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Module 03: BRANCH ACCOUNTING

Objectives – Types of Branches –Meaning and features of Branches - Dependent Branches –
Independent Branches – Foreign Branches. Methods of maintaining books of accounts by Head
office - Debtor System, Stock & Debtors System, Wholesale Branch System, and Final
Account System. Problems with the preparation of Dependent Branch A/c in the books of Head
Office under the Debtors System only when the goods are supplied at (a) Cost Price and (b)
Invoice Price.
Introduction:
The dictionary meaning of the word branch is any subordinate division of a business,
subsidiary shop, office etc. The business concern is often split into many parts or divisions.
Such parts may be departments or branches. In case various divisions are located under the
same roof or in the same building they are called departments when various divisions of the
business are located in different places in the same city or different cities, they are called
branches. In such a case the main place of business is known as head office and its subsidiary
units are known as branches.
Meaning
Branch accounting is a bookkeeping system. It separates accounts into different
branches, each of which is maintained separately.
This is a system that is typically found in corporations that are geographically dispersed, as
well as chain operators. It allows for greater transparency when it comes to transactions and
calculating cash flow, as well as helping accountants track the overall performance and financial
position of each branch.
Definition
According to the provisions contained in section 29 of the companies Act 1956, it would appear
that a branch is any establishment carrying on either the same or substantially the same activity
as that carried on by head office of the company.
Objectives
1. To know the profit or loss of cash branch.
2. To know the financial position of each branch.
3. To control the activities of the branch.
4. To find out requirement of goods or cash for each branch.
5. To provide concentrate suggestion for the improvement in the working of different
branches.
6. To compare the performance of one branch with the another branch.
7. To meet the statutory requirements.
Features
1. Branches are units physically separated from the head office.
2. Generally there is only one branch at one place
3. Most of the branches deal in the same type of goods or in the same line of business.
4. Head office makes capital investment for the branches.
5. The whole profit of the branches go to the head office.
Types of Branches
A. Home Branches or Domestic Branches: These are branches of a business or company that
 operate within the same country where the headquarters (main office) is located.
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1. Dependent Branch: A branch that does not have full control over its operations and is
managed directly by the head office. It cannot make independent financial decisions and
relies on the head office for major activities like pricing, purchasing, and policies. The
head office keeps the accounts of the dependent branch.
2. Independent Branch: A branch that has significant control over its operations and
maintains its own financial records. It can make decisions regarding purchases, sales,
and expenses without needing approval from the head office. It prepares its own
accounts but still submits reports to the head office.
B. Foreign Branches: These are branches of a business that operate in a different country
from where the headquarters is located. They follow the regulations and accounting
standards of the foreign country but still report to the main office. Foreign branches often
deal with international customers and operate in a different currency.
Dependent Branches
Dependent branches are those branches which are keeping their own separate set of books of
accounts. The relation between head office and branch is just like agency, therefore, these are
also known as agency branches.
Dependent branches can be further classified into two categories
1. Fully controlled branches: Branches which are those have no powers for any decision
making. They are not permitted to make any purchases on their own, but must
depend on the supplies of the head office. Such branches cannot retain any amount
collected from its debtors or from any other source, but must completely remit it to
the head office. The expenses of such branches are totally met by the head office.
2. Partly controlled branches: Branches which are given some limited powers for
decision making. Such branches are given a certain amount of flexibility in its
operations. It can make any purchases on its own only during emergency and need
not wait for the supplies of the head office. It can retain the collections and meet
some expenses. The balance of collections after meeting expenses must be remitted
to the head office.
Features of dependent branches:
∙ The branch does not maintain its own set of books instead the head office maintains record
of all transactions in respect of the branch.
∙ Goods are received from the head office. However the outside purchases by branch are
not allowed.
∙ Good are often supplied by the head office at cost price. But sometimes they may also be
sent it invoice price or loaded price.
∙ All expenses of regular nature are directly paid by the head office through cheques. ∙ All
petty expenses at branch are paid by the branch manager form the petty cash received in
advance form the head office.
∙ Usually branch makes sales on cash basis. But in certain, cases, credit sales may be made
with the authorization from the head office.
∙ Cash received on account of cash sales and from debtors is duly remitted to the head
office or deposited with a local bank is in the account of head office.
Accounting in respect of Dependent Branches:
The accounts of the dependent branches are maintained only in the books of head office hence
a branch is required to send returns (daily, weekly or monthly) relating to the translation which
have taken place in it as per the instructions of the head office.
Head office on the basis of returns maintains accounts in its books in order to know the profit or
loss of each branch for a particular period. Accounting procedure, in case of a dependent
branch, the head office may keep accounts of the branch according to the following methods:
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1. Debtors System
2. Stock and debtors system
3. Final account system
4. Wholesale branch system
Debtors System: It is a system of ascertaining the profit made by a head office at a branch by
preparing on account known as branch account in the head office book. This system is followed
when branches are of small size. Branch account is a nominal account in which all expenses are
debited and all incomes are credited. The Excess of the credit over its debit represents a profit
or loss, and is transfer to the general profit and loss account of the head office.
From the accounting point of view, the branches may be grouped as under. A. Branches receive
goods from the head office at cost price and sell them only for cash. B. Branches receive
goods from the head office at cost price and sell them for cash as well as credit.
C. Branches receive goods from the head office at cost plus ascertain percentage of profit
and sell both for cash and credit.
Stock and debtors system (Analytical method): Stock and debtors system is an alternative
method to find out the profit or loss made at the branch this method is useful only when goods
are invoiced to the branch at the selling price which the branch is not entitled to vary. Hence,
one of the main advantages of this system is that the head office can know in advance the
amount of profit that is may get from the branch. In this method, the head office keeps separate
accounts relating to various types of transactions at the branch instead of one branch account.
The following accounts are kept in the head office books relating to a branch under this system
1. Branch stock account
2. Branch debtors account
3. Branch expenses account
4. Branch adjustment account
5. Branch profit and loss account
6. Goods sent to branch account
7. Branch cash account
8. Fixed asset account
Final Account System: The profit or loss of a dependent branch can also be ascertained by
preparing a trading and profit and loss account, also known as memorandum trading and profit
and loss account. Thus , opening stock, goods sent to branch goods returned by branch, closing
stock at branch etc are recorded only at cost prices and not at invoice price. Besides the final
accounts, branch account is also to be prepared under this system; however this branch account
is different from the branch account prepared under the debtors system. The branch account
appearing under the debtors system is a nominal account. But the branch account, appearing
under final account system, is a personal account and generally will have debit balance.
Wholesale branch system: Now –a-days a manufacturing concern sells goods to the
consumers both through the wholesaler and its own retail branches. Usually wholesale price is
less than the retail price. Therefore, the manufacturing can earn more profit by running his own
retail branches. But for ascertaining the true profit of retail business the cost of running the
retail branch should also be taken into account. Under this situation, to ascertain the true profit
earned by a branch, the head office charges the branch with wholesale price. The difference
between the wholesale price and selling price is the pure profit on retailing. Under the
wholesale branch system the head office sends the goods to the branch at wholesale price and
not at cost. So, the goods sent to branches should be credited at wholesale price in the head
office trading account. Further the stock at the end of the year at the branch should also be
valued at wholesale price.
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Thus, the head office should create a proper reserve by debiting its own profit and loss account
to show the branch stock at cost in the balance sheet.
Debtors System
A. Branches receive goods from the head office at cost price and sell them only for
cash.
1. For bringing into account the balances of stock, furniture, petty cash etc, at the
commencement of the period (Opening balance of assets)
Branch a/c Dr.
To Opening balance of Branch stock a/c
To Opening balance of Branch Debtors a/c
To Opening balance of Furniture a/c
To Opening balance of Branch petty cash a/c
2. For brining into account the liabilities at the commencement (Opening balance of
liabilities)
Opening balance of Branch liabilities a\c Dr.
Opening balance of o/s expenses a/c Dr.
Opening balance of creditors a/c Dr.
To Branch a\c
3. For goods sent to branch
Branch a/c Dr.
To Goods sent to Branch a/c
4. For goods returned by branch
Goods sent to branch a/c Dr.
To Branch a/c
5. For the transfer of balance of goods sent to branch
Goods sent to branch a/c Dr.
To Purchase a/c or Trading a/c
6. For payment of branch expenses
Branch a/c Dr.
To Cash or bank a/c
7. For remittances received from branch or collection received from branch
Cash or Bank a/c Dr.
To Branch a/c
8. For recording closing assets at branch
Closing balance of branch debtors a/c Dr.
Closing balance of stock a/c Dr.
Closing balance of any assets a/c Dr.
Closing balance of petty cash a/c Dr.
To Branch a/c
9. For recording closing balance of liabilities at branch
Branch a/c Dr.
To Closing balance of branch liabilities a/c
To Closing balance of o/s expenses a/c
To Closing balance of branch creditors a/c
10.For closing the branch account
a. In case of profit
 Branch a/c Dr.
To General P&L a/c
b. In case of loss
General P&L a/c Dr.
To Branch a/c
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In the books of Head office

Branch a/c
Dr. Cr.
Particulars Amount Particulars Amount
To Op Bal of branch stock a/c XXXX By Op Bal of branch creditors XXXX
To Op Bal of branch debtors XXXX a/c By Op Bal of O/s expenses XXXX
a/c To Op Bal of petty cash XXXX a/c XXXX
a/c To Op Bal of other Assets XXXX By Op Bal of other liabilities XXXX
a/c a/c By Goods sent to branch
XXXX a/c XXXX
To Goods sent to branch (Returned to H.O)
a/c (Sent by H.O) By Cash or Bank a/c
(Cash sales + Cash received
XXXX from debtors) XXXX
To Bank a/c (cash remitted to H.O)
(Branch expenses paid by XXXX By Cl Bal of branch stock a/c XXXX
H.O) To Cl Bal of branch XXXX XXXX
creditors a/c To Cl Bal of O/s XXXX By Cl Bal of branch debtors XXXX
expenses a/c To Cl Bal of other XXXX a/c By Cl Bal of petty cash XXXX
liabilities a/c To General P&L a/c
a/c By Cl Bal of other assets a/c
(Balancing Figure) By General P&L a/c
(Balancing Figure)
XXXX XXXX

B. Branches receive goods from the head office at cost price and sell them
for cash as well as credit.
Accounting Entries
1. For bringing into account the balances of stock, furniture, petty cash etc, at the
commencement of the period (Opening balance of assets)
Branch a/c Dr.
To Opening balance of Branch stock a/c
To Opening balance of Branch Debtors a/c
To Opening balance of Furniture a/c
To Opening balance of Branch petty cash a/c
2. For brining into account the liabilities at the commencement (Opening balance of
liabilities)
Opening balance of Branch liabilities a\c Dr.
Opening balance of o/s expenses a/c Dr.
Opening balance of creditors a/c Dr.
To Branch a\c
 3. For goods sent to branch
Branch a/c Dr.
To Goods sent to Branch a/c
4. For goods returned by branch
Goods sent to branch a/c Dr.
To Branch a/c
5. For the transfer of balance of goods sent to branch
Goods sent to branch a/c Dr.
To Purchase a/c or Trading a/c
6. For payment of branch expenses
Branch a/c Dr.
To Cash or bank a/c
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7. For remittances received from branch or collection received from branch

Cash or Bank a/c Dr.
To Branch a/c
8. For recording closing assets at branch
Closing balance of branch debtors a/c Dr.
Closing balance of stock a/c Dr.
Closing balance of any assets a/c Dr.
Closing balance of petty cash a/c Dr.
To Branch a/c
9. For recording closing balance of liabilities at branch
Branch a/c Dr.
To Closing balance of branch liabilities a/c
To Closing balance of o/s expenses a/c
To Closing balance of branch creditors a/c
10.For closing the branch account
In case of profit
Branch a/c Dr.
To General P&L a/c
In case of loss
General P&L a/c Dr.
To Branch a/c
In the books of Head office
Branch a/c
Dr. Cr.
Particulars Amount Particulars Amount
 To Op Bal of branch stock a/c XXXX By Op Bal of branch creditors XXXX
To Op Bal of branch debtors XXXX a/c By Op Bal of O/s expenses XXXX
a/c To Op Bal of petty cash XXXX a/c XXXX
a/c To Op Bal of other Assets XXXX By Op Bal of other liabilities XXXX
a/c a/c By Goods sent to branch
XXXX a/c XXXX
To Goods sent to branch (Returned to H.O)
a/c (Sent by H.O) By Cash or Bank a/c
(Cash sales + Cash received
XXXX from debtors) XXXX
To Bank a/c (cash remitted to H.O)
(Branch expenses paid by XXXX By Cl Bal of branch stock a/c XXXX
H.O) To Cl Bal of branch XXXX XXXX
creditors a/c To Cl Bal of O/s XXXX By Cl Bal of branch debtors XXXX
expenses a/c To Cl Bal of other XXXX a/c By Cl Bal of petty cash XXXX
liabilities a/c To General P&L a/c
a/c By Cl Bal of other assets a/c
(Balancing Figure) By General P&L a/c
(Balancing Figure)
XXXX XXXX

Head office sends goods to the branch at a price above the cost price. Such
price is called the loaded price or the invoice price or cost plus profit price
or inflated price
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C.Branches receive goods from the head office at cost plus ascertain
percentage of profit and sell both for cash and credit.
1. For bringing into account the balances of stock, furniture, petty cash etc, at the
commencement of the period (Opening balance of assets)
Branch a/c Dr.
To Opening balance of Branch stock a/c
To Opening balance of Branch Debtors a/c
To Opening balance of Furniture a/c
To Opening balance of Branch petty cash a/c
2. For adjusting the excess price included in opening stock
Stock reserve a/c Dr.
To Branch a/c
3. For brining into account the liabilities at the commencement (Opening balance of
liabilities)
Opening balance of Branch liabilities a\c Dr.
Opening balance of o/s expenses a/c Dr.
Opening balance of creditors a/c Dr.
To Branch a\c
4. For goods sent to branch
Branch a/c Dr.
To Goods sent to Branch a/c
5. For goods returned by branch
Goods sent to branch a/c Dr.
 To Branch a/c
6. For adjusting the excess price included in net goods send to branch
Goods sent to branch a/c Dr.
To Branch a/c
7. For the transfer of balance of goods sent to branch
Goods sent to branch a/c Dr.
To Purchase a/c or Trading a/c
8. For payment of branch expenses
Branch a/c Dr.
To Cash or bank a/c
9. For remittances received from branch or collection received from branch
Cash or Bank a/c Dr.
To Branch a/c
10.For recording closing assets at branch
Closing balance of branch debtors a/c Dr.
Closing balance of stock a/c Dr.
Closing balance of any assets a/c Dr.
Closing balance of petty cash a/c Dr.
To Branch a/c
11. For the adjustment of excess price included in closing stock
Branch a/c Dr.
To Stock Reserve a/c
12.For recording closing balance of liabilities at branch
Branch a/c Dr.
To Closing balance of branch liabilities a/c
To Closing balance of o/s expenses a/c
To Closing balance of branch creditors a/c
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13.For closing the branch account

In case of profit
Branch a/c Dr.
To General P&L a/c
In case of loss
General P&L a/c Dr.
To Branch a/c
In the books of Head office
Branch a/c
Dr. Cr.
Particulars Amount Particulars Amount
 To Op Bal of branch stock a/c XXXXBy Op Bal of branch creditors XXXX
To Op Bal of branch debtors XXXXa/c By Op Bal of O/s expenses XXXX
a/c To Op Bal of petty cash XXXXa/c By Op Bal of other XXXX
a/c XXXXliabilities a/c By Stock XXXX
To Op Bal of other Assets XXXXReserve a/c
a/c To Goods sent to (Excess price in opening XXXX
branch a/c (Sent by H.O) XXXXstock) By Goods sent to
To Bank a/c branch a/c XXXX
(Branch expenses paid by XXXX(Returned to H.O)
H.O) To Cl Bal of branch By Cash or Bank a/c
creditors a/c XXXX(Cash sales + Cash received from
XXXXdebtors) XXXX
To Cl Bal of O/s expenses (cash remitted to H.O)
a/c To Cl Bal of other XXXX By Goods sent to branch a/c
liabilities a/c (Excess price in net goods send XXXX
to branch) XXXX
By Cl Bal of branch stock a/c XXXX
To Stock Reserve a/c XXXX
(Excess price in Closing stock) XXXX By Cl Bal of branch debtors
a/c By Cl Bal of petty cash XXXX
a/c
To General P&L a/c By Cl Bal of other assets a/c
(Balancing Figure) By General P&L a/c
(Balancing Figure)
XXXX XXXX

Other relevant accounts for ascertaining any missing

information Memorandum of B/R a/c Or Bills Receivable a/c
Dr. Cr.
Particulars Amount Particulars Amount
To Opening Balance XXXX By Closing Balance XXXX
To Trade Debtors XXXX By Cash or Bank a/c XXXX
a/c (New Bill (Cash from bills)
received) By Discount Allowed XXXX
a/c By Trade Debtors XXXX
a/c (Bills
dishonoured)
XXXX XXXX

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Memorandum of Trade Debtors or Memorandum of Branch debtors a/c Dr. Cr.

Particulars Amount Particulars Amount
 To Opening Balance XXXX By Closing Balance XXXX
To Credit Sales a/c XXXX By Cash or Bank a/c XXXX
To Bills Receivables XXXX (Cash received from
a/c (Bills debtors) By Discount XXXX
dishonoured) Allowed a/c XXXX
By Sales return a/c XXXX
By Bad debts a/c XXXX
By Bills Receivable a/c
(New bills received)
XXXX XXXX

Memorandum of Bills payable a/c

Dr. Cr.
Particulars Amount Particulars Amount
To Closing Balance XXXX By Opening Balance XXXX
To Cash or Bank a/c XXXX By Trade Creditors XXXX
(Cash paid against a/c (New Bill
bills) To Discount XXXX accepted)
received a/c To Trade XXXX
Creditors a/c (Bill
dishonoured)
XXXX XXXX

Memorandum of Trade Creditors a/c or Memorandum of Branch

Creditors a/c
Dr. Cr.
Particulars Amount Particulars Amount
To Closing Balance XXXX By Opening Balance XXXX
To Cash or Bank a/c XXXX By Credit Purchase XXXX
(Cash paid to a/c By Bills payable XXXX
creditors) To Discount XXXX a/c
received a/c To XXXX (Bill dishonoured)
Purchase return a/c To XXXX
Bills payable a/c
(New bill accepted)
XXXX XXXX

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1. Mr. Day ltd with his head office in Bangalore as a branch at Mysore. Goods are supplied
to the branch at cost. The expenses of the branch are paid from Bangalore and the
 branch keeps a sales ledger and the debtors ledger only. From the following information
supplied by the branch, prepare branch account and branch debtors account in the
books of Bangalore.
i. Stock @ branch on 1/4/16 Rs. 16,700
ii. Goods sent to branch during the year Rs. 48,600
iii. Total sales @ branch Rs. 78,300
iv. Cash received from debtors Rs. 54,400
v. Cash sales Rs. 19,300
vi. Petty cash @ branch on 1/4/16 Rs. 220
vii. Goods returned by the branch Rs. 5,900
viii. Cash sent to branch for expenses: Salary 13,200; Petty cash Rs. 2,600; Rent Rs. 3,200
ix. Stock @ branch on 31/3/17 Rs. 20,800
x. Petty cash @ branch on 31/3/17 Rs. 200
xi. Debtors at branch on 31/3/17 Rs. 18,300
2. Prepare Branch a/c from the following details, opening stock Rs. 12,000, petty cash Rs.
300, furniture Rs. 4,000, Prepaid expenses Rs. 6,000.
Goods sent to branch Rs. 1,20,000; Total sales Rs. 2,10,000; Credit sales Rs. 60,000;
Discount allowed Rs. 1,000; Cash received from debtors Rs. 40,000; Closing value of
stock Rs. 14,000; Petty cash closing value Rs. 30; Furniture Rs. 3,600; Creditors Rs. 3,000;
Expenses paid by Head office are Salary Rs. 6,000; Petty cash expenses Rs. 3,000 and
Other expenses Rs. 1,000.
3. From the following particulars prepare the Mysore branch in the books Bangalore Head
office. Stock on hand @ branch on 1/4/16 Rs. 10,000; Debtors @ branch on 1/4/16 Rs.
4,000; Petty cash @ branch on 1/4/16 Rs. 500; Furniture @ branch on 1/4/16 Rs. 2,000;
Prepaid insurance on 1/4/16 Rs. 150; Outstanding Salary on 1/4/16 Rs. 100; Goods sent to
branch Rs. 80,000; Cash sales by branch Rs. 1,30,000; Credit sales by branch Rs. 40,000;
Amount collected from debtors Rs. 35,000; Amount received by the Head office directly
from the branch debtors Rs. 2,000; Discount allowed to branch debtors Rs. 100;
Cash sent to branch for expenses: For rent Rs. 2,000, for salaries Rs. 2,400, for petty
expenses Rs. 1,000, for insurance premium Rs. 600 (Paid up to 30/6/17 @ the rate of
600pa).
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Goods returned to Head office from branch Rs. 1,000; Goods returned to branch by
debtors Rs. 2,000; Stock on hand @ branch on 31/3/17 Rs. 5,000; Petty expenses @
 branch on 31/3/17 Rs. 850; Depreciation on branch furniture Rs. 10% pa.
4. Form the following particulars relating to Bangalore branch for the year ending 31.3.17
prepare Branch a/c in the books of HO Tumkur.
Stock @ branch 1.4.16 Rs. 40,000; Branch debtors on 1.4.16 Rs. 15,000; Petty cash @
branch on 1.4.16 Rs. 2,000; Furniture @ branch on 1.4.16 Rs. 12,000; Prepaid insurance
on 1.4.16 Rs. 2,300; Salary o/s on 1.4.16 Rs. 4,100; Goods sent to branch Rs. 3,30,000;
Cash sales during the year Rs. 2,80,000; Total sales during the year Rs. 4,63,000; Cash
received from debtors Rs. 1,35,000; Cash paid by branch debtors directly to HO Rs.
22,000; Discount allowed to debtors Rs. 2,300; Cash sent to branch for expenses: for rent
Rs. 15,000, Salaries Rs. 10,800, Petty cash Rs. 4,000, Insurance up to 30.6.17 Rs. 2,600.
Goods return by the branch Rs. 5,000; Goods return by the debtors Rs. 7,200; Stock on
31.3.17 Rs. 36,000; Petty expenses paid by the branch Rs. 3,850; Provide depreciation on
furniture @ 20% pa.
5. Form the following figure relating to Bangalore branch opened in 2015/16. Prepare
branch a/c for 2015/16 and 2016/17.
Particulars 2015/16 2016/17
Goods sent to branch 3,000 4,200
Cash sales 1,200 1,920
Credit sales 2,160 3,000
Cash received from Drs 1,920 2,400
Discount allowed 30 90
Bad Debts 30 60
Cash sent to branch for exp 420 600
Stock on 31.3 480 840
Petty cash on 31.3 10 12

6. Mumbai HO as a branch in Chennai to which goods are invoiced by the HO @ cost plus
25%. Cash received by the branch is daily remitted to HO. All expenses of branch are paid
from Mumbai HO from the following details prepare Chennai branch in HO books. Stock on
1.4.16 @ invoice price Rs. 12,500; Debtors on 1.4.16 Rs. 12,000; Goods invoiced from
Mumbai @ invoice price Rs. 40,000; Remittance to Mumbai- Cash sales Rs. 16,000, Cash
received from debtors Rs. 29,500; Goods returned to HO @ invoice Rs. 2,400; Cash
Page 12 of 16 SP

received from Mumbai- for wages and salaries Rs. 11,000, for rent Rs. 3,000, for sundry
exp Rs. 510; Stock on 30.9.16 @ invoice price Rs. 15,000; Debtors on 30.9.16 Rs. 22,500.
7. A Shoe co., of Kanpur as at branch at Delhi goods are invoiced to the branch @ cost plus
25%. Branch has been instructed to deposit daily all cash received by it in the HO except
petty expenses which are met by the branch manager from the petty cash amount sent by
the HO time to time.
From the following particulars prepare Delhi branch account in the books of Head office
Kanpur.
∙ The branch sells the goods at the invoice price only.
∙ Stock on 1.4.16 @ invoice price Rs. 30,000
∙ Sundry debtors on 1.4.16 Rs. 18,000
∙ Cash in hand on 1.4.16 Rs. 800
∙ Furniture on 1.4.16 Rs. 2,400
∙ Goods invoice from HO (Invoice price) Rs. 1,60,000
∙ Goods returned to HO (Invoice price) Rs. 2,000
∙ Cash received from debtors Rs. 60,000
∙ Credit sales Rs. 1,00,000
∙ Discount allowed to debtors Rs. 600
∙ Goods returned by debtors Rs. 960
∙ Expenses paid by HO Rent Rs. 2,400, Salary Rs. 4,800, Printing and stationary Rs. 600 ∙
Petty exp paid by the branch manager Rs. 560
∙ Depreciation is to be provided on furniture @ 10%pa
∙ Cash realized from sales Rs. 60,000.

8. Delhi head office of company invoices a goods to its Bangalore branch at cost plus 20%
the branch also purchases independently from local parties goods which payment are
made by head office all cash collection of day is to be remitted to head office through
bank account and all expenses of branch are directly paid by HO from the following
show branch account in books of HO.
i. Impressed cash 1.4.16 Rs. 20,000, 31.3.17 Rs. 18,500
ii. Sundry debtors on 1.4.16 Rs. 2,50,000
iii. Stock on 1.4.16:
a. Transferred from H.O. (@invoice price) Rs. 2,40,000
 b. Direct purchase by branch Rs. 1,60,000
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iv. Total sales Rs. 17,50,000

v. Cash sales Rs. 4,50,000
vi. Returns from customers Rs. 30,000
vii. Direct purchase Rs. 4,50,000
viii. Goods sent to branch from Ho Rs. 6,00,000
ix. Transfer from HO for petty cash expenses Rs. 25,000
x. Bad debts Rs. 10,000
xi. Discount to customers Rs. 20,000
xii. Cash received from customers Rs. 12,50,000
xiii. Branch expenses Rs. 3,00,000
xiv. Stock on 31.3.17
a. Directly purchased by branch Rs. 1,20,000
b. Transfer from HO at invoice price Rs. 1,80,000
9. The kolar HO usually send goods to it nelamangala branch selling price plus 20% further
where ever required the branch purchases goods independently. From the following
details prepare the Nelamanagala branch a/c in kolar HO.
i. Petty cash balance (opening) Rs. 4000
ii. Petty cash balance (closing) Rs. 4000
iii. Stock on hand (opening)
Goods received from HO (IP) Rs. 12,800
Goods purchased from outside Rs. 3,200
iv. Goods sent to branch (IP) Rs. 1,36,000
v. Cash sales Rs. 26,000
vi. Credit purchases Rs. 30,400
vii. Collection from debtors Rs. 2,24,400
viii. Debtors (opening) Rs. 16,400 & Debtors (closing) Rs. 22,400
ix. Office expenses (Cash sent from HO) Rs. 60,000
x. Stock on hand at the end
Goods received from HO (IP) Rs. 12,000
Goods purchased from outside Rs. 4,000
xi. Amount paid to creditors (out of collections made) Rs. 29,600
xii. Creditors at the beginning Rs. 1,600
 xiii. Creditors at the end Rs. 2,400
xiv. Outstanding salary Rs. 2,400
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10.A company has branches at several places. The following information relates to
managalore branch which does not maintain books of account for the year ended
31.3.15. a. Opening balance: Stock Rs. 18,750, Debtors Rs. 10,500
b. Transactions during the year at the branch: Cash sales Rs. 81,000, Credit sales Rs.
52,500, Cash remitted to HO Rs. 1,12,500, Furniture purchase by the branch Rs. 9,000,
Goods invoiced to the branch Rs. 1,36,500, Expenses paid by the HO Rs. 12,300, Cash
sent to branch by the HO for the purchases of weighing machine Rs. 9,750.
c. Closing balances: Stock Rs. 22,500, Debtors Rs. 13,500, Goods are sent to the branch
@ 25% of the cost.
All the branch expenses are paid by the HO except petty expenses paid by the branch
manager. Prepare the Managalore branch account in the books of HO for the year ended
31.3.15
Multiple Choice Questions
What is the main purpose of branch accounting?
a) To determine the financial position of the branch
b) To hide branch expenses from the head office
c) To increase the number of branches
d) To centralize all accounting records in the head office
Which of the following best defines a branch?
a) A separate legal entity independent of the head office
b) A subordinate unit of the main business located in a different place
c) A type of partnership firm
d) A financial institution managing company investments
Which of the following is NOT a feature of a dependent branch?
a) It does not maintain a separate set of books
b) It receives goods from the head office
c) It makes independent purchasing decisions
d) It remits cash collections to the head office
What is the primary advantage of the stock and debtors system in branch accounting?
a) It eliminates the need for financial statements
b) It allows the branch to operate independently
c) It helps the head office determine branch profits in advance
d) It does not require any inventory tracking
Under which system is only one account maintained for the branch?
a) Stock and debtors system b) Debtors system
c) Final accounts system d) Wholesale branch system
 What is the relation between the head office and a dependent branch?
a) Employer and employee b) Parent and subsidiary
c) Principal and agent d) Buyer and seller
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In which type of branch is accounting done as per the local laws of the country?
a) Domestic branch b) Independent branch
c) Foreign branch d) Dependent branch
Which method of branch accounting is suitable for small branches?
a) Wholesale branch system b) Stock and debtors system
c) Debtors system d) Final accounts system
Under which system are branch profits determined using a memorandum trading and profit
& loss account?
a) Debtors system b) Final accounts system
c) Stock and debtors system d) Wholesale branch system
Which type of branch is allowed to retain cash collections and make certain purchases?
a) Dependent branch b) Fully controlled branch
c) Partly controlled branch d) Foreign branch
What does the ‘Goods Sent to Branch’ account represent?
a) Sales made by the branch
b) Revenue earned by the branch
c) Cost of goods transferred from head office to the branch
d) Opening stock of the branch
Which system is followed when goods are sent to the branch at wholesale price?
a) Stock and debtors system b) Final accounts system
c) Wholesale branch system d) Debtors system
What is the accounting entry for branch expenses paid by the head office?
a) Branch A/c Dr. → To Cash/Bank A/c
b) Cash/Bank A/c Dr. → To Branch A/c
c) Branch A/c Dr. → To Goods Sent to Branch A/c
d) Goods Sent to Branch A/c Dr. → To Branch A/c
What is a major benefit of branch accounting?
a) Helps in comparing performance among branches
b) Increases business complexity
c) Reduces transparency in transactions
d) Prevents the head office from tracking branch performance
Under the stock and debtors system, which account is used to record unrealized profit?
a) Branch Adjustment Account b) Branch Stock Account c) Branch Profit & Loss Account
d) Branch Cash Account
If a branch is required to remit all cash collections to the head office, it is classified as a:
a) Foreign branch b) Partly controlled branch
c) Fully controlled branch d) Independent branch
 What is the purpose of maintaining a stock reserve in branch accounting? a) To track
damaged stock at branches b) To account for unrealized profit c) To control the stock
levels at branches d) To keep extra stock for emergencies
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Under the Debtors System, the branch account is treated as a:

a) Real account b) Nominal account
c) Personal account d) Capital account
In which system does the head office maintain multiple accounts instead of a single branch
account?
a) Debtors System b) Stock and Debtors System
c) Final Account System d) Wholesale Branch System
Which type of branch has the most control over its operations?
a) Dependent branch b) Independent branch
c) Agency branch d) Fully controlled branch
When goods are sent from the head office to the branch, which account is credited in the
head office books?
a) Branch Account b) Goods Sent to Branch Account
c) Purchase Account d) Sales Account
Two mark Questions
1. Give two features of depended branches.
2. What do you mean by loading?
3. What is the significance of stock reserve account?
4. Mention two objectives of branch accounting.
5. Find out the loading which is 20% of the invoice price of goods, when the cost price of
goods is Rs. 20,000.
Case Study
XYZ Ltd. is a textile manufacturing company headquartered in Delhi, India. The company
operates multiple dependent branches across the country, including one in Jaipur. The Jaipur
branch receives all its goods from the head office at cost price and sells them for cash and
credit. It does not maintain a separate set of books; instead, the head office records all branch
transactions under the Debtors System.
In March 2024, the following transactions occurred at the Jaipur branch:
∙ Goods sent by head office – ₹5,00,000
∙ Cash sales at branch – ₹2,00,000
∙ Credit sales at branch – ₹1,50,000
∙ Expenses paid by head office – ₹50,000
∙ Cash collected from debtors & remitted to head office – ₹1,00,000
∙ Closing stock at branch – ₹75,000
The head office calculates the profit of the branch using the Debtors System and ensures that all
cash collected is remitted back. However, the branch manager of Jaipur is concerned about
delayed remittances from credit customers and requests limited control over collections to
avoid disruptions.
Questions (Write 100-200 words of your observations for each question) ∙
What are the advantages and disadvantages of maintaining the Jaipur branch under the
Debtors System?
∙ If XYZ Ltd. decided to switch the Jaipur branch to the Stock and Debtors System, how
would the accounting process change?