FYBCOM – DIV A, B & C - SEM II – 2024-2025

ACCOUNTS MAJOR
ACCOUNTANCY & FINANCIAL MANAGEMENT PAPER II

A Branch is a local office which is a part of a large concern. A Branch is geographically located
away from the large concern’s Head Office unlike a Department which is a division or part of the
Head Office and is located in the same premise

Types of Branches:

1) Based on their dependence of the HO

Dependent Branch & Independent Branch
2) Based on their Location
Indian Branch & Foreign Branch

METHODS OF BRANCH ACCOUNTING

DEPENDENT BRANCHES INDEPENDENT
BRANCHES
1. DEBTORS METHOD
i) Goods sent AT COST Independent Branches
ii) Goods sent AT INVOICE PRICE do their own
Dependent Branch is treated as a Debtor of the Head Office & accounting and do not
accounting is done accordingly. The rule debit the receiver & credit depend on the HO to
the giver is followed. do their accounting.

2. STOCK & DEBTORS METHOD

i) Goods sent AT COST
Branch Stock Account is treated as the Branch Trading A/c here

ii) Goods sent AT INVOICE PRICE

Branch Stock under this method is a Real Account showing the
movement of goods.
Branch Adjustment Account is treated as the Branch Trading A/c
here

1
A Branch is a local office which is a part of a large concern. A Branch is geographically located away
from the large concern’s Head Office unlike a Department which is a division or part of the Head Office
and is located in the same premise

Types of Branches:

1) Based on their dependence of the HO

Dependent Branch & Independent Branch
2) Based on their Location
Indian/Domestic Branch & Foreign Branch

METHODS OF BRANCH ACCOUNTING DEPENDENT BRANCHES

1. DEBTORS METHOD
i) Goods sent AT COST
ii Goods sent AT INVOICE PRICE
Dependent Branch is treated as a Debtor of the Head Office & accounting is done accordingly. The rule
debit the receiver & credit the giver is followed.

HO will account for transactions only between branch & HO or HO & branch

HO will not account for transactions between branch & other parties.

These transactions will have to be kept track of by branch itself in its memorandum
(rought/draft) books
HO ---> BRANCH ---> OUTSIDERS, CUSTOMERS
<-- <--
ACCOUNTED BY HO NOT ACCOUNTED BY HO

2. STOCK & DEBTORS METHOD

i) Goods sent AT COST
Branch Stock Account is treated as the Branch Trading A/c here
ii Goods sent AT INVOICE PRICE
Branch Stock under this method is a Real Account showing the movement of goods.
Branch Adjustment Account is treated as the Branch Trading A/c here
I DEBTORS METHOD ( GOODS SENT AT COST PRICE OR INVOICE PRICE)
HO TREATS BRANCH
HO LIKE A DEBTROR A/C BRANCH (MEMORANDUM)
BRANCH A/C BRANCH STOCK
GOODS SENT TO BRANCH A/C BRANCH DEBTORS
BRANCH CASH / BANK
BRANCH FIXED ASSETS
BRANCH EXPENSES
BRANCH LIABILITES

II STOCK & DEBTORS METHOD 1 BRANCH DOES NOT MAINTAIN EVEN THE MEMORANDUM BOOKS
1) GOODS SENT AT COST PRICE 2 FULL ACCOUNTING IS DONE BY HO FOR THE DEPENDENT BRANCH
HO BRANCH PROB 6 3 HENCE HO DOES MORE DETAILED ACCOUNTING FOR BRANCH
BRANCH STOCK LIKE THE TRADING A/C --- 4 HO FINDS OUT GROSS PROFIT & NET PROFIT OF THE BRANCH
BRANCH DEBTORS --- 5 AS HO IS KEEPING COMPLETE RECORDS FOR BRANCH, THEREFORE HO
BRANC
H A/C BRANCH CASH / BANK --- WILL HAVE TO EVEN ACCOUNT FOR TRANSACTIONS BETWEEN BRANCH
BRANCH FIXED ASSETS --- & OUTSIDERS/THIRD PARTIES/CUSTOMERS
BRANCH EXPENSES ---
BRANCH LIABILITES ---
BRANCH P&L A/C ---

+ GOODS SENT TO BRANCH A/C

2) GOODS SENT AT INVOICE PRICE

HO BRANCH PROB 7
BRANCH STOCK REAL A/C ---
BRANCH ADJUSTMENT A/C LIKE THE TRADING A/C
BRANCH DEBTORS ---
BRANC
H A/C BRANCH CASH / BANK ---
BRANCH FIXED ASSETS ---
BRANCH EXPENSES ---
BRANCH LIABILITES ---
BRANCH P&L A/C ---

+ GOODS SENT TO BRANCH A/C

 Accountancy and Financial Management (F. Y.B.Com.: SEM-11)
174 Branch Accounts 175
(vi) To coordinate the operations of various brandies.
(vii) To incorporate the profit or loss made by branch and its assets and liabilities in the head ORKSHEET 1 : ENTRIES- GOODS SENT ON COST

office's final accounts.

(viii) To fulfill the audit requirements under the Companies Act in case of a company.
No. I Transaction I Entry I Amount
Entries During the Year
3. Distinction Between Branch Accounts and Departmental Accounts
(1) Goods Sent to Branch (a) by H. 0. or (b) by Another B h.
1#3ii!:JitP:t;tM@Ifi1Li4J•13kNJif113~if4IH
Branch Ale ranc .
To Goods sent to Branch Ale Dr.,
Departmental Accounts
Basis of Distinction Branch Accounts (2) (a) Cash·sent to Branch or (b) Expenses of Branch Met by H 0.
Departmental .accounts are Branch Ale ., · ··
Maintenance of Branch accounts may be To Cash/ Bank Ale . Dr. · ,
1. maintained either at branch
maintained one place only.
Accounts
or at head office. (3) z;~:o~=t~~~~~;ot~~~ (a) 'htBranch or {b) by Branch Customers or
2. Allocation of
Common
No allocation problem arises

of each branch can be

Common expenses are
since the expenses in respect distributed among the
departments concerned on To Branch Ale
ranc
Goods sent to Branch Ale
o another Branch·

.
· Dr
·
i .
Expenses
identified. .
some equitable basis
considered suitable in the
(4) gas~;em:rzd to H.O. (a) by Branch or (b) by Branch Customers:
as an c . D
case. To Branch A/c . r. 1
No such problem arises.
the Branch ale will indicate the amount of prof/ elbra~ch at thiS stage, the balance in
Reconciliation of head office Note : If there are no goods and cash left with h .
3. Reconciliation
branch has sold all the goods and sent all the c~ o~ oss_m respect of the branch , as the
and branch accounts is
always be some items left with the branch at t~ received on s~le. ~owever, there will
necessary in case of
independent branches at the follows : e year-end wh1ch w111 be recorded as
end of the accounting year.
No such problem arises in
At the time of finalisation of Closing balances of Br. Assets/Liabilities c/d
4. Conversion of accounts, conversion of
departmental accounts.
Foreign Currency (1) Branch assets at end of year:
figures of foreign branch is Stock Ale Dr.
Figures
necessary. Debtors Ale Dr.
Cash Ale Dr.
Fixed Assets Ale Dr.
3. DEBTORS METHOD Pre-paid expenses Ale Dr.
To Branch Ale
When the dependent branch is of small size, the accounting is done ander the 'Debtors Method'.
Under the Debtors Method a separate Account (styled as .... Branch Account) is"kept by the Head
(2) Branch liabilities at end of year :
Branch Ale Dr.
Office for each dependent branch, e.g. Delhi Branch Account, Mumbai Branch Account and so on.
To Creditors Ale
This single branch account is used to record all items relating to the branch, i.e. branch income,
To Outstanding expenses Ale
branch expenses, branch assets and branch liabilities. The accounting procedure is different depending
upon whether the goods are sent to the branch at cost or at a price higher than cost (loaded price). ~~~et~!~ec~~:~~dbu~~~~~~~t~~t~~e~~:~~~~biliti~s of the branch are first ascertained
These amounts are then recorded in the Br ~~ ranch Cash ~tc. kept at the Branch.
• sheet of the concern as a whole b . anc c and shown In the closing balance
4. GOODS SENT AT COST
above entries are reversed, to brin:f~~~~~gt~he abo_v e en~ries. In the next year, the
shown below : e opemng ba ances of branch items, as
When the Head Office sends the goods to the branch at cost, the Head Office opens the following
accounts for that branch iri its books: Opening balances of Br. Assets/Liabilities b/d
(1) Branch Account to record the transactions between the H. 0 . and Branch. The Branch is treated
as a debtor of the H.O. for accounting purposes. Therefore, entries in this ale follow the rule: (1) Branch assets at beginning of year:
Branch Ale Dr.
Debit the receiver and credit the giver, i.e. Branch Ale is debited for the items (cash/goods/
To Stock Ale
assets) received by it and credited for the items given back to H.O. by it.
To Debtors Ale
(2) Goods sent to Branch Account to record all transactions of goods with the Branch. It should be To Cash Ale
noted that when goods are sent to a branch, it is not an actual sale but a mere transfer of goods To Fixed Assets Ale
(like a contra entry). To Pre-paid expenses Ale -
(2) Bran?h liabilities at beginning of year :
Creditors Ale Dr.
Outstanding expenses Ale Dr.
To Branch Ale
 176 Accountancy and Financial Management (R Y.B.Com.: SEM-11) Branch Accounts 177
(7) Loss : If the Debit total is more than the Credit total, it indicates the loss made by the H.O. from
Closing Entries at Year-end that Branch. This loss is transferred to the debit of the General P & L A/c. The loss arises
(1) Closing Goods Sent to Branch Ale by transfer to rrchase Ale : because the total amount sent to the branch is more than the total amount received back from
Goods sent to Branch Ale Dr. the branch.
To Purchases Ale (8) Transactions Recorded : The Branch Account is maintained in H.O. Books by the H.O. and
records only the transactions between the H.O. and the Branch.
[Note : Instead of Purchases, Trading Ale may be credited].
(9) Transactions Not Recorded : The following direct transactions between the Branch and the
(2) ·Closing Branch Ale by transfer to General P & L Ale : outsiders are not recorded by the H.O. in the Branch Ale
Net Profit: - Cash transactions by branch with outsiders e.g. receipts from branch debtors, payments
Branch Ale Dr. Credit total Less Debit total towards expenses, purchase of goods or fixed assets, creditors;
To Profit & Loss Ale Credit transactions by branch with outsiders e.g. purchase or sales of goods or fixed assets
or, by branch; .
Net Loss: - Adjustments by branch with its debtors e.g. discount allowed, bad debts, goods returned by
Profit & Loss Ale Dr. Debit total Less Credit total debtors to branch etc.
To Branch Ale Adjustments by branch with its creditors e.g. discount received, goods returned to suppliers
by branch etc. ·
WORKSHEET 2 : FORMAT OF BRANCH ACCOUNT [GOODS SENT AT COST] Depreciation, profit/loss on sale of fixed assets.
- Abnormal losses e.g. loss of stock/fixed asset in fire etc.
BOOKSOFHEADOFACE [The closing balances of branch assets/ liabilities, i.e. memorandum accounts of branch cash
branch debtors, branch fixed assets, branch creditors etc. kept at the branch, show the effect of
Dr. Branch Account Cr. all the above transactions].
(10) Missing Figures: The figures of opening/closing balances of branch assets and liabilities are
Particulars
To Balance of Br. Assets b/d :
-Stock
" Particulars
By Balance of Br. Liabilities b/d:
-Creditors
" norma~ly given in an examination problem. If not so given, these have to be ascertained by
prepanng Memorandum Ledger Accounts of concerned items such as Branch Stock, Branch
Cash, Branch Debtors, Branch Fixed Assets etc. Such accounts will record all transactions by
-Debtors - Outstanding Expenses the Branch whether with the H.O. or with outsiders, and adjustments such as bad debts
-Cash depreciation etc. The balancing figure of such account will indicate the amount of the missing
- Fixed Assets item .
- Pre-paid Expenses
To Goods sent to Branch Al e By Goods sent to Branch A/c WORKSHEET 3 : FORMAT OF GOODS SENT TO BRANCH ACCOUNT
-sent to Br. by H.O. - returned to H.O. by Br.
- sent to Br. by another Br. - returned to H.O. by Br. Customers (2) Dr. GOODSSENTTOBRANCHACCOUNT

To Cash/Bank A/c
. - sent to another Br.
By Cash/ Bank Ale Particulars ~ Particulars ~
Cr.

- remitted by H.O. to Br. -remitted to H.O. by Br. To Branch Ale By Branch Ale
-spent by H.O. for Br. -remitted to H.O. by Br. Customers - returned by Br. to H.O. - sent by Br. to another Br.
To Balance of Br. Liabilities c/d: By Balance of Br. Assets c/d: - returned by Br. Customers to H.O. - sent to Br. by H.O.
-Creditors -Stock - sent to Br. by another Br.
- Outstanding Expenses . -Debtors To Purchases Ale I Trading Ale
-Cash (Balance tfd.)
- Fixed Assets
- Pre-paid Expenses
Notes:
To Net profit tfd. to P & L A/c ... or ... By Net loss tfd. to P & L Ale
(Balancing Figure) (Balancing Figure) (1) This Ale is credited for goods sent to the branch whether by H.O. or by any other branch under
instructions of H.O.
(2) It is debited for goods returned to H.O. whether by the branch or directly by its customers. It is
Notes: also debited when goods are sent by this branch to another branch under instructions from the
(1) Opening Balance: The net opening balance of the Branch Ale (assets -liabilities) in~licates .the H.O.
amount due from the Branch as a debtor of H.O. at the beginning of the year. (3) At the end of the year, the balance of the account, which indicates the cost of net goods sent to the
(2) Debits :The Branch Ale is debited for the goods/cash given by the H.O. to the Branch. branch , is reduced from the Purchases shown in the General Trading Ale of the concern as the net
(3) Credits : The Branch Ale i~ credited with the goods/cash received back from the Branch. profit of branch is already recorded in the General P & L A/c by transfer from the Bran~h A/c.
(4) Closing Balance : The net closing balance of the Branch Ale (assets - lia!:>ilities) indicates the
amount due from the Branch as debtor of H.O. at the end of the year.
(5) Balance - Dr. I Cr. : After recording the above details, the Branch Ale is now balanced. ·
(6) Profit : If the Credit total is more than the Debit total, it indicates the profit made by the H.O. from
that Branch. This profit is transferred to the credit of the General P & L A/c. The profit arises
because the total amount received back from the branch is more than the total amount sent to
_the branch.

..
 JJranchAccounrs
Solution: (3) Computation of Goods Sent to Branch
IN THE BOOKS OF HEAD OFFICE Closing Stock 75,000
Add : Goods sold (cost) 5.50,000
Dr. New Delhi Branch Account Cr.
6,25,000
Particulars t' Particulars t' I Less : Opening stock 50.000
By Cash : Goods Sent to Branch 5,75,000
To Opening Balance b/d:
Stock 50,000 Cash Sales 1,50,000 (4) Cash Received for Petty Expenses
Debtors 70,000 Cash Received from Opening Petty Cash · 250
Petty Cash 250 1,20,250 Debtors (WN 2) 5,1 2,500 6,62 ,500 Add : Cash Received = 7,870 (Balancing Figure)
To Goods Sent to Branch (WN 3) 5,75,000 By Closing Balance c/d : Less : Closing Petty Cash _1gQ
ToCash : Stock 75,000 Petty Cash spent = 8,000
Salaries 30,000 Debtors ~5,000
Rent 12,000 Petty Cash 120 1,70,120
Petty cash (WN 4) 7,870 49,870 6. GOODS SENT AT INVOICE PRICE
To Net Profit tfd. to General
P & L Ale (Bal. Fig.) 87,500 At times, H. 0. would not like the Branch to know about the cost ofgoods sent to the branch and the
8,32,620 8,32,620 profit made by the branch on sale. Hence goods are sent to branch at invoice price (e.g. at cost plus
25%), also known as loaded price.
Dr. New Delhi Branch Trading Account Cr.
Accounts
'Particulars ~ Particu/t:Jrs ~ When the Head Office sends the goods to the branch at Invoice price, the Head Office opens the
To Opening Stock 50,000 By Sales: following accounts for that branch in its books:
To Goods Sent to Branch 5,75,000 Cash 1,50,000 ( ! ),Branch A ccount to record the transactions between the H.O. and Br~nch.
To Gross Profit 1,37,500 Credit (WN 1) 5,37,500 6,87,500
By Closing Stock 75,000 (2) Goods sent to Branch A ccount to record all transactions of goods with the Branch, but at the
invoice price.
7,62,500 7,62 ,500
(3) Stock Reserve Account to record and adjust the loading (Invoice Price Less Cost) on the goods
Dr. Branch Profit and Loss Account Cr. sent to branch.
Entries
!Particulars ~ Particulars ~

To Salaries 30,000 By Gross Profit 1,37,500 While all other entries are the same as explained above in Worksheet 1 (when goods are sent at cost),
To Rent 12,000 (transferred from it is necessary for the H.O. to remove the loading before preparing the final accounts as the loading
To Petty Expenses 8,000 Trading Account) is only for internal controls. The following adjustment entries are passed by the H.O., at the year-
To Net Profit t/f to General P & L Ale 87,500 end, to remove the loading:
1,37,500 1,37,500
WORKSHEET 4 : ENTRIES- GOODS SENT AT INVOICE PRICE
Note : Thus, the profit shown by the Branch Ale is cross-checke~ by prepa~~ng Branch Tr~dmg,
Profit & Loss A/c . Broadly speaking, Branch Ale shows the net Investment by the H.O. m the
branch. It shows amounts invested in branch; amounts realised from such investments and their
No. Transaction I Entry I Amount
(1) Remove loading on Net Goods Sent by H.O. t~ Branch
difference (Realisation from Investment Less Cost of Investments) being profit or loss from the
branch. Goods sent to Branch Ale Dr. Amount of Loading
Working Notes : The missing amounts will be ascertained by preparing Statements/Memorandum
To Branch ale .
Ledger Accounts as shown below : Note:
(1) Computation of Credit Sales Net Goods sent by Branch =
Cost of Goods Sold 5,50,000 (A) Goods sent to branch by H.O.
Add : 25% Profit 1.37.500 (B) Add: Goods sent to branch by another branch
Total Sales 6,87,500 (C) Less : Goods returned to H.O. by branch
Less : Cash Sales 1.50,000 (D) Less : Goods returned to H.O. directly by branch customers
5,37.500
(E) Less : Goods sent by this branch to another branch .
Credit Sales
=[A + B - C • D - E]
(2) Dr. . New Delhi Branch Debtors Account cr. Alternatively, the load on each transaction may be adjusted individually. Thus instead of
adjusting load on 'net goods sent load', on goods sent and load on goods returned, for
Particulars t' Particulars r example, will be adjusted by two separate entries.
To Opening Balance b/d 70,000 By Cash (Balancing Figure) 5,12,500
95,000
(2) Remove loading on Closing Stock at Branch c/d :
To Credit Sales (WN 1) 5,37,500 By Closing Balance c/d
6,07,500 6,07,500
Branch Ale j
Dr. Amount of Loading c/d
To Stock Reserve Ale
 .lOIJ .ru:cuumuncy unu r munctatJrJanagement (r. r.D.t-om.: ~.t:.M-11)
Branch Accounts
187
(3) Remove loading on opening stock b/d - sent to Br. (load)

Stock Reserve Ale

To Branch Ale
I
(By Reversing above entry in the Beginning of Next Year)
Dr. Amount of Loading b/d
To Purchases Nc I Trading Ale
(Balance tfd.)

Once these adjustment entries are passed, the Branch Account at the year end will Notes:
look like follows: (1) This A/c is credited (at IP) for goods sent to the branch whether by H o. 0 b th b
Under ·ms t rue t"1ons of H.0. and· for load on goods returned. · · r Y any o er ranch

(2) :: ~s d~bited (~tIP) for goods returned to H.O . whether by the branch or directly by its customers
WORKSHEET 5 : FORMAT OF ACCOUNTS
thels Ha soo dlt~bitdedb~t hdenf gol ods are sent by this branch to another branch under instructions fro~
A. FORMAT OF BRANCH ACCOUNT [GOODS AT INVOICE PRICE] • . IS e 1e or oad on goods sent to Br.
(3) ~t thehe~d of the year, the balance of the account, which indicates the cost of net goods sent to the
BOOKS OF HEAD OFFICE ra~c . 1s reduc~d from the Purchases shown in the General Trading Nc of the concern as th
(1) Dr. Branch Account Cr. profit of branch rs already recorded in the General P & L A/c by transfer from the Bran~h Nc.e net
rParticulars {' Particulars r 7. DEBTORS METHOD ('fP) .. ILLUSTRATIONS
To Balance bi d: By Balance bi d :
-Stock (at invoice price) - Stock Reserve Ale
-Debtors (load: opng. stock) Illustration 9 : [Goods shown (a) at cost (b) at IPJ
-Cash -Creditors ~ & Co. of D~lhi have a branch at Madras. Goods are sent by the Head Office at invoice rice which
- Fixed Assets - Outstanding Expenses IS at the ~roflt of ~5% on cost price. All expenses of the branch are paid. by the Head dffice From
- Pre-paid Expenses the follow_rng partrculars, prepare Branch Account in Head Office books: (a) when goods are ~hown
To Goods sent to Branch Ale By Goods sent to Branch Ale at cost prrce, and {b) when goods are shown at invoice price.
(at invoice price) (at invoice price)
Balances:
-sent to Br. by H.O. - returned to H.O. by Br. Opening Closing
- sent to Br. by another Br. - returned to H.. o. by Br. Customers
- sent to another Br. Stock at invoice price
(f) m
To Cash I Bank Ale By Cash/ Bank Ale Debtors 11 ,000 13,000
- remitted by H.O. to Br. -remitted to H.O. by Br. Petty Cash 1,700 2,000
-spent by H.O. for Br. - remitted to H.O. by Br. Customers 100 25
To Balance c/d: By Goods sent to Branch Ale Goods sent to branch at invoice price ~ 20,000.
- Stock Reserve (load: ct. st.) (load: net goods sent to Branch) Exp~nses made by head office :- Rent ~ 600, Wages ~ 200, Salaries ~ 900
-Creditors By Balance c/d: Remrttances made to Head Office :- Cash Sales ~ 2 ,650,
- Outstanding Expenses -Stock (at invoice price)
-Debtors Cash Collected from Debtors ~ 21 ,000
Goods Returned by Branch at invoice price ~ 400.
-Cash
Solution :
- Fixed Assets
- Pre-paid Expenses IN THE BOOKS OF HEAD OFFICE
To Net Profit tfd. to P & l Nc. ... or .. .By Net loss tfd. toP & L Nc {a) When goods are shown at cost
Dr.
Madras Branch Account
Notes: Cr
Particulars {F
(1) Additional entries under this method to record/adjust load are shown in italics.
To Balance b/d:
Particulars r I
(2) If branch sells all the goods only at the invoice price, H.O. can have an easy check on the branch By Ba·n k Nc:
cash and stock by using the following formula (stocks and goods sent at invoice price): Stock (~ 11 ,000- ~ 2,200) 8,800 Cash Sales 2,650
Debtors 1,700
Cash remitted to H.O. +Cash balance with Br. +Closing stock with Br. =Opening stock with Br. Cash Collected
Petty Cash 100
+Goods sent to Br. from Debtors 21,000 23,650
To Goods sent to Branch
Any difference would indicate a difference in either cash or stock which the branch will be asked By Goods Sent to Branch Ale 320
Ale {20,000 - 4,000) 16,000
to explain. (400- 80)
To Bank (Expenses) :
In fact, such control is one of the basic aims of sending goods at such loaded price. By Balance c/d:
Rent 600
Wages Stock (13,000 - 2 ,600) 10,400
B : FORMAT OF GOODS SENT TO BRANCH ACCOUNT [AT INVOICE PRICE] 200 Debtors
Salaries 900 2 ,000
1,700 Petty Cash
To Net Profit tfd. to General 25
(2) Dr. GOODS SENT TO BRANCH ACCOUNT Cr. P & L Nc (Balancing figure) 8,095
Particulars Particulars 36,395
To Branch Ale 36,395
By Branch Nc
- returned by Br. to H.O. - sent by Br. to another Br.
- returned by Br. Customers to H.O. - sent to Br. by H.O.
- sent to Br. by another Br. - returned by Br. (Load)

..
 Branch Accounts 201
Accountancy and Financial Management (F. Y.B. Com.: SEM-11)
200"
65,000 Account in H.O. Books Purpose
Cash Received from Debtors
1,20,000 1. Branch Stock A/c Ascerta ~ n
gross profit/loss of branch (i.e. like Branch Trading Ale) .
Cash Sales
70,000 2. Goods sent to Branch Ale Ascertarn cost of net goods sent to branch. .
Credit Sales
3. Branch Debtors Ale Record transactions with branch customers.
Depreciation to be provided on branch Furniture at 10% p.a. 4. Branch Cash A/c Record cash receipts & payments of branch
Solution: (CA-Inter, Nov. 2014, May 2011, F.Y.B.A.F., Apri12017, adapted) Ascertain total expenS'es of branch. ·
5. Branch Expenses A/c
IN THE BOOKS OF HEAD OFFICE • LMN 6. Branch Profit and Loss Ale Ascertain net profit/loss of branch.

Mumbai Branch Account (at Invoice Price) ORKSHEET 6 : ENTRIES • GOODS SENT AT COST (S & D METHOD
Particulars
,particulars 10,000 No. Transaction I Entry Amount
By Stock Reserve (Opening)
To Balance b/d By Remittances : Entries During the yea·r
40,000
- Stock - Cash Sales 1,20,000
25,000 1,85,000 {1) Goods Sent to branch (a) by H.O. or (b) by another branch .
Debtors - Cash from Debtors 65.000
- Cash in Hand 1,000 . 45,000 Branch Stock Ale D ·
4 ,000 By Goods Sent by Branch (Loading
- Furniture 6,000 To Goods sent to Branch Ale r.
1,80,000 By Goods Returned by Branch
To Goods Sent to Branch (Return to H.O.)
1,5QO (2) oGro(ocd)sbSebnt (a}hby branch to H.O. or (b) by branch customers directly to H 0
To Goods Returned by Branch Y ranc to another branch : · ·
By Balance c/d
(Loading) 35,000
To Bank (Expenses paid by H.O.)
Stock
28,450
Goods sent to Branch Ale Dr.
Debtors To Branch Stock Ale
- Salary 4,000 - Cash (~ 1 ,000 - ~ 700) 300
- Staff Welfare 750 Furniture ~ 4,000- ~ 400) 3,600 {3) Cash Sales by Branch :
- Telephone 1.200 5,950
8,750
Branch Cash Ale Dr.
To Stock Reserve (Closing) To Branch Stock Ale
To Profit transferred to General
Profit and Loss A/c 47,150 (4) Credit Sales by Branch :
3,13,350 Branch Debtors Ale Dr.
3,13,350
To Branch Stock Ale
Working Notes : (5) Goods Returned by Customers to Branch .
Debtors Account Branch Stock Ale · Dr.
1.
lio Branch Debtors Ale
f' Particulars
.Particulars 65,000 (6) Receipts from Customers :
25,000 By Cash Account (a) By Branch:
To Balance b/d 70,000 By Sales Return Account 1,250
To Sales Account (Credit) 300 Branch Cash Ale Dr.
By Discount Allowed Account
28,450 To Branch Debtors Ale
By Balance c/d
95,000 {b) By H.O.:
95,000 H.O. Cash/Bank Ale Dr.
2. Depreciation on Furniture is not debited separately in the Branch Account, sirce the Furniture
To Branch Debtors Ale
Closing Balance is shown at WDV. (7) Discount/Bad Debts etc.:
3. Sales Returns and Discounts are accounted for automatically, since the Opening and Closing Branch Expenses Ale Dr.
Balance of Debtors is shown in the Branch Ale. To Branch Debtors Ale
(8) Expenses Incurred by Branch :
8. STOCK AND DEBTORS METHOD Branch Expenses Ale Dr.
To Branch Cash Ale
Under the Stock and Debtors Method the accounts are kept by the Head Office for each (dependent) (9) Expenses For Branch Incurred by H.O.:
branch, but in a much detailed manner than, under the Debtors method. The closing balances of Branch Expenses Ale Dr.
· branch assets and liabilities are ascertained from the regular accounts ofbranch debtors, branch cash To H.O. Cash/Bank Ale
etc. kept in the H.O. books (instead of from the memorandum accounts kept at the branch). The (1 0) Remittance From H. 0 . to Branch:
accounting procedure is different depending upon whether the goods are sent to the branch at cost or Branch Cash Ale Dr.
at a price higher than cost (invoice price or loaded price). To H.O. Cash/Bank Ale
(11) Remittance From Branch to H.O.: .
9. GOODS SENT AT COST H.O. Cash/Bank Ale Dr.
To Branch Cash Ale
When the Head Office sends the goods to a branch at cost, the Head Office opens the following
accounts for the branch in its books:

..
 Branch Accounts 203
Accountancy and Financial Management (F. Y.B.Com.: SEM-11)
202 By Goods sent to Branch A/c
. (returned to H.O.)
Entries at the end of the year By Branch Expenses A/c
(12} Balance of Goods Sent to Branch Ale tfd. : (Discount/Bad Debts etc.)
Goods sent to Branch Ale Dr. By Balance c/d
To (H.O.) Purchases/Trading Ale
(13} Loss of Stock by Theft, Fire etc. :
Dr. (4) Dr. Branch Cash Account Cr.
Branch P & L Ale
. To Branch Stock A/c . Particulars I' Particulars r :

(14} Closing Stock at Branch : To Balance b/d By Branch Expenses A/c

Branch Closing Stock Ale Dr. To Branch Stock Ale (Cash Sales) (Cash Expenses by br.)
To Branch Stock Ale To Branch Debtors A/c By H.O. Cash/Bank A/c .
(Cash collections) (Cash sent to H.O.)
(15} Gross Profit tfd.: To H.O. Cash/Bank A/c By Balance c/d
Dr.
Branch Stock Ale (Cash received from H.O.)
To Branch Profit & Loss Ale --
(16} Branch Expenses tfd. :
Branch Profit & Loss Ale Dr. (5 Dr. Branch Expenses Account Cr.
To Branch Expenses Ale
Particulars r Particulars r
(17} Net Profit tfd.: To Branch Cash A/c By Branch P & L A/c (tfd.)
Dr.
.
Branch Profit & Loss Ale (Exp. incurred by br.)
To General Profit & Loss Ale To H.O. Cash/Bank A/c
Note: In case of loss, above entry is reversed i.e. (Exp. incurred by H.O.)
General Profit & Loss Ale Dr. To Branch Debtors A/c
To Branch Profit & Loss Ale (Discount/Bad Debts)
- .-
WORKSHEET 7 : FORMAT OF LEDGER ACCOUNTS (6) Dr. Branch P & l Account c r.
Cr.
(1) Dr.
Branch Stock Account ·Particulars r Particulars r
r Particulars
r To Branch Stock Ale By Branch Stock Ale (Gross Profit)
'Particulars (Cost of Goods lost etc.)
By Branch Cash A/c (Cash Sales) To Branch Expenses A/c
To Balance b/d (Opng. St.) By Branch Debtors Ale (Credit Sales)
To Goods sent to Branch A/c To Net Profit tfd. to Gen. By Net Loss tfd. to Gen.
By Goods sent to Branch Ale P & L ........ or ....... : ..
- sent by H.O. P & L A/c
- returned to H.O. (Balancing Figure)
- sent by another Branch
To Branch Debtors Ale
- returned by Br. Customers to H.O.
- sent to another branch
--
(goods returned by customers). By Branch P & L Ale (goods lost etc.)
To Branch P & L Ale (Gross Profit c/d)

-
By Balance c/d (CI. St.)
- . 10. STOCK & DSBTORS (COST) -ILLUSTRATIONS
Cr. Illustration 22 :
Goods sent to Branch Account
(2) Dr.
account with State Bank and are authorised~~ at kolapurhand Kolhapur. The branches maintain a
Emgee Enterprises of Pune has two branch S
r Particulars r F 11 · . ma e pure ases locally
Particulars
By Branch Stock Ale (Goods sent) o owmg mformation is obtained from Solapur branch by Pune ott·ICe. . .
To Branch Stock Ale (returns)
To Br. Debtors Ale (returns)
To Purchases/Trading Ale (tfd.)
- - Particulars
·- Solapur
1-4-2()13 31-3-2014

Branch Debtors Account

cr. r r
(3) Dr. Balance as on

,p articulars
r Particulars Cash 4,000 5,400
Stocks . 10,000 18,000
By Branch Cash Ale
To Balance b/d (Cash paid to branch) Debtors 24,000 8,000
To Branch Stock A/c By H.O. Cash/Bank A/c Bank ... ''.' ...... .. . 14,000 12,000
(Credit Sales) (Cash paid to H.O.) Creditors 2,000 1,000
By Branch Stock A/c
(returns to branch)
 Accountancy and Financial Management (F. Y. B.Com.:SEM-11) Branch Accounts 2()!1
208
Solution: 11. GOODS SENT AT INVOICE PRICE
In the Books of Head Office
Cr.
Branch Stock Account At times the Head Office sends the goods to the branch at a price which is higher than cost. This is
D r.
~ known as the Invoice Price (e.g. Cost plus 25%). The difference between such price and cost is
~ Particulars
1Particulars known as the "Load" or the mark-up. If the branch also in turn sells the goods to its customers at the
800
To Balance bid 6,000 By Goods sent to Branch same price (invoice price at which it gets the goods), the Gross profit is _equal to the load (IP- Cost).
24,000 (Return by Branch) ·
To Goods sent to Branch 1,500 However, at times; the branch may be selling the goods to its customers at a higher price (list price
To Branch Debtors (Return Inwards) 2 ,000 By Branch Cash Ale (Cash Sales)
By Branch Debtors Afc . 37,250 or catalogue price). In such case, the exces~ of Sale price (SP) over Invoice price (IP) is known as
To Gross Profit transferred to Surplus; and the Gross profit ~rned by the branch is equal to the Load (IP- Cost)+ Surplus (SP- IP).
15,550 (Credit Sales)
Branch Profit and Loss Ale 8,000
By Balance cld Accounts
47,550 In such case, the gross profit is ascertained by opening a Branch Adjustment Account. Hence this is
47,550
Cr. also known as the 'Branch Adjustment Method'. Under this method, Head Office opens the following
Branch Debtors Account
Dr accounts for a branch in its books :
r Particulars r (1) Branch Stock Account : Branch Stock Account under this method is a Real Account showing
Particulars
34,000 the movement of goods.
To Balance bi d 8,000 By Branch Cash Ale
(Received from Debtors) (2) Branch Adjustment Account : This is also known as Branch Stock Adjustment Account. This
To Branch Stock (Credit Sales) 2 ,000
~7 ,250 By Branch Stock Ale account is like the Branch Trading Account and shows the gross profit made by the branch. It
(Bal. Fig.)
(Return Inwards) shows the amount ofload or surplus in the various entries shown in the Branch Stock Account.
- By Branch Expenses Ale
- Bad Debts 150 (3) Other Accounts: Other accounts are same as explained earlier in Para 10 viz. (a) Branch Debtors
_j_QQ 250
- Discount
9 ,000
Account ifthere are credit sales, (b) Branch Cash Account, (c) Goods Sent to Branch Account,
By Balance cld (d) Branch Expenses Account, (e) Branch Profit and Loss Account.
45,250 Accounting Entries
45,250
Cr. Only the entries made at invoice prices are different; other entries are the same as shown earlier
Branch Cash Account .
Dr. when the goods are sent at cost under the Stock and Debtors Method [Para 9].
r Particulars r .!
Particulars
500 By Branch Expenses Ale WORKSHEET 8 : ENTRIES -GOODS SENT AT INVOICE PRICE (S & D METHOD)
To Balance (Petty Cash) 2,000
To Bank (Remittance) 2,200 - Salaries 1,500 .
To Branch Stock (Cash Sales) 1,500 - Rent 750
No; Transaction I Entry Amount
To Branch Debtors (Received) 34,000 - Commission 33,500 Entries during the year
. By Bank (Remittance from Branch)
450

38,200
By Balance (Petty Cash)
38,200
(1) Goods Sent to Branch (by H. 0. or another branch):
Branch Stock Ale
. To Goods sent to Branch Ale
I
Dr. At Invoice Price [IP]
Cr.
Branch Expenses Account
Dr . . (2) Goods Sent by Branch (to H. 0. or another branch) :
~ Particulars r Goods sent to Branch Ale Dr. At Invoice Price [IP]
Particulars To Branch Stock Ale
4,500
To Branch Cash Ale 4,250 By Branch Profit and Loss Ale
250 (Balance Transferred) (3) Cash Sales by Branch :
To Branch Debtors
4,500 Branch Cash Ale Dr. At Selling Price [SP]
4,500
To Branch Stock Ale
Cr.
Dr Goods Sent to Branch Account (4) Credit Sales by Branch :
r Particulars r Branch Debtors Ale Dr. At Selling Price [SP]
Particulars To Branch Stock Ale
24,000
To Branch Stock Ale 800 By Branch Stock Ale
23,200 (5) Goods Returned by Customers to Branch :
To Purchases Branch Stock Ale Dr. At Selling Price [SP]
24,000
24,000
To Branch Debtors Ale
Branch Profit and Loss Account
cr.
·Dr Entries (6) to (11) are the same as shown in Worksheet 6 - Entries (6) to (11 ).
Particulars ~ Entries at year-end for adjusting load
~
,Particulars
15,550 . (12) Load on Opening Stock :
To Branch Expenses Ale 4,500 By Branch Stock (Gross Profit)
Stock Reserve Ale Dr. [IP- Cost]
To Net Profit transferred To Branch Adjustment Ale
to General Profit and Loss Ale 11,050.
15,550
15,550

..
 Accountancy and Financial Management (R Y.B.Com.: SEM-11) Branch Accounts 211
210
quite often the value of stock actually held at the branch is either more or less than the balan
Load on Goods Sent by H.O. : of the Branch Stock Account. In that event it will be necessary that the balance in the Bra c~
(13) Stock Account is increased or reduced by debit or credit to Goods Lost Account (at cost pricnc f
Dr. [IP- Cost]
goods) and Branch Adjustment Account (with the loading). The Stock Account at selling pri:~
Goods Sent to Branch Ale
To Branch Adjustment Ale thus reveals loss of stock (or surplus) and seNes as a check on the branch in this respect. '
(14) Load on Goods Returned to H. 0. : The discrepancy in the amount of balance in the Branch Stock Account and the value of sto k
Dr. [IP- Cost]
Branch Adjustment Ale actually in hand, valued at sale price, may be the result of one or more of the undermention cd
To Goods Sent to Branch Ale ~~ffi : . e
(15) Load on Closing Stock : • An error in applying the percentage of loading.
Dr. [IP- Cost] • Goods having been sold either below or above the established selling price
Branch Adjustment Ale
To Stock Reserve Ale • A commission to adjust returns or allowances
• Errors in stock-taking.
Final Accounts : • Physical loss of stock.
(16) Balance of Goods Sent to Branch Ale tfd: (5) ~t~ck Shortage/Loss (N_ormal): lft~e debit .total is more, the difference (balancing figure) will
Goods Sent to Branch Ale Dr. 1nd1cate loss or shortage 1n stock. It w111 be adjusted against the gross profit through the Bran h
To (H.O.) Purchases/Trading Ale. Adjustment A/c. Following entry is passed to record such shortage : c
Gross Profit tfd.: Shortage in Stock (loss) :
(17)
Branch Adjustment Ale Dr. Branch Adjustment A/c Dr.
To Branch Profit & Loss Ale To Branch Stock A/c
[The ~a~e entry is passed whether the amount of Shortage or lo.s s is directly given in the
(18) Branch Expenses tfd.: examinatiOn problem or ascertained as balancing figure in the Branch Stock Ale].
Branch Profit & Loss Ale Dr.
(6) Abnormal Loss : Physical loss of stock due to natural causes or pilferage, etc. is treated as
To Branch Expenses Ale abnormal loss. For example the balance brought down in the Branch Stock Account is~ 100 in
(19) Net Profit tfd. : excess ~f the value of stock actually held by the branch when the goods were invoiced by the
Branch Profit & Loss Ale Dr. head off1~e to the branch at 20% a~ove cost and the discrepancy is either due to pilferage or
To General Profit & Loss Ale loss by fire, the actual loss to the f1rm would be ~ 80, since 20% of the invoice price would
represent the element of profit. The adjusting entry in such a case would be :
Note : In case of loss, above entrY is reversed i.e.
Goods Lost Ale Dr. 80
General Profit & Loss Ale
Branch Adjustment A/c Dr. 20
To Branch Profit & Loss Ale
To Branch Stock A/c . . 1oo
On the other hand, if a part of the sale proceeds has been misappropriated, then the adjusting
WORKSHEET 9 : FORMAT OF LEDGER ACCOUNTS
entry would be :
Branch Stock Account (IP) Cr. Loss by Theft A/c Dr.
(1) Dr.
Branch Adjustment Ale Dr.
~ Particulars To Branch Stock Ale
Particulars
[IP] By Branch Cash Ale (7) ~tock Gain : If the credit total of the Branch Stock Ale is more than its debit total, the difference
To Opening Stock b/d [IP]
[IP] (Cash Sales) IS taken as normal stock gain. Following entry is passed to record such gain :
To Goods sent to Branch Ale
(by H.O. I another branch) By Branch Debtors A/c Gain in Stock :
(Credit Sales) [IP] Branch Stock A/c Dr.
To Branch Debtors (returns) [1P]
By Goods sent to Branch A/c [IP]
To Branch Adjustment Ale
(returns to H.O. by Br.) (8) The Branch Stock Account, after above adjustment entries, will appear as shown below :
By Closing stock c/d [IP]
\ Dr. Branch Stock Account (IP) Cr.
',
Particulars Particulars r
Notes: ·.
(1) Real Ale : Branch Stock Account under this method is a Real Account showing the movement of To Opening stock b/d By Branch Cash A/c
To Goods sent to Branch A/c (Cash Sales)
goods. . (by H.O./another branch) By Branch Debtors Ale
(2) Entries at IP :The entries with the outsiders (customers) as well as other entnes are made at
To Branch Debtors (returns) (Credit Sales)
Invoice Price [IP], i.e. price at which goods are sent to the branch . . . .
To Branch Adjustment A/c By Goods sent to Branch A/c
(3) Stock Control : Since the goods are received and sold by the branch at the lnvo1ce pnce , thiS
(Stock gain) (returns to H.O. by Br.)
account can be directly used to control the stocks at branch. When all the entries in the account
By Branch Adjustment Ale
are made at Invoice price, the account must tally i.e. broadly speaking,.Opening stock+ Net
(Stock shortage)
Goods sent to branch - Net Goods sold will be equal to Closing stock. When th~ stock ac~ou~t
By Closing stock c/d
is thus tallied and reconciled , H.O. can presume that there are no mistakes or d1screpanc1es In
the branch stock.
(4) Stock Discrepancy : However, if the Branch Stock Ale does ~ot tally,.the totals of its .debit. and
credit sides will not be the same, indicf!ting some discrepancy m the branch stocks wh1ch Will be
investigated by the H.O. The balance in the Branch Stock Account at the close of t~e year
normally should be equal to value of the unsold stock at the Branch valued at sale pnce: But

•
 212 Accountancy and Financial Management (R Y.B.Com.: SEM-11) Branch Accounts
(2) Dr. Branch Adjustment Account (GP). Cr. 213
4. ~lo~!~g balances of branch assets and
1Partioulars ~ Particulars lrabrlrtres are ascertained from ~lo~!~g balances of branch assets and
To Branch Stock Ale By Stock Reserve.b/d Memorandum accounts of Branch lrabrlrtres are ascertained from Regular
(loss/shortage) (Load : Opening Stock) Debtors, etc. accounts of branch debtors, etc.
To Stock Reserve Ale By Goods sent to Branch Ale
5. If goods are sent at 1p the load is
(Load : Cl. Stock) (Load; net goods sent)
adjusted in Stock Reserve A/c. If goods are sent at 1P the lo~d ·is
To Br. P & L A/c By Br. Stock Ale (gain)
(G. P.; Balancing Figure)
adjusted in Branch Stock Adjustment
Ale. · · ·

Notes: STOCK AND DEBTORS (IP) .. ILLUSTRATIONS

(1) Branch Adjustment Account is like the Branch Trading Account and shows the gross profit made
by the branch. Illustration 26 : (Returns) .
(2) It shows the amount of load in the various entries shown in the Branch Stock Account. A H~ad Office in Solapur has a branch to which ood . . .
(3) The load on goods coming into branch (except sales returns) is shown on the credit side. profit of _2 0% on sale under the strict instructions ~ ~ are sent at mvor_ce ~nee which is fixed at a
(4) The load on the goods going out of the branch (except sales) is shown on the debit side. the partrculars about the branch transactions : selling goods only at rnvorce price. Following are
(5) The load on sales or on sales returns by customers is not adjusted because these show real
profits and not apparent profits. ·
Particulars
(6) The balancing figure in this account shows the gross profit. The total Gross profit is made up of Stock (at invoice price) on 1st July, 2013
the load (IP -Cost). This account is closed by transferring the Gross profit (or gross loss) to the Branch Debtors on 1st July, 2013 . ...... ... .... ... 5,000
Branch Profjt and Loss Account. The load on closing stock is carried forward as Stock Reserve Goods sent to Branch ... .... ... ...... 2,000
of next year. Total Sales .............. . 40,000
Cash Sales ... ... ... ... .... 43,600
(3) Dr. Goods sent to Branch Account (Cost) Cr. Cash received from Debtors ............... 32,600
Goods returned by Debtors ... ... ...... ... 8,400
Particulars Particulars 0. . ••• ~ . . ••••• 0
. Cheque sent to Branch tor: 600
To Branch Stock Ale (returns) By Branch Stock Ale (goods sent) Rent
To Branch Adjustment Ale Salaries ... .. . ... ... ... 1.,200
(Load: net goods sent) Sundry Expenses ... ... ... ... ... 3,600
To Purchases/Trading Ale Discount allowed to Debtors ...... ,.. ... ... 300
(Balancing Figure; cost) Bad Debts .. . ... .. . ... ... 150
Stock on 31st December, 2013 (at Invoice price) ... .. . ... ... ... 250
Calculate profit made b th B h ... .. · .. · ... ·.. 2, 100
Note : Other ledger accounts (Branch Debtors, Branch Cash, Branch Expenses and Branch P & L
Solution : Y e ranc . Accounts are to be opened on Stock and Debtors System.
A/c) are the same as shown in Worksheet 7 earlier. ·
(IDE, Oct. 2003, adapted)
EXHIBIT 3 : DEBTORS V. STOCK AND DEBTORS METHOD IN THE BOOKS OF HEAD OFFICE
Dr.·
Branch Stock Account (IP)
S.N. Debtors Method Debtors and Stock Method Cr.
Particulars
1. The Branch is treated as a debtor of The Branch is treated as a debtor of Particulars
the H.O. for accounting purposes. the H.O. for accounting purposes; but To Opening Stock b/d (IP)
5,000 By Branch Debtors (Sales)
To Goods sent to Branch Ale (IP) 11 ,000
accounting is .detailed. 40,000 By Branch Cash (Sales)
To Branch Debtors (Returns) 32,600
2. H.O. opens Branch Ale; Goods sentto H.O. opens Branch Stock Ale; Goods 600 By Closing Stock c/d (IP)
To Branch Adj. Ale (Stock Gain) 2,100
100
Branch A/c. sent to Branch Ale; Branch Debtors
Ale; Branch Cash Ale, Branch 45,700 ...
45,700
Expenses Ale;· Branch P & L Ale and Branch Adjustment Account (GP)
Branch Adjustment Ale (if goods sent
Particulars
at IP) Partfculars
To Stock Reserve (loading in ·
3. Balance in the Branch Ale will indicate If goods are sent at cost, Balance in 420 By Stock Reserve b/d (Loading in
Closing Stock) (1 /5 of 2,1OO) 1,000
the net profit _or loss in respect of the the Branch Stock Ale will indicate the To Branch P & L A/c Opening Stock) (1 /5 x 5 000)
branch. Gross Profit;. if goods are sent at IP, (Gross Profit) (Bai. Fig.) .
8,680 By Goods sent to Branch Nc 8,000
Branch Adjustment Nc shows the . (Load - 1/5 x 40,000)
Gross Profit. The Branch P &.L Ale By Branch Stock Ale
100
shows the net rofit. 9,100
. 9,100