000
Excess of LP over IP 2,00,000 x 1 / 40,000 Goods sent to Branch - Returns -
5
Abnormal loss : loss of stock by theft 6,000
– B.F.
Bal. c/d 30,000
Branch Adjustment A/c
Details Amount Details Amount
Load on closing stock – 30,000 x 5,000 Load on opening stock 24,000 x 1/6 4,000
1/6
Load on GSTB- R - Load on GSTB a/c 2,64,000 x 1/6 44,000
Load on G.I.T - Excess of LP over IP 40,000
Load on Goods T/F -
Load on Abnormal Loss 6,000 x 1,000
1/6
Normal loss ( full) -
Gross profit – bal Fig. 82,000
Branch Profit and Loss A/c
Details Amount Details Amount
Branch expenses a/c 12,000 Branch adjustment a/c- Gross Profit 82,000
Petty cash : amount spent - Insurance claim -
Discount 26,750
Bad debts -
Abnormal loss at cost 5,000
Provision for Discount as per 2,970
Notes#
Net profit bal. fig. 35,300

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 Financial Accounting

Branch Debtors A/c

Details Amount Details Amount
Bal b/d 20,000 Cash from debtors 1,71,270
Credit sales 2,00,000 Discount allowed 26,730
Bad debts -
Sales returns -
Bal c/d 22,000
Notes :

Goods sold to customers on credit

Payment bef. Due Date Payment on due date

15 % Discount No discount
Notes : Provision For discount
Cash received from debtors given as 1,71,270
Discount given Only to prompt paying debtors 26,730
Who must be equal to:
15% of Prompt paying debtors =
26,730
PPD = 26,730 x 100 / 15 = 1,78,200
Debtorswho must have paid during the 1,98,000
year
Out of these PPD ( prompt Paying 1,78,200
Debtors) are
Trend of debtors who pay promptly 1,78,200 / 1,98,000 x 100 90%
Closing debtors at the end of the year are 22,000
Out of these likely to pay promptly as per 90% of 22,000 19,800
trend
Therefore Provision for discount to be 15% of 19,800 2,970
given to such debtors who pay promptly

Section 4 - Whole Sale Branch Accounts

Under this system HO sends goods to branches at invoice price[ also known as wholesale price] and
branches sell the goods to customers at list price [also known as catalogue price ].under this system HO itself
also sells the goods to customers –generally at wholesale price however it could also sells the goods at list
price. If all the goods sent to the branch are sold out then there is no problem however if some of the goods
remain unsold then unrealized profit on the same has to be wiped out in order to find out the true profits.

4.1 - Past Examination

A HO sends goods to its branch at cost plus 80%. Goods are sold to customers at cost plus 100%. From the
following particulars ascertain the profits made at the HO.
Details HO BO
Stock 20,000 -
Purchases 200,000 -
Goods sent to the branch at invoice price 90,000 -
Sales 270,000 90,000
Sales at the HO are made at wholesale price basis.
[Answer closing stock at HO at cost: 20000/net profit at HO 156000]

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 Accounting for Branches Including Foreign Branches

Solution :
Note- 1
100 / 200 : L.P into C.P

Cost price Whole Sale Price / Invoice price List Price

100 (100 + 80% of 100 ) = 180 100 + 100 = 200

80 / 180 20 / 200
4/9 1 / 10
IP into CP List price into Invoice Price
HO Books
HO trading and profit and loss a/c
Op. stock 20,000 Goods sent to Branch a/c at WSP 90,000
Purchases 2,00,000 Sales at WSP 2,70,000
Gross : Profit ( 40,000 + 1,20,000) 1,60,000 Closing stock# 20,000

Expenses - Gross Profit 1,60,000

Unrealised Profit on Part of „Goods
sent to branch‟ Remaining unsold (
Closing stock with branch )*= 9,000* 4,000
x4/9
Net Profit 1,56,000

Calculation of closing Stock with Head office

Op. stock available 20,000
Purchases 2,00,000
Cost of Goods 2,20,000
available for sale
Less cost of :
a)Goods sent to 90,000
Branch
Less : Margin 4 / 9 40,000 50,000
b)cost of Sales 2,70,000
Less : Margin 4 / 9 1,20,000 1,50,000
Closing stock 20,000#
Calculation of closing Stock with Branch office
WSP List Price / Sales
Goods received by branch 90,000
Sales by branch 90,000
WSP of Goods sold by branch List price : 90,000
- 1 /10 : 9,000
: 81,000
Closing stock 9,000*
HO Books
BO trading and profit and loss a/c
Op. stock - Sales 90,000
Goods sent to branch 90,000 Closing stock * 9,000
Gross profit 9,000

Expenses - Gross profit 9,000

Net profit 9,000

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 Financial Accounting

4.2 – Past Examination

A limited has its BO at city X and goods are sold to customers at cost plus 100% where as HO sends goods
to BO at wholesale price of cost plus 80%.from the following particulars track out proper profits presuming
HO sells the goods to customers at wholesale price.
Details HO BO
Stock in the beginning 25,000 -
Purchases 150,000 -
Goods sent to branch at invoice price 54,000 -
Sales 153,000 50,000
Answer- Net Profit At HO 88000; Stock At The End At Cost At HO-60,000
Solution :
Note- 1

100 / 200 : L.P into C.P

Cost price Whole Sale Price / Invoice price List Price
100 (100 + 80% of 100 ) = 180 100 + 100 = 200
80 / 180 20 / 200
4/9 1 / 10
HO Books
HO trading and profit and loss a/c
Op. stock 25,000 Goods sent to Branch a/c at 54,000
WSP
Purchases 1,50,000 Sales at WSP 1,53,000
Gross : Profit ( 24,000 + 68,000) 92,000 Closing stock# 60,000

Expenses - Gross Profit 92,000

Unrealised Profit on Part of „Goods
sent to branch‟ Remaining unsold
(Closing stock with branch )*= 4,000
9,000* x 4 / 9
Net Profit 88,000

Calculation of closing Stock with Head office

Op. stock available 25,000

Purchases 1,50,000
Cost of Goods available for sale 1,75,000
Less cost of :
a)Goods sent to Branch 54,000
Less : Margin 4 / 9 24,000 30,000
b)cost of Sales 1,53,000
Less : Margin 4 /9 68,000 85,000
Closing stock 66,000#
Calculation of closing Stock with Branch office
WSP List Price / Sales
Goods received by branch 54,000
Sales by branch 50,000
WSP of Goods sold by branch List price : 50,000
- 1 /10 : 5,000
: 45,000
Closing stock 9,000*

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 Accounting for Branches Including Foreign Branches

HO Books
HO trading and profit and loss a/c
Op. stock - Sales 50,000
Goods sent to branch 54,000 Closing stock * 9,000
Gross profit 5,000

Expenses - Gross profit 5,000

Net profit 5,000

4.3 – Past Examination

A HO sends goods to its branch at 20% less than the list price which is cost plus 100%.from the following
particulars prepare HO trading and profit and loss a/c in the books of HO.
Details HO BO
Opening stock - -
Purchases 200,000 -
Goods sent to branch at wholesale price 80,000 80,000
Sales at list price 170,000 80,000
Expenses 20,000 10,000
Solution :
Note- 1

100 / 200 : L.P into C.P

Cost price Whole Sale Price / Invoice price List Price
100 (200 - 20% of 200 ) = 160 100 + 100 = 200
60 / 160 40 / 200
3/8 1/5
HO Books
HO trading and profit and loss a/c
Op. stock - Goods sent to Branch a/c at WSP 80,000
Purchases 2,00,000 Sales at List Price 1,70,000
Gross : Profit ( 30,000 + 85,000) 1,15,000 Closing stock# 65,000

Expenses 20,000 Gross Profit 1,15,000

Unrealised Profit on Part of „Goods
sent to branch‟ Remaining unsold (
Closing stock with branch )*= 6,000
16,000* x 3 / 8
Net Profit 89,000

Calculation of closing Stock with Head office

Op. stock available -

Purchases 2,00,000
Cost of Goods available for sale 2,00,000
Less cost of :
a)Goods sent to Branch 80,000
Less : Margin 3 / 8 30,000 50,000
b)cost of Sales 1,70,000
Less : Margin 1 / 2 85,000 85,000
Closing stock 65,000#

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 Financial Accounting

Calculation of closing Stock with Branch office

WSP List Price / Sales
Goods received by branch 80,000
Sales by branch 80,000
WSP of Goods sold by branch List price : 80,000
-1/5 : 16,000
: 64,000
Closing stock 16,000*
HO Books
HO trading and profit and loss a/c
Op. stock - Sales 80,000
Goods sent to branch 80,000 Closing stock * 16,000
Gross profit 16,000

Expenses 10,000 Gross profit 16,000

Net profit 6,000

4.4 – Past Examination – 8 Marks

Beta Limited having a Head Office at Mumbai has a branch at Nagpur. The Head office does whole sale trade
only at cost plus 80%. The goods are sent to branch at the whole sale price namely, Cost plus 80%. The
branch at Nagpur is wholly engaged in retail trade and the goods are sold at cost to HO plus 100%.
st
Following details are furnished for the year ended 31 March, 2017.
Details Head office Branch
Opening stock as on 1.4.2016 225,000 --
Purchases 25,50,000 --
Goods sent to Branch – cost to HO Plus 80% 954,000 --
Sales 27,81,000 950,000
Office expenses 90,000 8,500
Selling expenses 72,000 6,300
Staff salary 65,000 12,000
You are required to prepare Trading and Profit and Loss Account of the Head Office and Branch for. The year
st
ended 31 March, 2017.
Answer – closing stock- 7,00,000, gross profit Rs. 16,60,000, Net Profit Rs. 13,89,000
Closing stock at branch – 99,000, gross profit – Rs. 95,000, Net profit – Rs. 68,200
Solution :
Note- 1

100 / 200 : L.P into C.P

Cost price Whole Sale Price / Invoice price List Price
100 (100 + 80% of 100 ) = 180 100 + 100 = 200

80 / 180 20 / 200
4/9 1 / 10
HO Books
HO trading and profit and loss a/c
Op. stock 2,25,000 Goods sent to Branch a/c at WSP 9,54,000
Purchases 25,50,000 Sales at WSP 27,81,000
Gross : Profit ( 4,24,000 + 12,36,000) 16,60,000 Closing stock# 7,00,000
Expenses 2,27,000 Gross Profit 16.60.000
Unrealised Profit on Part of „Goods sent 44,000
to branch‟ Remaining unsold ( Closing

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 Accounting for Branches Including Foreign Branches

stock with branch )*= 99,000* x 4 / 9

Net Profit 13,89,000

Calculation of closing Stock with Head office

Op. stock available 2,25,000

Purchases 25,50,000
Cost of Goods available for sale 27,75,000
Less cost of :
a)Goods sent to Branch 9,54,000
Less : Margin 4 / 9 4,24,000 5,30,000
b)cost of Sales 27,81,000
Less : Margin 4 / 9 12,36,000 15,45,000
Closing stock 7,00,000#
Calculation of closing Stock with Branch office
WSP List Price / Sales
Goods received by branch 9,54,000
Sales by branch 9,50,000
WSP of Goods sold by branch List price : 9,50,000
- 1 /10 : 95,000
: 8,55,000
Closing stock 99,000*
HO Books
HO trading and profit and loss a/c
Op. stock - Sales 9,50,000
Goods sent to branch 9,54,000 Closing stock * 99,000
Gross profit 95,000

Expenses 26,800 Gross profit 95,000

Net profit 68,200

4.5 – Past Examination – 8 Marks

G-9 Limited having a Head Office at Delhi has a branch at City-Y. The Head office does whole sale trade only
at cost plus 80%. The goods are sent to branch at the whole sale price namely, Cost plus 80%. The branch is
wholly engaged in retail trade and the goods are sold at cost to HO plus 100%.
st
Following details are furnished for the year ended 31 March, 2017.
Details Head office Branch
Opening stock as on 1.4.2018 1,25,000 --
Purchases 21,50,000 --
Goods sent to Branch – cost to HO Plus 80% 7,38,000 --
Sales 23,79,600 7,30,000
Office expenses 50,000 4,500
Selling expenses 32,000 3,300
Staff salary 45,000 8,000
You are required to prepare Trading and Profit and Loss Account of the Head Office and Branch for. The year
st
ended 31 March, 2019.
Solution Hint
 Closing stock- 5,43,000, gross profit Rs. 13,85,000, Net Profit Rs. 12,22,600
 Closing stock at branch – 81,000, gross profit – Rs. 73,000, Net profit – Rs. 57,200

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 Financial Accounting

Section - 5 - Independent Branches

As the name suggests these branches do not depend completely on the HO- rather take independent
decisions regarding purchases and sales. These branches keep a full system of accounting and prepare their
own trial balance. This trial balance forms the basis for the HO to prepare branch trading and profit and loss
a/c and incorporate the same in its books
Although branch acts as a separate entity yet there may be transactions in between HO and BO.A list of such
possible transactions and their respective entries in the two sets of books is given below.
Transactions HO books BO books
Goods sent to BO by the HO Branch a/c Dr Goods recd from HO a/c Dr
To goods sent to branch a/c To, HO a/c

Cash remitted by HO to BO Branch a/c Dr Bank a/c debit

To, bank a/c To, HO a/c

Cash remitted by BO to HO Bank a/c Dr HO a/c

To, BO a/c To, bank a/c

Amount remitted by branch not yet No entry Amount in transit a/c debit
received by Head office To, HO a/c
Goods sent by HO not yet recd by BO Goods in transit a/c debit No entry
To, BO a/c
Assets purchased by the BO but Branch asset a/c debit HO a/c debit
maintained at Head office To, BO a/c To, bank a/c or suppliers a/c
Depreciation charged on such assets Branch a/c debit Depreciation a/c debit
To, branch asset a/c To, HO a/c
When branch is charged with some BO a/c debit HO expenses a/c debit
expenses by the HO To, P&L a/c To, HO a/c
When goods are T/F from one branch to Receiving BO a/c debit Branch which will receive the
other To, supplying BO a/c goods shall pass following entry-
Goods from HO a/c debit
To, Ho a/c
And the supplying branch shall
pass this entry-
HO a/c debit
To, Goods sent HO a/c.

Incorporation of Branch Trial Balance

With the help of the BO trial balance HO incorporates in its books branch assets liabilities and profit or loss
a/c so that a consolidated balance sheet could be prepared which reflects performance of the entire
organization.
Following steps are required for such incorporation-
1] Incorporation branch assets
Entry will be-branch asset a/c debit
To, branch a/c
2] Incorporation of branch liabilities
Entry will be-branch a/c debit
To, branch liabilities a/c
3] Incorporation of branch profit
Entry will be –branch a/c debit
To, branch profit and loss a/c

72
 Accounting for Branches Including Foreign Branches

5.1
st
The following is the trial balance of City – X Branch as on 31 Dec.2023:
Delhi HO 3240 -
Stock in the beg 6000 -
Purchases 97800 -
Goods recd. from HO 19000 -
Sales - 138000
Goods supplied to HO - 6000
Salaries 4500 -
Debtors 3700 -
Creditors - 1850
Rent 1960 -
Sundry office expenses 1470 -
Cash at bank 1780 -
Furniture 6000 -
depreciation 400 -
st
City – X - BO in the books of HO books on 31 Dec 2023 stood at rupees 460 [debit balance].
On 28 the Dec 2023 the HO forwarded goods of value of rupees 3,700 to branch where they were received
rd
on 3 Jan2024.
1] Prepare trading and profit and loss account of City – X Branch for the year ended 2023
2] Pass journal entries in the books of the HO to incorporate the aforementioned trial balance, and
3] Show City X Branch Account as it would appear in the books of the HO
4] Closing stock at branch was Rs. 7,700
Solution :
Trading and Profit and loss a/c
Details Amount Details Amount
Op. Stock 6,000 Sales 1,38,000
Purchases 97,800 Goods supplied ( returns) 6,000
Goods received 19,000 Closing Stock 7,700
Gross Profit : Bal. Figure 28,900
1,51,700 1,51,700
Salaries 3,700 Gross Profit b/d 28,900
Sundry office expenses 1,470
Rent 1,960
Depreciation 400
Net Profit : Bal. figure 20,570
28,900 28,900
Reconciliation of balances :
Adjustments HO will pass BO will As per HO As per BO books
the entry pass the books
entry
BO bal is : HO bal. Is
Dr. 460 Dr. 3,240
Cheque in - - -
transit
To BO
On 28 the Dec 2008 the HO - G.I.T - Cr. 3,700
forwarded goods of value of To HO
rupees 3,700 to branch where
rd
they were received on 3
Jan2008.
Reconciled Balances Dr. 460 Cr. 460

73
 Financial Accounting

Revised Trial Balances and Consolidated Balance sheet

Revised Trial Balances Consolidated Balance sheet
Head office Trial Balance Branch office Trial Balance Liabilities Assets
Debit Credit Debit Credit Amount Amount
Capital - - - - - -
Profit and loss: - - - 20,570 20,570 -
Revised
Creditors - - - 1,850 1,850 -
Bills Payable - - - -, -
Furniture - - 6,000 - - 6,000
Stock - - 7,700 - - 7,700
Debtors - - 3,700 - - 3,700
Bills receivable - - - - -
Cash in hand & - - 1,780 - - 1,780
at bank
Cheque in - - - -, - -
transit
Goods in transit - - 3,700 - - 3,700
Branch account - - - - - -
: Revised
Head Office - - - 460 460 -
account:
revised*
Total - - 22,880 22,880 22,880 22,880

5.2
The HO of a business and its branch keep their own books and each prepares its own P&L a/c. the following
st
are the balances appearing in the two sets of the books as on 31 DEC 2021 after ascertainment of profits
and after making all the adjustments except referred to below:
Head office Branch office
Details Dr. Cr. Dr. Cr.
Capital - 100,000 - -
Fixed assets 36,000 - 16,000 -
Stock 34,200 - 10,740 -
Debtors 7,820 - 4,840 -
Creditors - 3,960 - 1,920
Cash 10,740 - 1,420 -
Profit and loss a/c - 14660 - 3,060
BO account 29,860 - - -
Head office a/c - - - 28,020
st
Set out the b/s of the business as on 31 Dec 2021 and the journal entries necessary to record the
adjustments dealing with the following
st
1. On 31 Dec 2021, B.O had sent cheque for Rs 1,000 to the H.O not received by the H.O nor
credited by the H.O to the B.O a/c.
th
2. Goods valued at Rs.840 had been forwarded by the H.O to the branch on 30 Dec 2021 but were
not received by the B.O.
3. the profits shown by the B.O is to be T/F to the H.O a/c
Solution :
Reconciliation of balances :
Point No HO will pass the BO will pass the entry As per HO books As per BO books
entry
BO bal is : HO bal. Is
DR. 29,860 Cr. 28,020

74
 Accounting for Branches Including Foreign Branches

Point No HO will pass the BO will pass the entry As per HO books As per BO books
entry
1. Cheque in transit - CR 1,000 -
To BO
2. - G.I.T - Cr. 840
To HO
Reconciled Balances Dr. 28,860 Cr. 28,860
Revised Trial Balances and Consolidated Balance sheet
Revised Trial Balances Consolidated Balance sheet
Head office Trial Balance Branch office Trial Liabilities Assets
Balance
Debit Credit Debit Credit Amount Amount
Capital - 1,00,000 - - 1,00,000 -
Profit and loss: - 14,660* - 3,060 17,720 -
Revised
Creditors - 3,960 - 1,920 5,880 -
Fixed assets 36,000 - 16,000 - - 52,000
Stock 34,200 - 10,740 - - 44,940
Debtors 7,820 - 4,840 - - 12,660
Cash 10,740 - 1,420 - - 12,160
Cheque in transit 1,000* - - - 1,000
Goods in transit - 840* - - 840
Branch account : 28,860* - - - - -
Revised
Head Office - - - 28,860* - -
account: revised
Total 1,18,620 1,18,620 33,840 33,840 1,23,600 1,23,600

5.3
From the following balances and additional information, in the books of BO, you are required to prepare for
the –
1] Branch account
2] Branch trading and profit and loss a/c.
3] Journal entries to incorporate the above
st
Trial balance as on 31 March 2022 as prepared by BO
Purchases 356,000 Bills payable 7,000
Stock in the beg 120,000 Creditors 30,000
salaries 20,000 Goods supplied to HO 120,000
Commission 10,000 sales 760,000
HO a/c 64,800
Goods recd. from HO 180,000
B/R 4,000
Debtors 70,000
Rent 28,600
Plant 28,000
Cash in hand and at bank 35,600

Additional information-
1. The branch account in the books of HO stood at rupees 9,200 debit balance
th nd
2. On 25 March 2022, the HO sent goods for Rs.45,000 to the BO, received on 2 April 2022
th rd
3. A cash remittance of Rs 29,000 by BO on 28 March was received on 3 April 2022
4. Closing stock was valued at Rs 54,000.

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 Financial Accounting

Solution:
Trading and Profit and loss a/c
Details Amount Details Amount
Op. Stock 1,20,000 Sales 7,60,000
Purchases 3,56,000 Goods supplied ( returns) 1,20,000
Goods received 1,80,000 Closing Stock 54,000
Gross Profit : Bal. Figure 2,78,000
9,34,000 9,34,000
Salaries 20,000 Gross Profit b/d 2,78,000
Commission 10,000
Rent 28,600
Net Profit : Bal. figure 2,19,400
2,78,000 2,78,000
Reconciliation of balances :
Adjustments HO will pass the BO will As per HO As per BO books
entry pass the books
entry
BO bal is : HO bal. Is
Dr. 9,200 Dr. 64,800
A cash remittance of Rs Cheque in transit - Cr. 29,000 -
th
29,000 by BO on 28 To BO
March,2022 was received on
rd
3 April 2022
th
On 25 March 2022, the HO - G.I.T Cr. 45,000
sent goods for Rs.45,000 to To HO
nd
the BO, received on 2 April
2022
Reconciled Balances Cr. 19,800 Dr. 19,800
Revised Trial Balances and Consolidated Balance sheet
Revised Trial Balances Consolidated Balance sheet
Head office Trial Branch office Trial Liabilities Assets
Balance Balance
Debit Credit Debit Credit Amount Amount
Capital - - - - -
Profit and loss: - - 2,19,400 2,19,400 -
Revised
Creditors - - 30,000 30,000 -
Bills Payable - - 7,000 7,000 -
Plant - - 28,000 - - 28,000
Stock - - 54,000 - - 54,000
Debtors - - 70,000 - - 70,000
Bills receivable - - 4,000 - - 4,000
Cash in hand & - - 35,600 - - 35,600
at bank
Cheque in - - - - -
transit
Goods in transit - - 45,000* - - 45,000
Branch account - - - -- -
: Revised
Head Office - - 19,800* - - 19,800*
account:
revised*
Total - - 2,56,400 2,56,400 2,56,400 2,56,400

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 Accounting for Branches Including Foreign Branches

5.4
st
A firm has HO in Mumbai and an independent branch in Kolkata. The following were the balances as on 31
March 2022
Trial balance
HO BO HO BO
Profit and loss a/c 14,660 3,060 Fixed assets 236,000 116,000
creditors 123,960 31,920 stock 35,200 20,740
capital 300,000 - debtors 17,820 24,840
HO a/c - 128,020 cash 19,740 1,420
Branch a/c 129,860 -
Information to be adjusted was as follows
1. BO had sent a cheque for rupees 1,000 to HO on 25 the March but not received by HO till next month.
2. Dep. of branch assets, of which accounts are maintained at HO, not provided for is Rs.250.
3. It was agreed that BO should be charged with Rs 300 for administrative services, rendered by the HO
during the year.
4. Goods worth 840 forwarded by HO to BO on 27 the March, 2022 but not recorded by branch till next month
Pass incorporation entries and prepare relevant B/S in the books
Solution :
Reconciliation of balances :
Point No HO will pass the BO will pass the As per HO books As per BO books
entry entry
BO bal is : HO bal. Is
DR. 1,29,860 Cr. 1,28,020
1. Cheque in transit - CR 1,000 -
To BO
2. BO P&L Dr. 250 Cr. 250
To F. Assets To HO
3. BO P&L Dr. 300 Cr. 300
To P&L To HO
4. G.I.T - Cr. 840
To HO
Reconciled Balances Dr. 1,29,410 Cr. 1,29,410
Reconciliation of profit and loss balances :
HO BO
Profit and loss Cr. 14,660 Cr. 3,060
Cr. 300 Dr. 300
Dr. 250
Revised Balances Cr. 14,960 Cr. 2,510

Revised Trial Balances and Consolidated Balance sheet

Revised Trial Balances Consolidated Balance sheet
Head office Trial Balance Branch office Trial Liabilities Assets
Balance
Debit Credit Debit Credit Amount Amount
Capital - 3,00,000 - - 3,00,000 -
Profit and - 14,960* - 2,510* 17,470 -
loss: Revised
Creditors - 1,23,960 - 31,920 1,55,880 -
Fixed assets 2,36,000- - - -
250= 1,16,000 3,51,750
2,35,750*

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 Financial Accounting

Revised Trial Balances Consolidated Balance sheet

Head office Trial Balance Branch office Trial Liabilities Assets
Balance
Debit Credit Debit Credit Amount Amount
Stock 35,200 - 20,740 - - 55,940
Debtors 17,820 - 24,840 - - 42,660
Cash 19,740 - 1,420 - - 21,160
Cheque in 1,000* - - - 1,000
transit
Goods in - 840* - - 840
transit
Branch 1,29,410* - - - - -
account :
Revised
Head Office - - - 1,29,410* - -
account:
revised
Total 4,38,920 4,38,920 1,63,840 163,840 4,73,350 4,73,350

5.5
The Head Office of Z Ltd. and its Branch keeps their own books prepare own Profit and Loss Account. The
following are the balances appearing in the two sets of the books as on 31.3.2023 after ascertainment of
profits and after making all adjustments except those referred to below :
Details Dr. Cr. Dr. Cr.
Capital - 100,000 - -
Fixed assets 36,000 - 16,000 -
Stock 34,200 - 10,740 -
Debtors 7,820 - 4,840 -
Creditors - 3,960 - 1,920
Cash 10,740 - 1,420 -
Profit and loss a/c - 14,660 - 3,060
BO account 29,860 - - -
Head office a/c - - - 28,020
Prepare the Balance Sheet of the business as on 31.3.2023 and the journal entries necessary (in both sets of
books) to record the adjustments dealing with the following:
1. On 31.3.2023, the branch had sent a cheque for Rs. 1,000 to the head office, not received by them
nor credited to the branch till next month.
2. Goods valued at Rs. 440 had been forwarded by the head office to the branch and invoiced on
30.3.2023, but were neither received by the branch nor dealt with in their books till next month.
3. It was agreed that the branch should be charged with Rs. 300 for Administration Services, rendered
by the Head Office during the year.
4. Stock stolen in transit from the Head Office to the Branch and charged to the Branch by the Head
Office but not credited to the Head Office in the Branch Books as the Manager declined to admit
any liability, Rs. 400 (not covered by insurance).
5. Depreciation of Branch Assets, of which accounts are maintained by the Head Office, not provided
for Rs. 250.
6. The balance of Profits shown by the Branch is to be transferred to HO Books.
Solution:
Reconciliation of balances:
Point No HO will pass the BO will pass the As per HO As per BO books
entry entry books
BO bal is : HO bal. Is
DR. 29,860 Cr. 28,020

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 Accounting for Branches Including Foreign Branches

Point No HO will pass the BO will pass the As per HO As per BO books
entry entry books
1. Cheque in transit CR 1,000
To BO
2 G.I.T Cr. 440
To HO
3 BO P&L Dr. 300 Cr. 300
To P&L To HO
4 P&L Cr. 400
To HO
5 BO P&L Dr. 250 Cr. 250
To F. Assets To HO
Reconciled Balances Dr. 29,410 Cr. 29,410
Reconciliation of P&L balances:
HO BO
Profit and loss Cr. 14,660 Cr. 3,060
Cr. 300 Dr. 300
Dr. 400
Dr. 250
Revised Balances Cr. 14,960 Cr. 2,110

Revised Trial Balances and Consolidated Balance sheet

Revised Trial Balances Consolidated Balance sheet
Head office Trial Balance Branch office Trial Liabilities Assets
Balance
Debit Credit Debit Credit Amount Amount
Capital - 1,00,000 - - 1,00,000 -
Profit and - 14,960* - 2,110* 17,070 -
loss: Revised
Creditors - 3,960 - 1,920 5,880 -
Fixed assets 36,000-250= - - -
35,750* 16,000 51,750
Stock 34,200 - 10,740 - - 44,940
Debtors 7,820 - 4,840 - - 12,660
Cash 10,740 - 1,420 - - 12,160
Cheque in 1,000* - - - 1,000
transit
Goods in - 440* - - 440
transit
Branch 29,410* - - - - -
account :
Revised
Head Office - - - 29,410* - -
account:
revised
Total 1,18,920 1,18,920 33,440 33,440 1,22,950 1,22,950

Section - 6 - Question Related to Adjustment Entries

6.1 – Past Examination
Alpha and company having HO in Mumbai has a Branch at Nagpur. The branch at Nagpur is an independent
branch. On 31.3.2017, it was found that the goods dispatched by Head Office for Rs. 2,00,000 was received

79
 Financial Accounting

by the branch only to the extent of Rs. 1,50,000. The balance goods are in transit. What is the accounting
entry to be passed by the branch for recording the goods in transit, in its books?
Solution:
Goods in transit a/c Dr. 50,000
To, Head Office 50,000

6.2 – Past Examination

Give journal entries in the books of „branch one‟ to rectify the following:
1] HO expenses rupees 3,500 allocated to branch, but not recorded in the books of BO.
2] Depreciation of branch assets, whose accounts are kept by the HO not provided by the BO. Amount is
rupees 1,500.
3] BO paid rupees 2,000 as salary to a HO inspector, but the amount paid has been debited by BO to
salaries account.
4] HO collected rupees 10,000 directly from a customer on behalf of the BO, but no intimation to this effect
has been received by the BO.
5] A remittance of Rs 15,000 sent by the BO has not been received by the HO.
6] Branch one incurred advertisement expenses of Rs 3000 on behalf of branch two.
Solution :
Journal of branch:
Debit Credit Amount Amount
1 Profit and loss a/c Head office a/c 3,500 3,500

2 Depreciation a/c/ P&L a/c Head office 1,500 1,500

3 Head office a/c Salaries/ P&L a/c 2,000 2,000

4 Head office Debtors 10,000 10,000

6.3
Goods worth Rs. 50,000 sent by head office but the branch has received till the closing date goods only Rs.
40,000. Give journal entry
Past Examination – 2 Marks

6.4
st
Global limited has branch which closes its books of account every year on 31 March .this is a an independent
branch which maintains comprehensive books of accounts for recording their transactions. Give journal
entries in the books of branch on 31.03.2011 to rectify the following.
1] HO expenses rupees 1,35.000 allocated to branch, but not recorded in the books of BO.
2] Depreciation of branch assets, whose accounts are kept by the HO not provided by the BO. Amount is
rupees 1,15,000.
3] BO paid rupees 1,40,000 as salary to a HO inspector, but the amount paid has been debited by BO to
salaries account.
4] HO collected rupees 1,30,000 directly from a customer on behalf of the BO, but no intimation to this effect
has been received by the BO.
5] A remittance of Rs 150,000 sent by the BO has not been received by the HO.
6. Branch incurred advertisement expenses of Rs. 30,000 on behalf of Branch of B
Past Examination, 4 Marks
Solution:
Journal of branch:
Debit Credit Amount Amount
1 Head Office expenses Head office a/c 1,35,000 135,000

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 Accounting for Branches Including Foreign Branches

Debit Credit Amount Amount

2 Depreciation Head office 1,15,000 1,15,000

3 Head office a/c Salaries 1,40,000 1,40,000

4 Head office Debtors 1,30,000 1,30,000

5. No entry in the books

of branch

6 Head office Cash 30,000 30,000

6.5 - Examination Question-5 Marks

Give journal entries in the books of HO on 31.03.2019 to rectify the following.
1] Goods sent to branch Rs. 12,000 stolen during transit. Branch manager refused to accept any
liability.
2] Branch paid Rs. 15,000 as salary to the officer of HO on his visit to the branch
th
3] On 28 of March 2019, the HO dispatched goods to the branch invoiced Rs. 25,000 which was not
st
received by the Branch till 31 March 2019
th st
4] A remittance of Rs. 10,000 sent by the branch on 30 March 2019 received by the HO on 1 April,
2019.
5] Head Office made payment of Rs. 25,000 for purchase of goods by Branch and wrongly debited its
own purchase account.
Solution :
Journal of Head Office
Debit Credit Amount
1 Loss of goods due to theft a/c expenses Purchases a/c 12,000
2 Salaries Branch 15,000
3 No entry
4 Cash in transit a/c Branch a/c 10,000
5. Branch a/c Purchases 25,000

6.6 –Past Examination- 5 Marks

Give journal entries in the books of HO on 31.03.2021 to rectify the following.
1] Depreciation amounting to Rs. 11,000 on branch fixed assets when such accounts are maintained in the
books of HO.
Branch a/c Dr.
To Branch fixed assets a/c
2] Goods amounting to Rs. 7,500 transferred from City F Branch to City G branch.
City G branch
To City F branch
3] The City G branch paid Rs. 2,10,000 for machinery purchased by HO.
Machinery a/c Dr.
To, Branch City G A/c
4] Branch in City F collected Rs. 8,000 from a City F customer of the HO
Branch a/c
To Debtor a/c
th th
5] goods of Rs. 20,000 sent by HO to Branch in City G on 28 March and received by the later on 10 April
21
Goods in transit a/c Dr.

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 Financial Accounting

To, Branch a/c

6.7 - Past Examination – 5 Marks

Give journal entries to rectify or adjust the following in the books of the HO:
1. Goods purchased by branch for Rs. 7,500 but payment made by HO. The HO has wrongly debited this
amount to its own purchases account
Branch a/c Dr
To, Purchases a/c
2. Branch paid Rs. 6,500 as salary to a visiting HO official. The branch has debited the amount to salaries
account
Salary a/c
To, Branch a/c
3. Depreciation Rs. 11,250 in respect of branch shop whose account is kept in HO books.
Branch a/c
To, Branch Shop a/c
4. Expenses Rs. 5,600 to be charged to Branch for work done on its behalf by the HO
Branch a/c
Expenses a/c
5. Goods sent by the HO to branch Rs. 25,000 not yet received by the branch.
No entry by the HO

6.8 - Past Examination – 3 Marks

Pass the entries in the Head Office books to record the following transactions:
th th
1. A remittance of Rs. 35,000 made by Branch to HO on 29 March, 2022 and received by HO on 5 April,
2022.
Cash in transit
To Branch a/c
th
2. Goods of Rs. 63,000 sent by the Head office to Branch on 26 March, 2022 and received by the later on
th
4 April, 2022.
Goods in transit a/c Dr.
To, Branch a/c
3. Branch paid Rs. 30,000 as salary to a visiting HO official.
Salary a/c
Branch a/c

6.9 - Past Examination – 8 Marks

Pass necessary Journal entries in the books of an independent Branch of a company, wherever required, to
rectify or adjust the following:
1] Income of Rs. 2,800 allocated to the Branch by HO but not recorded in the Branch books.
2] Provision for doubtful debts, whose accounts are kept by the HO, not provided earlier for Rs. 1,000
3] Branch paid Rs. 3,000 as salary to a HO Manager, but the amount paid has been debited by
Branch Salaries Account.
4] Branch incurred travelling expenses of Rs. 5,000 on behalf of other branches, but not recorded in
the books of Branch
5] A remittance of Rs 150,000 sent by the BO has not been received by the HO on the date of
reconciliation.
6. HO allocates Rs. 75,000 to the Branch as Head Office Expenses, which has not yet been recorded
by the Branch.
7. HO collected Rs. 30,000 directly from a Branch customer. The intimation of the fact has been
received by the Branch only now.

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 Accounting for Branches Including Foreign Branches

8. Goods dispatched by the HO amounting to Rs. 10,000, but not received by the Branch till date of
reconciliation. The goods have been received subsequently.
These Notes are property of Sanjay Welkins
Solution :
Journal of Branch Office
Debit Credit Amount
1 Head office a/c Income a/c 2,800

2 Provision for doubtful debts a/c Head Office a/c 1,000

3 Head Office a/c Salaries a/c 3,000

4 Head Office a/c Cash a/c 5,000

5. No Entry
6. Expenses a/c Head Office a/c 75,000
7. Head Office Debtors a/c 30,000
8. Goods in transit a/c Head Office a/c 10,000

Section - 7 - Inter Branch Adjustments

7.1
Show adjustment journal entry in the books of head office at the end of April, 2023 for incorporation of inter-
branch transactions assuming that only head office maintains different branch accounts in its books.
A. Delhi branch:
(1) Received goods from Mumbai - Rs. 35,000 and Rs. 15,000 from Kolkata.
(2) Sent goods to Chennai - Rs. 25,000, Kolkata - Rs. 20,000.
(3) Bill Receivable received - Rs. 20,000 from Chennai.
(4) Acceptances sent to Mumbai - Rs. 25,000, Kolkata - Rs. 10,000.
B. Mumbai Branch (apart from the above) :
(5) Received goods from Kolkata - Rs. 15,000, Delhi - Rs. 20,000.
(6) Cash sent to Delhi - Rs. 15,000, Kolkata - Rs. 7,000.
C. Chennai Branch (apart from the above) :
(7) Received goods from Kolkata - Rs. 30,000.
(8) Acceptances and Cash sent to Kolkata - Rs. 20,000 and Rs.10,000 respectively.
D. Kolkata Branch (apart from the above) :
(9) Sent goods to Chennai - Rs. 35,000.
(10) Paid cash to Chennai - Rs.15,000.
(11) Acceptances sent to Chennai - Rs.15,000.
Solution:
(a) Journal entry in the books of Head Office
Date Particulars Dr. Cr.

30th April, 2019 Mumbai Branch Account Dr. 3,000

Chennai Branch Account Dr. 70,000
To Delhi Branch Account 15,000
To Kolkata Branch Account 58,000
(Being adjustment entry passed by head office in respect of
inter-branch transactions for the month of April, 20X1)

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Working Note:
Inter - Branch transactions
Delhi Mumbai Chennai Kolkata
A. Delhi Branch
(1) Received goods 50,000 (Dr.) 35,000 (Cr.) 15,000 (Cr.)
(2) Sent goods 45,000 (Cr.) 25,000 (Dr.) 20,000 (Dr.)
(3) Received Bills receivable 20,000 (Dr.) 20,000 (Cr.)
(4) Sent acceptance 35,000 (Cr.) 25,000 (Dr.) 10,000 (Dr.)
B. Mumbai Branch
(5) Received goods 20,000 (Cr.) 35,000 (Dr.) 15,000 (Cr.)
(6) Sent cash 15,000 (Dr.) 22,000 (Cr.) 7,000 (Dr.)
C. Chennai Branch
(7) Received goods 30,000 (Dr.) 30,000 (Cr.)
(8) Sent cash and acceptances 30,000 (Cr.) 30,000 (Dr.)
D. Kolkata Branch
(9) Sent goods 35,000 (Dr.) 35,000 (Cr.)
(10) Sent cash 15,000 (Dr.) 15,000 (Cr.)
(11) Sent acceptances 15,000 (Dr.) 15,000 (Cr.)
15,000 (Cr.) 3,000 (Dr.) 70,000 (Dr.) 58,000 (Cr.)

Section – 8 - Foreign Branches

1. Preface:
Such Branches which are situated outside the home country in which Head office is located are known as
Foreign Branches.
2. Accounting For Foreign Branches
For the purpose of accounting, AS 11 (revised 2003) classifies the foreign branches may be classified into
two types:
Foreign operation, the activities of which are an integral part of those of the reporting enterprise is known as
Integral Foreign Operations (IFO).For example- foreign branch.
On the other hand, foreign operation, that is not an integral part of the reporting enterprise , is known as Non-
Integral foreign Operation (NIFO)- For example a foreign subsidiary
Any exchange difference arising on translation of financial Statements of Integral foreign Operations is
recognised as income or expense in the period in which they arise while in case of non-integral foreign
operations such differences are accumulated in Foreign currency Translation Reserve until the disposal of
Net Investment.
3. Indicators of Non- Integral Foreign Operation-
● Control by reporting enterprises - While the reporting enterprise may control the foreign operation,
the activities of foreign operation are carried independently without much dependence on reporting
enterprise.
● Transactions with the reporting enterprises are not a high proportion of the foreign operation's
activities.
● Activities of foreign operation are mainly financed by its operations or from local borrowings. In
other words it raises finance independently and is in no way dependent on reporting enterprises.
● Foreign operation sales are mainly in currencies other than reporting currency.
● All the expenses by foreign operations are primarily paid in local currency, not in the reporting
currency.
● Day-to-day cash flow of the reporting enterprises is independent of the foreign enterprises cash
flows.
● Sales prices of the foreign enterprises are not affected by the day-to-day changes in exchange rate
of the reporting currency of the foreign operation.
There is an active sales market for the foreign operation product.

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4. Change In Classification
When there is a change in classification, accounting treatment is as under-
4.1. Integral to Non-Integral
(i) Translation procedure applicable to non-integral shall be followed from the date of change.
(ii) Exchange difference arising on the translation of non-monetary assets at the date of re-
classification is accumulated in foreign currency translation reserve.
4.2. Non-Integral to Integral
(i) Translation procedure as applicable to integral should be applied from the date of change.
(ii) Translated amount of non-monetary items at the date of change is treated as historical cost.
(iii) Exchange difference lying in foreign currency translation reserve is not to be recognized as income
or expense till the disposal of the operation even if the foreign operation becomes integral.
5. Foreign CurrencyTranslation
As per AS-11 Revised following procedure should be adopted for translation of financial statements of
aIntegral Foreign Operation (foreign branch)-
● Revenue items except depreciation should be converted into reporting currency at actual rates on
the date of transactions however if actual rates are not available then average rates should be
used.
● Opening stock should be converted on the basis of actual rates on the date of Purchase however
if such rates are not available then opening rate should be used- likewise in case of closing stock
actual rates should be used but if same are unavailable then closing rates should be used.
● Depreciation should be translated on the basis of rate used for translating the fixed asset.
● Monetary items such as Cash, Bank Balance, Debtors, B/R, Prepaid Expenses, Creditors and B/P
etc. should be translated on the basis of closing rate.
● Non- Monetary items (excluding stocks) like Fixed Asset should be translated using the Actual
exchange rate at the date of Purchase.
● Other Revenue items such as purchases , sales, interest, expenses etc., should be translated on
the basis of actual exchange rates however if same are unavailable then average rates should be
used
● Goods received from HO :are taken at an amount which is recorded in the books of HO
● Balance in HO account in the Books of Branch Books: taken at amounts recorded in HO Books
● Remittances : at Actual Exchange Rate
● Contingent liability: Closing Rate
The net exchange difference arising from the translation of items in the financial statements of a foreign
branch should be recognized as income or expense for the period-except to the extent adjusted in the
carrying amount of the fixed asset.
It is important to note that unless otherwise stated, it is always reasonable to assume that the Branch is an
Integral foreign Operation.
As per AS-11 Revised following procedure should be adopted for translation of financial statements of a Non-
Integral Foreign Operation (foreign branch)-
● Revenue items except depreciation should be converted into reporting currency at actual rates on
the date of transactions however if actual rates are not available then average rates should be
used.
● Opening stock should be converted on the basis of opening rate – likewise, in case of closing
stock actual rates should be used
● Depreciation should be translated on the basis of closing rates.
● Monetary items such as Cash, Bank Balance, Debtors, B/R, Prepaid Expenses, Creditors and B/P
etc. should be translated on the basis of closing rate.
● Non- Monetary items (excluding stocks) like Fixed Asset should be translated using the Closing
exchange rates.

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● Other Revenue items such as purchases , sales, interest, expenses etc., should be translated on
the basis of actual exchange rates however if same are unavailable then average rates should
be used
● Goods received from HO :are taken at an amount which is recorded in the books of HO
● Balance in HO account in the Books of Branch Books: taken at amounts recorded in HO Books
● Remittances : at Actual Exchange Rate
● Contingent liability: Closing Rate
The net exchange difference arising from the translation of items in the financial statements of a Non-Foreign
Integral Operation should be accumulated in Foreign Currency Translation Reserve until the disposal of Net
Investment.
It is important to note that unless otherwise stated, it is always reasonable to assume that the Branch is an
Integral foreign Operation.

Illustrative Studies:

8.1
W-1 Incorporation, an Indian company has branch at Country X. The trial balance of the branch as at
31.03.2023 is as follows:
$ $
Fixed Assets 51,000
Opening stock 22,000
Purchases 95,000
Sales 1,66,000
Good sent from HO 34,000
Carriage Inward and other branch 5,000
expenses
Debtors 9,000
Creditors 7,000
Cash and Bank 3,000
Head Office a/c 46,000
2,19,000 2,19,000
 Head office sent goods to Branch for Rs. 15,00,000
 The Head office Books have shown an amount of Rs. 20,00,000 due from Branch
 Closing stock is $ 20,000
 On 1.4.2021 when fixed assets were purchased the rate of exchange was Rs. 60 to 1 $
Exchange rates –
 on 1.4.2022: $ 1 = Rs. 63
 On 31.3.2023 - $ 1 = Rs. 67
 Average rate = $ 1= Rs. 65
Required:
Presuming that Branch is an Integral foreign Operation, calculate the exchange difference.
Solution:
$ $ Rate Rs. Rs.
Fixed Assets 51,000 60 30,60,000
Opening stock 22,000 63 13,86,000
Purchases 95,000 65 61,75,000
Sales 1,66,000 65 107,90,000
Good sent from HO 34,000 Actual 15,00,000
Carriage Inward and other branch 5,000 65 3,25,000
expenses
Debtors 9,000 67 6,03,000
Creditors 7,000 67 4,69,000

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Cash and Bank 3,000 67 2,01,000

Head Office a/c 46,000 Actual 20,00,000
Total 2,19,000 2,19,000 1,32,50,000 1,32,59,000
Exchange difference - Loss 9,000

8.2
W2-Incorporation, an Indian company has branch in Country X. The trial balance of the branch as at
31.03.2023 is as follows:
$ $
Fixed Assets 51,000
Opening stock 22,000
Purchases 95,000
Sales 1,66,000
Good sent from HO 34,000
Carriage Inward and other branch expenses 5,000
Debtors 9,000
Creditors 7,000
Cash and Bank 3,000
Head Office a/c 46,000
2,19,000 2,19,000
 Head office sent goods to Branch for Rs. 15,00,000
 The Head office Books have shown an amount of Rs. 20,00,000 due from Branch
 Closing stock is $ 20,000
 On 1.4.2021 when fixed assets were purchased the rate of exchange was Rs. 60 to 1 $
Exchange rates –
 on 1.4.2022: $ 1 = Rs. 63
 On 31.3.2023: $ 1 = Rs. 67
 Average rate: $ 1= Rs. 65
Presuming that Branch is a Non-Integral foreign Operation, calculate the exchange difference.
$ $ Rate Rs. Rs.
Fixed Assets 51,000 67 34,17,000
Opening stock 22,000 63 13,86,000
Purchases 95,000 65 61,75,000
Sales 1,66,000 65 107,90,000
Good sent from HO 34,000 Actual 15,00,000
Carriage Inward and other 5,000 65 3,25,000
branch expenses
Debtors 9,000 67 6,03,000
Creditors 7,000 67 4,69,000
Cash and Bank 3,000 67 2,01,000
Head Office a/c 46,000 Actual 20,00,000
Total 2,19,000 2,19,000 1,36,07,000 1,32,59,000
Exchange difference 3,48,000

8.3
W-3 Incorporation, an Indian company has branch at Country X. The trial balance of the branch as at
31.03.2023 is as follows:
$ $
Fixed Assets 51,000
Opening stock 22,000
Purchases 95,000
Sales 1,66,000

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$ $
Good sent from HO 34,000
Carriage Inward and other branch expenses 5,000
Debtors 9,000
Creditors 7,000
Cash and Bank 3,000
Head Office a/c 46,000
2,19,000 2,19,000
 Expenses outstanding $ 1,000
 Depreciate Fixed assets @ 10% per annum at written down value
 Head office sent goods to Branch for Rs. 15,00,000
 The Head office Books have shown an amount of Rs. 20,00,000 due from Branch
 Closing stock is $ 20,000
 On 1.4.2021 when fixed assets were purchased the rate of exchange was Rs. 60 to 1 $
Exchange rates –
 on 1.4.2022: $ 1 = Rs. 63
 On 31.3.2023: $ 1 = Rs. 67
 Average rate: $ 1= Rs. 65
Solution:
$ $ Rate Rs. Rs.
Fixed Assets 51,000 - 5,100= 45,900 60 27,54,000
Depreciation 5,100 60 3,06,000
Opening stock 22,000 63 13,86,000
Purchases 95,000 65 61,75,000
Sales 1,66,000 65 107,90,000
Good sent from HO 34,000 Actual 15,00,000
Carriage Inward and 5,000 + 1,000 65 3,90,000
other branch
expenses
Expenses o/s 1,000 67 67,000
Debtors 9,000 67 6,03,000
Creditors 7,000 67 4,69,000
Cash and Bank 3,000 67 2,01,000
Head Office a/c 46,000 Actual 20,00,000
Total 2,20,000 2,20,000 135,15,000 133,26,000
Exchange difference 11,000

8.4
An Indian company Moon Star limited has a branch at Virginia (USA). The branch is non-integral foreign
operation of the Indian company. On 31st March, 2022 the following balances appeared in the books of i
Branch are as folows:
$ $
Office equipments 48,000
Furniture and Fixtures 3,200
Stock as at 1.4.2021 22,400
Purchases 96,000
Sales - 1,66,400
Goods sent from HO 32,000
Expenses 5,200
HO Account 45,600
Debtors 9,600
Creditors 6,800

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Cash and Bank A/c 2,400

2,18,800 2,18,800

Further Information:
Salaries Outstanding $ 400
Depreciate Office Equipment and F/F @ 10% p.a on WDV basis.
HO sent goods to branch for ₹15,80,000
HO books have shown an amount of ₹20,50,000 due from branch.
Stock on 31st March, 2022 was $ 21,500.
On 1.4.2020 when FA were purchased the rate of Exchange was ₹ 43 per dollar.
st
The rate of exchange on 1.4.21 for 1 $ was ₹47 and on 31 March, 22 it was ₹50 per dollar.
Average rate during the year was ₹ 45 per dollar.
Prepare - a. Trial Balance incorporating adjustments given converting dollars into rupees and b Trading and
Profit and Loss A/c and the Balance Sheet of the Branch in the books of HO
Solution :
a.
In the books of Moon star Limited
BO Trial balance in ₹
Amount in $ x Exchange rate ₹ Rs. Rs.
Office Equipments 43,200 x 50 21,60,000
Depreciation on OE 4,800 x 50 2,40,000
F/F 2,880 x 50 1,44,000
Dep. On F/F 320 x 50 16,000
Stock - 1.4.21 22,400 x 47 10,52,800
Purchases 96,000 x 45 43,20,000
Sales 1,66,400 x 45 74,88,000
Good sent from HO 32,000 15,80,000
Expenses 5,200 + 400 = 5,600 x 45 2,52,000
Expenses o/s 400 x 50 20,000
Debtors 9,600 x 50 4,80,000
Creditors 6,800 x 50 3,40,000
Cash and Bank 2,400 x 50 1,20,000
Head Office a/c 45,600 20,50,000
Total 2,20,000 1,03,64,800 98,98,000
Exchange Difference 4,66,800
b.
Branch Trading and Profit & Loss A/c for the year ended 31st March, 202
Particular Rs. Particulars Rs.
To Opening stock 10,52,800 By Sales 74,88,000
To Purchases 43,20,000 By Closing stock $ 21,500 x ₹50 10,75,000
To Goods from head office 15,80,000
To Gross profit c/d 16,10,200
85,63,000 85,63,000
To Depreciation on O/E 2,40,000 + Dep. 2,56,000 By Gross profit b/d 16,10,200
On F/f 16,000
To Expenses 2,52,000
To Net Profit c/d 11,02,200
16,10,200 16,10,200

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(c)
Balance Sheet
Rs. Rs.
HO balance : 20,50,000 + Net profit 23,28,200 O/E 24,00,000 - 2,40,000 21,60,000
11,02,200
FCTR 4,66,800 F/F 1,60,000 - 16,000 Depreciation 1,44,000
Creditors 3,40,000 Closing stock 10,75,000
O/s salaries 20,000 Debtors 4,80,000
Prepaid Expenses 15,400
Cash /bank 1,20,000
39,79,000 39,79,000

8.5
On 31st December, 2020 the following balances appeared in the books of Chennai Branch of an English firm
having its HO office in New York:
Amount in(Rs.) Amount in (Rs.)
Stock on 1st Jan., 2020 2,34,000
Purchases and Sales 15,62,500 23,43,750
Debtors and Creditors 7,65,000 5,10,000
Bills Receivable and Payable 2,04,000 1,78,500
Salaries and Wages 1,00,000 -
Rent, Rates and Taxes 1,06,250 -
Furniture 91,000 -
Bank A/c 5,68,650
New York Account - 5,99,150
36,31,400 36,31,400
Stock on 31st December, 2020 was Rs. 6,37,500.
Branch account in New York books showed a debit balance of $ 13,400 on 31st December, 2020 and
Furniture appeared in the Head Office books at $ 1,750.
The rate of exchange for 1 $ on 31st December, 2019 was Rs. 52 and on 31st December, 2020 was Rs. 51.
The average rate for the year was Rs. 50.
Prepare in the Head Office books the Profit and Loss A/c and the Balance Sheet of the Branch assuming
integral foreign operation.
Solution:
a.
Calculation of Exchange Translation Loss Chennai Branch Trial Balance (converted in $) as on 31st
December, 2020
Dr. Cr. Conversion Dr. Cr.
Rate ($) ($)
Stock on 1st Jan., 2020 2,34,000 52 4,500
Purchases & Sales 15,62,500 23,43,750 50 31,250 46,875
Debtors & creditors 7,65,000 5,10,000 51 15,000 10,000
Bills Receivable and Bills Payable 2,04,000 1,78,500 51 4,000 3,500
Salaries and wages 1,00,000 50 2,000
Rent, Rates and Taxes 1,06,250 50 2,125
Furniture 91,000 1,750
Bank A/c 5,68,650 51 11,150
New York Account 5,99,150 13,400
Exchange translation loss (bal. fig.) 2,000
36,31,400 36,31,400 73,775 73,775

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b.
In the books of English Firm (Head Office in New York)
Chennai Branch Profit and Loss Account
for the year ended 31st December, 2020
($) ($)
To Opening stock 4,500 By Sales 46,875
To Purchases 31,250 By Closing stock 12,500
To Gross profit c/d 23,625 (6,37,500 / 51)
59,375 59,375
To Salaries 2,000 By Gross profit b/d 23,625
To Rent, rates and taxes 2,125
To Exchange translation loss 2,000
To Net Profit c/d 17,500
23,625 23,625
Balance Sheet of Chennai Branch as on 31st December, 20
Liabilities Rs. Assets Rs.
Head Office A/c 13,400 Furniture 1,750
Add: Net profit 17,500 30,900 Closing Stock 12,500
Trade creditors 10,000 Trade Debtors 15,000
Bills Payable 3,500 Bills Receivable 4,000
Cash at bank 11,150
44,400 44,400

8.6 - RTP
DM Limited , Delhi has a branch in London. London branch is an integral foreign operation of DM limited. At
the end of the year 31st march 2022, the branch furnishes the following trial balance in UK Pound:
£ £
Fixed Assets - acquired on 1st April , 2018 _ 24,000
Stock as on 1st April, 20021 11,200
Goods from HO 64,000 -
Expenses 4,800 _
Debtors 4,800
Creditors - 3,200
Cash at bank 1,200 _
HO Account 22,800
Purchases 12,000 _
Sales - 96,000
1,22,000 1,22,000
In the books of head office, the Branch A/c stood as follows:
London Branch A/c
Particular Rs. Particulars Rs.
To Balance b/d 20,10,000 By Cash 52,16,000
To Goods sent to branch 49,26,000 By Balance c/d 17,20,000
69,36,000 69,36,000
Further Information:
 Fixed assets are to depreciated @ 10% per annum on SLM basis.
 On 31st March 2022:
Expenses outstanding £ 400
Prepaid expenses - £ 200
Closing stock - £ 8,000
 Rates of Exchange :

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1st April , 2018 - ₹ 70 to £ 1

1st April , 2021 - ₹ 76 to £ 1
31st March, 2022 - ₹ 77 to £ 1
Average - ₹75 £ 1
You are required to:
(i) Prepare the Branch Trading & Profit & Loss A/c in dollars.
(ii) Convert the Trial Balance of branch into Indian currency, incorporating adjustments of outstanding
and prepaid expenses.
Solution:
a.
Converted Branch Trial Balance (into Indian Currency)
Particulars Rate per £ Dr. (Rs.) Cr. (Rs.)
Fixed Assets 24,000 x 70 70 16,80,000 -
Stock April 1, 2021 11,200 x 76 76 8,51,200 -
Goods from head office Actual 49,26,000 -
Sales 96,000 x 75 75 - 72,00,000
Purchases 12,000 x 75 75 9,00,000 -
Expenses 4,800 + 400 - 200 = 5,000 x 75 75 3,75,000 -
Debtors 4,800 x 77 77 3,69,600 -
Creditors 3,200 x 77 77 - 2,46,400
Outstanding Expenses : 400 x 77 77 - 30,800
Prepaid Expenses : 200 x 77 77 15,400 -
Cash at bank : 1,200 x 77 77 92,400 -
HO account - 17,20,000
Total 92,09,600 91,97,200
Exchange difference - Gain 12,400
Closing stock : £ 8,000 x ₹ 77 = ₹ 6,16,000
(b)
Branch Trading and Profit & Loss A/c for
the year ended 31st March, 2022
Particular Rs. Particulars Rs.
To Opening stock 8,51,200 By Sales 72,00,000
To Purchases 9,00,000 By Closing stock 6,16,000
To Goods from head office 49,26,000
To Gross profit c/d 11,38,800 43,32,000
78,16,000 78,16,000
To Depreciation 1,68,000 By Gross profit b/d 11,38,800
To Expenses 3,75,000 By Exchange difference 12,400
To Net Profit c/d 6,08,200
11,51,200 11,51,200
(c)
Balance Sheet
Rs. Rs.
HO balance : 17,20,000 + Net profit 23,28,200 Fixed Assets 16,80,000
6,08,200
Outstanding expenses 30,800 Less: Depreciation (1,68,000) 15,12,000
Creditors 2,46,400 Closing stock 6,16,000
Debtors 3,69,600
Prepaid Expenses 15,400
Cash at bank 92,400
26,05,400 26,05,400

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8.7 - Professional Examination Problem

On 31st March, 2022, the following Ledger balances have been extracted from books of Washington branch
office:
Account $
Building 180
Stock as on 1.4.21 26
Cash and bank balances 57
Purchases 96
Sales 110
Commission receipts 28
Debtors 48
Creditors 65
You are required to convert above ledger balances into Indian Rupees. Use following rates of exchange:
Opening rate per $ ₹46
Closing rate per $ ₹ 50
Average rate per $ ₹48
For Fixed assets per &₹42

8.8 - Professional Examination Problem

ABCD Ltd., Delhi, have a branch in Sydney, Australia, which is an integral foreign operation of the company..
At the end of 31st March, 2022, the following ledger balances have been extracted from the books of the
Delhi Head Office and the Sydney branch:
Delhi Sydney
(Rs. thousand) ( Australian dollars in
thousands)
Debit Credit Debit Credit
Share Capital - 1,250 - -
Reserves & Surplus - 940 - -
Land 475 - - -
Buildings (Cost) 1,000 - - -
Buildings Dep. Reserve - 200 - -
Plant & Machinery (Cost) 2,000 - 100 -
Plant & Machinery Dep. Reserve - 500 - 20
Debtors / Creditors 500 270 60 20
Stock (1.4.2021) 250 - 25 -
Branch Stock Reserve - 65 - -
Cash & Bank Balances 125 - 4 -
Purchases / Sales 275 600 25 125
Goods sent to Branch - 1,500 30 -
Managing Director's salary 50 - - -
Wages & Salaries 100 - 16 -
Rent - - 6 -
Office Expenses 25 - 12 -
Commission Receipts - 275 - 100
Branch / H.O. Current A/c 800 - - 15
5,600 5,600 280 280
The following information is also available: Stock as at 31.3.2022:
 Delhi ₹2,00,000 Sydney $ 10 (all stock out of stock received from Delhi)
 HO always sents goods to branch at cost plus 25%
 Provision is to be made for doubtful debts at 5%

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 Depreciation is to be provided on buildings at 10% and on Plant and machinery at 20% on written
down value.
You are required to convert the Sydney Branch Trial Balance into rupees; (use the following rates of
exchange:
Opening rate A $ = Rs. 50
Closing rate A $ = Rs. 55
Average rate A $ = Rs. 52
For Fixed Assets A $ = Rs. 45
Prepare trading and profit and loss account for the year ended 31st March 2022 showing results of
HO and BO.
Solution:
Sydney Branch Trial Balance (in Rupees)
As on 31st March, 2020
(Rs. '000)
Conversion DR $ CR Rate per Dr. Cr.
$ A$
Plant & Machinery (cost) 100 - Rs. 45 4,500 -
Plant & Machinery Dep. Reserve - 20 Rs. 45 - 900
Debtors / Creditors 60 20 Rs. 55 3,300 1,100
Stock (1.4.2021) 25 - Rs. 50 1,250 -
Cash & Bank Balances 4 - Rs. 55 220 -
Purchase / Sales 25 125 Rs. 52 1,300 6,500
Goods received from H.O. 30 - Actual 1,500 -
Wages & Salaries 18 - Rs. 52 936 -
Rent 6 - Rs. 52 312 -
Office expenses 12 - Rs. 52 624 -
Commission Receipts - 100 Rs. 52 - 5,200
H.O. Current A/c - 15 Actual 800
13,942 14,500
Exchange loss (balancing figure) 558
14,500 14,500
Closing stock : $ 10 x ₹55 = 550
HO and BO Trading and profit and Loss a/c
HO BO HO BO
Opening stock 250 1,250 Sales 600 6,500.00
Purchases 275 1,300 GSTB 1,500 -
Goods recd. From HO - 1,500 Closing stock 200 0.55
Wages and salaries 100 936
Gross Profit 1,675 1,514.55
2,300 6,500.55 2,300 6,500.55
Rent - 312 Gross profit b/d 1,675 1,514.55
Office Expenses 25 624 Commission receipts 255 5,100.00
PFDD @5% 25 165
Depreciation :
Buildings Cost 1,000 - 80 -
dep. Reserve 200 =
WDV 800 @ 10%
P/M : 300 720
HO: Cost (2,000 - 500 =
1,500) x 20%
BO: Cost ( 4,500 - 900 =
3,600) x 20%

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HO BO HO BO
Balance c/d 1,520 4,893.55
1,950 6,714.55 1,950 6,714.55
Combined P/L
MD Salary 50.00 By Balance b/d: 1,520 + 4,893.55 6,413.55
Exchange Loss 558.00 By Branch stock reserve opening 65.00
Stock reserve closing : 0.55 x 25/125 0.11
Net profit 5,870.44
6,478.55 6,478.55

8.9 - Professional Examination Problem

S & M Ltd., Bombay, have a branch in Sydney, Australia. Sydney branch is an integral foreign operation of S
& M Ltd.
At the end of 31st March, 2020, the following ledger balances have been extracted from the books of the
Bombay Office and the Sydney Office:
Bombay Sydney
(Rs. thousand) (Aust. dollars thousands)

Debit Credit Debit Credit

Share Capital - 2,000 - -
Reserves & Surplus - 1,000 - -
Land 500 - - -
Buildings (Cost) 1,000 - - -
Buildings Dep. Reserve - 200 - -
Plant & Machinery (Cost) 2,500 - 200 -
Plant & Machinery Dep. Reserve - 600 - 130
Debtors / Creditors 280 200 60 30
Stock (1.4.2019) 100 - 20 -
Branch Stock Reserve - 4 - -
Cash & Bank Balances 10 - 10 -
Purchases / Sales 240 520 20 123
Goods sent to Branch - 100 5 -
Managing Director's salary 30 - - -
Wages & Salaries 75 - 45 -
Rent - - 12 -
Office Expenses 25 - 18 -
Commission Receipts - 256 - 100
Branch / H.O. Current A/c 120 - - 7
4,880 4,880 390 390
The following information is also available: Stock as at 31.3.2020:
 Bombay Rs. 1,50,000 Sydney A $ 3,125 (all stock out of purchases made abroad)
 HO always sends goods to branch at cost plus 25%
 Provision is to be made for doubtful debts at 5%
 Depreciation is to be provided on buildings at 10% and on Plant and machinery at 20% on written
down value.
You are required to convert the Sydney Branch Trial Balance into rupees; (use the following rates of
exchange:
Opening rate A $ = Rs. 50
Closing rate A $ = Rs. 53
Average rate A $ = Rs. 51
For Fixed Assets A $ = Rs. 46

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Prepare trading and profit and loss account for the year ended 31st March 2020 showing results of
HO and BO.
Solution:
Sydney Branch Trial Balance (in Rupees)
As on 31st March, 2020
(Rs. '000)
Conversion DR $ CR Rate per Dr. Cr.
$ A$
Plant & Machinery (cost) 200 - Rs. 46 9,200 -
Plant & Machinery Dep. Reserve - 130 Rs. 46 - 5,980
Debtors / Creditors 60 30 Rs. 53 3,180 1,590
Stock (1.4.2019) 20 - Rs. 50 1,000 -
Cash & Bank Balances 10 - Rs. 53 530 -
Purchase / Sales 20 123 Rs. 51 1,020 6,273
Goods received from H.O. 5 - - 100 -
Wages & Salaries 45 - Rs. 51 2,295 -
Rent 12 - Rs. 51 612 -
Office expenses 18 - Rs. 51 918 -
Commission Receipts - 100 Rs. 51 - 5,100
H.O. Current A/c - 7 120
18,855 19,063
Exchange loss (balancing figure) 208
19,063 19,063
Closing stock : $ 3,125 x ₹ 53 = 165.625 = 165.625 thousands = ₹166 approx.
HO and BO Trading and profit and Loss a/c
HO BO HO BO
Opening stock 100 1,000 Sales 520 6,273
Purchases 240 1,020 GSTB 100 -
Goods recd. From HO - 100 Closing stock 150 166
Wages and salaries 75 2,295
Gross Profit 355 2024
770 6,439 770 6,439
Rent - 612 Gross profit b/d 355 2024
Office Expenses 25 918 Commission receipts 255 5,100
PFDD @5% 14 159
Depreciation :
Buildings Cost 1,000 - 80 -
dep. Reserve 200 =
WDV 800 @ 10%
P/M : 380 644
HO: Cost (2,500 -600 =
1,900) x 20%
BO: Cost ( 9,200 - 5,980
= 3,220) x 20%
Balance c/d 112 4,790
611 7,124 611 7,125
Combined P/L
MD Salary 30 By Balance b/d: 112 + 4,790 4,902
Exchange Loss 208 By Branch stock reserve 4
Net profit 4,668
4,906 4,906

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8.10 - Professional Examination Problem

M/s Carlin has head office at New York (U.S.A.) and branch at Mumbai (India). Mumbai branch is an integral
foreign operation of Carlin & Co.
Mumbai branch furnishes you with its trial balance as on 31st March, 2020 and the additional information
given thereafter:
Dr. Cr.
Rupees in thousands
Stock on 1st April, 2020 300 -
Purchases and sales 800 1,200
Sundry Debtors and creditors 400 300
Bills of exchange 120 240
Wages and salaries 560 -
Rent, rates and taxes 360 -
Sundry charges 160 -
Computers 240
Bank balance 420 -
New York office a/c - 1,620
3,360 3,360
Additional information:
(a) Computers were acquired from a remittance of US $ 6,000 received from New York head office and paid
to the suppliers. Depreciate computers at 60% for the year.
(b) Unsold stock of Mumbai branch was worth Rs. 4,20,000 on 31st March, 2020.
(c) The rates of exchange may be taken as follows:
(i) On 1.4.2019 @ Rs. 40 per US $
(ii) On 31.3.2020 @ Rs. 42 per US $
(iii) Average exchange rate for the year @ Rs. 41 per US $
(iv) Conversion in $ shall be made upto two decimal accuracy.
You are asked to prepare in US dollars the revenue statement for the year ended 31st March, 2020 and the
balance sheet as on that date of Mumbai branch as would appear in the books of New York head office of
Carlin & Co. You are informed that Mumbai branch account showed a debit balance of US $ 39609.18 on
31.3.2020 in New York books and there were no items pending reconciliation.
Solution:
M/s Carlin
Mumbai Branch Trial Balance in (US $) as on 31st March, 2020
Conversion Dr. Cr.
rate per US $ US $ US $
(Rs.)
Stock on 1.4.19 40 7,500.00 -
Purchases and sales 41 19,512.20 29,268.29
Sundry debtors and creditors 42 9,523.81 7,142.86
Bills of exchange 42 2,857.14 5,714.29
Wages and salaries 41 13,658.54 -
Rent, rates and taxes 41 8,780.49 -
Sundry charges 41 3,902.44 -
Computers - 6,000.00 -
Bank balance 42 10,000.00 -
New York office A/c - - 39,609.18
81,734.62 81,734.62

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Trading and Profit & Loss Account for the year ended 31st March, 2020
US $ US $
To Opening Stock 7,500.00 By Sales 29,268.29
To Purchases 19,512.20 By Closing stock
(4,20,000/42) 10,000.00
To Wages and salaries 13,658.54 By Gross Loss c/d 1,402.45
40,670.74 40,670.74
To Gross Loss b/d 1,402.45 By Net Loss 17,685.38
To Rent, rates and taxes 8,780.49
To Sundry charges 3,902.44
To Depreciation on computers 3,600.00
(US $ 6,000 × 0.6)
17,685.38 17,685.38
Balance Sheet of Mumbai Branch as on 31st March, 2020
Liabilities US $ Assets US $ US $
New York Office A/c 39,609.18 Computers 6,000.00
Less : Net Loss (17,685.38) 21,923.80 Less: Depreciation (3,600.00) 2,400.00
Sundry creditors 7,142.86 Closing stock 10,000.00
Bills payable 5,714.29 Sundry debtors 9,523.81
Bank balance 10,000.00
Bills receivable 2,857.14
34,780.95 34,780.95

8.11 Professional Examination Problem

The Washington branch of F- 9 Mumbai sent the following trial balance as on 31st December, 2019:
$ $
Head office A/c _ 22,800
Sales 84,000
Debtors and creditors 4,800 3,400
Machinery 24,000 _
Cash at bank 1,200
Stock, 1 January, 2019 11,200 _
Goods from H.O. 64,000 _
Expenses 5,000 _
1,10,200 1,10,200
In the books of head office, the Branch A/c stood as follows:
Washington Branch A/c
Particular Rs. Particulars Rs.
To Balance b/d 8,10,000 By Cash 28,76,000
To Goods sent to branch 29,26,000 By Balance c/d 8,60,000
37,36,000 37,36,000
Goods are sent to the branch at cost plus 10% and the branch sells goods at invoice price plus 25%.
Machinery was acquired on 31st January, 2007, when $ 1.00 = Rs. 40.
Rates of exchange were :
1st January, 2019 $ 1.00 = Rs. 46
31st December, 2019 $ 1.00 = Rs. 48
Average $ 1.00 = Rs. 47
Machinery is depreciated @ 10% and the branch manager is entitled to a commission of 5% on the profits of
the branch.
You are required to:
(i) Prepare the Branch Trading & Profit & Loss A/c in dollars.

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(ii)Convert the Trial Balance of branch into Indian currency and prepare Branch Trading & Profit and Loss
A/c and the Balance sheet in the books of head office.
Solution:
(i) In the Books of Head Office
Branch Trading and Profit & Loss A/c (in Dollars) for the year ended 31st December, 2019
Particular $ Particulars $
To Opening stock 11,200 By Sales 84,000
To Goods from H.O. 64,000 By Closing stock (W.N.2) 8,000
To Gross profit c/d 16,800
92,000 92,000
To Expenses 5,000 By Gross profit b/d 16,800
To Depreciation (24,000 x 10%) 2,400
To Manager's commission (W.N.1) 470
To Net profit c/d 8,930
16,800 16,800
(ii) (a)
Converted Branch Trial Balance (into Indian Currency)
Particulars Rate per $ Dr. (Rs.) Cr. (Rs.)
Machinery 40 9,60,000 _
Stock January 1, 2019 46 5,15,200 _
Goods from head office Actual 29,26,000 _
Sales 47 39,48,000
Expenses 47 2,35,000 _
Debtors & creditors 48 2,30,400 1,63,200
Cash at bank 48 57,600
Head office A/c Actual 8,60,000
Difference in exchange rate (b.f.) 47,000
49,71,200 49,71,200
Closing stock $ 8,000 (W.N. 2) 48 Rs. 3,84,000
(b)
Branch Trading and Profit & Loss A/c for
the year ended 31st December, 2019
Particular Rs. Particulars Rs.
To Opening stock 5,15,200 By Sales 39,48,000
To Goods from head office 29,26,000 By Closing stock (W.N.2) 3,84,000
To Gross profit c/d 8,90,800
43,32,000 43,32,000
To Expenses 2,35,000 By Gross profit b/d 8,90,800
To Depreciation @ 10% 96,000
on Rs. 9,60,000
To Exchange difference 47,000
To Manager's commission due (W.N.1) 22,560
To Net Profit c/d 4,90,240
8,90,800 8,90,800
(c)
Balance Sheet
Rs. Rs.
To Balance b/d 8,60,000 By Machinery 9,60,000
To Net profit Creditors 4,90,240 Less: Depreciation (96,000) 8,64,000
To Creditors 1,63,200 By Closing stock 3,84,000

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Balance Sheet
Rs. Rs.
To Outstanding commission 22,560 By Debtors 2,30,400
By Cash at bank 57,600
15,36,000 15,36,000
Working Notes :
1. Calculation of manager's commission @ 5% on profit
i.e. 5% of $[16,800 - (5,000 + 2,400)]
Or 5% × $9,400 = $ 470
Manager's commission due in Rupees = $ 470 × Rs. 48 = Rs. 22,560
2. Calculation of closing stock $
Opening stock 11,200
Add: Goods from head office 64,000
75,200
Less: Cost of goods sold (at invoice price) 84,000 -16,800*
i.e. *27.50 / 137.50 × 84,000 (67,200)
Closing stock 8,000
Closing stock in Rupees = $8,000 x Rs. 48 = Rs. 3,84,000.
Note : Manager is entitled to commission on profits earned at the end of the year.

8.12 - Professional Examination Problem

M/s Hill -view limited has head office at Singapore and branch at Delhi (India). Delhi branch is an integral
foreign operation of M/s Hill -view limited .
Delhi branch furnishes you with its trial balance as on 31st March, 2022 and the additional information given
thereafter:
Dr. Cr.
Rupees in thousands
Stock on 1st April, 2021 600 -
Purchases and sales 1,600 2,400
Sundry Debtors and creditors 800 600
Bills of exchange 240 480
Wages and salaries 1,120 -
Rent, rates and taxes 720 -
Sundry charges 320 -
Computers 600
Bank balance 520 -
New York office a/c - 3,040
6,520 6,520
Additional information:
(a) Computers were acquired from a remittance of Singapore Dollar(SD $) 12,000 received from Singapore
head office and paid to the suppliers. Depreciate computers at 40% for the year.
(b) Unsold stock of Delhi branch was worth ₹ 15,60,000 on 31st March, 2022.
(c) The rates of exchange may be taken as follows:
(i) On 1.4.2021 @ Rs. 50 per SD $
(ii) On 31.3.2022 @ Rs. 52 per SD $
(iii) Average exchange rate for the year @ Rs. 51 per US $
(iv) Conversion in $ shall be made upto two decimal accuracy.
Delhi branch account showed a debit balance of SD $ 59,897.43 on 31.3.2022 in Head Office books and
there were no items pending reconciliation.
You are asked to prepare in SD dollars :
 the revenue statement for the year ended 31st March, 2022 and
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 the balance sheet as on that date in the books of HO

Solution:
M/s Hill View Limited
Delhi Branch Trial Balance in (Singapore Dollar) as on 31st March, 2022
Conversion Dr. Cr.
rate per Singapore Singapore
Singapore dollar dollar dollar
(Rs.)
Stock on 1.4.21 50 12,000.00 -
Purchases and sales 51 31,372.55 47,058.82
Sundry debtors and creditors 52 15,384.61 11,538.46
Bills of exchange 52 4,615.38 9,230.77
Wages 51 21,960.78 -
Rent, rates and taxes 51 14,117.65 -
Sundry Expenses 51 6,274.51 -
Computers Actual 12,000 -
Bank balance 52 10,000 -
Singapore office A/c Actual - 59,897.43
1,27,725.48 1,27,725.48
Revenue Statement for the year ended 31st March, 2022
Singapore Singapore
dollar dollar
To Opening Stock 12,000.00 By Sales 47,058.82
To Purchases 31,372.55 By Closing stock
(15,60,000/52) 30,000.00
To Wages 21,960.78
To Gross profit : B.F 11,725.49
77,058.82 77,058.82
To Rent, rates and taxes 14,117.65 By Gross Profit b/d 11,725.49
To Sundry charges 6,274.51 By Net Loss c/d (B.F) 13,466.67
To Depreciation on computers 4,800.00
(US $ 12,000 × 0.40)
25,192.16 25,192.16
Balance Sheet of Delhi Branch as on 31st March, 2022
Liabilities US $ Assets US $ US $
Singapore Office A/c 59,897.43 Computers 12,000.00
Less : Net Loss (13,466.67) 46,430.76 Less: Depreciation (4,800.00) 7,200.00
Sundry Creditors 11,538.46 Closing stock 30,000.00
Bills payable 9,230.77 Sundry debtors 15,384.61
Bank balance 10,000.00
Bills receivable 4,615.38
67,199.99 67,199.99

Section - 9 - MCQs
Select most appropriate option -
1. If goods are invoiced to branches at cost, trading results of branch can be ascertained by
(a) Debtors method.
(b) Stock and debtors method.
(c) Either (a) or (b).

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2. Under branch trading and profit loss account method

(a) H.O prepares profit and loss account.
(b) Each branch is treated separate entity.
(c) Both (a) and (b).
3. Goods may be invoiced to branch at
(a) Cost or Selling price.
(c) Wholesale price.
(c) Both (a) and (b).
4. Under debtors method, opening balance of debtors is
(a) Debited to branch account.
(b) Credited to branch account.
(c) Debited to H.O account.
5. Cost of goods returned by branch will have the following effect
(a) Goods sent to branch account will be debited.
(b) Branch stock account will be credited.
(c) (a) and (b).
6. Assets and liabilities of a non- integral foreign operation should be converted at
(a) Closing exchange rate.
(b) Average exchange rate.
(c) Opening exchange rate.
7. All of the following are examples of monetary assets except:
(a) Trade Payables.
(b) Inventory.
(c) Trade Receivables.
8. If asset of an integral foreign operation is carried at cost, cost and depreciation of tangible fixed assets is
translated at
(a) Average exchange rate.
(b) Closing exchange rate.
(c) Exchange rate at the date of purchase of asset.
9. Incomes and expenses of a NFO is translated at
(a) Average rate that approximates the actual exchange rates.
(b) Exchange rate at the date of transaction.
(c) Either (a) or (b).
10. AS 11 classifies foreign branches are classified as
(a) Autonomous branches and non-autonomous branches.
(b) Uncontrolled and fully controlled branches.
(c) Integral and non-integral foreign operations.
11. under branch account, debtors system cash sales is shown in the _____________.
A. debit
B. credit
C. asset
D. none
Answer: D
12. Branch which does not maintain its own set of books is ______________.
A. dependent branch.
B. independent branch.
C. foreign branch.
D. local branch .

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Answer: A
13. The business policies and the administration of a branch are wholly controlled by the head office the
type of branch is __________.
A. independent branch.
B. dependent branch.
C. local branch .
D. foreign branch.
Answer: B
14. A branch set up merely for booking orders which are executed by head office is ____.
A. dependent branch.
B. independent branch.
C. foreign branch.
D. local branch.
Answer: A
15. Branches not keeping full system of accounting are ________.
A. independent branch.
B. dependent branch.
C. local branch .
D. foreign branch.
Answer: B
16. All branch expenses such as rent, salary, are paid by the head office in case of _____.
A. independent branch.
B. local branch.
C. local branch.
D. dependent branch.
Answer: D
17. Dependent branch make _______.
A. only cash sales.
B. only credit sales.
C. cash and credit sales.
D. Instalment sales.
Answer: C
18. Under stock and debtors system the head office opens _________.
A. branch adjustment account.
B. branch debtors account.
C. branch creditors account .
D. branch cash account.
Answer: A
19. Which of the following is to be recorded in an income and expenditure account?
A. Purchase of a fixed asset
B. Capital expenditure incurred on a fixed asset
C. Profit on the sale of a fixed asset
D. Sale of a fixed asset
Answer: C
20. Under branch accounts debtors system, the depreciation of an asset is _______.
A. show in debtors account.
B. shown in debit side of branch account.
C. not shown in branch account .

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D. shown in credit side of branch account.

Answer: C
21. Under branch accounts debtors system, opening balance of assets are recorded in ____.
A. credit side.
B. debit side.
C. first credit and debit side.
D. first debit and credit side.
Answer: A
22. Under branch accounts debtors system, closing balance of assets are recorded in ________.
A. credit side.
B. debit side.
C. first credit and debit side.
D. first debit and credit side.
Answer: A
23. Under branch accounts debtors system, opening balance of liabilities are recorded in ___________.
A. first credit and debit side.
B. first debit and credit side.
C. credit side.
D. debit side.
Answer: C
24. Under branch accounts debtors system, closing balance of liabilities are recorded in _________.
A. first credit and debit side.
B. first debit and credit side.
C. credit side.
D. debit side.
Answer: D
25. Under branch accounts debtors system, goods sent to branch account is recorded in _________.
A. debit side.
B. credit side.
C. asset side .
D. liabilities side.
Answer: A
26. Under branch accounts debtors system, loading on goods sent to branch adjusted in ________.
A. debit side.
B. credit side.
C. asset side .
D. liabilities side.
Answer: B
27. Under branch accounts debtors system, bad debts, discount allowed to debtors is ________.
A. shown in debit side.
B. shown in credit side.
C. shown in asset side .
D. not shown.
Answer: B
28. Under branch accounts debtors system, credit sales is _______.
A. shown in debit side.
B. shown in credit side.
C. shown in asset side .

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D. not shown.
Answer: A
29. The difference between goods sent by head office and received by the branch is known
as___________.
A. goods in transit.
B. goods in godown.
C. goods in production.
D. goods in warehouse.
Answer: A
30. Under stock and debtors system of branch account, branch adjustment account is opened when
goodssent to branch is at ________.
A. cost price.
B. invoice price.
C. market price.
D. normal price.
Answer: B
31. Under stock and debtors system of branch account, the account prepared to record all the
transactionsrelating to branch debtors is recorded in ________.
A. branch expenses account.
B. branch adjustment account.
C. branch debtors account.
D. branch creditors account.
Answer: C

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