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Accounting For Branches Combined Financial Statements: ©the Mcgraw Hill Companies, Inc. 2006 Mcgraw Hill/Irwin
Accounting For Branches Combined Financial Statements: ©the Mcgraw Hill Companies, Inc. 2006 Mcgraw Hill/Irwin
Accounting for
Branches
Combined Financial
Statements
McGrawHill/Irwin
TheMcGrawHillCompanies,Inc.2006
Scope of Chapter
Accounting
segment is operated as a
separate corporation
Consolidated financial statements are
required. The consolidated statement is
described in chapters 6 through 10.
10
Journals
Ledgers
Chart of accounts
11
12
13
recorded by a branch
should include all controllable expenses
and revenue initiated by the branch
If the branch manager has responsibility
over all branch assets, liabilities, revenue
and expenses, the branch accounting
records should reflect this responsibility.
14
16
18
19
20
21
23
24
25
Illustration 1
In
26
Illustration 1
Home Office Accounting Records
Journal Entries
Journal Entries
1. Investment in Branch
Cash
2. Investment in Branch
Inventories
3. Equipment : Branch
Investment in Branch
4. None
1,000
60,000
Inventories
500
1,000
60,000
Home Office
Home Office
37,500
3,000
Cash
Trade Accts. Receivables
Cost of Goods Sold
Sales
Inventories
Cash
Trade Accts. Receivable
Operating Exps.
Cash
Home Office
37,500
Cash
Operating Exps.
3,000
Home Office
60,000
500
500
6. None
27
1,000
Home Office
60,000
5. None
7. Cash
Investment in Branch
8. Investment in Branch
Operating Exps.
Cash
1,000
500
80,000
45,000
80,000
45,000
62,000
62,000
20,000
20,000
37,500
37,500
3,000
3,000
alternative methods.
Shipment
28
29
30
31
32
33
34
Illustration 2
SBH COMPANY
Working Paper for Combined Financial Statements of Home Office and Branch
For Year Ended December 31, 2002
(Perpetual Inventory System: Billings at Cost)
Adjusted Trial Balances
Home Office
Branch
Dr (Cr)
Dr (Cr)
Income Statement
Sales
Cost of goods sold
Operating expenses
Net Income (to statement of retained earnings
below)
Totals
Statement of Retained Earnings
Retained earnings, beginning of year
Net (Income) (from income statement above)
Dividends declared
Retained earnings, end of year (to balance
sheet below)
Totals
37
Balance Sheet
Cash
Trade accounts receivable (net)
Inventories
Investment in Branch
Equipment
Accumulated depreciation of equipment
Trade accounts payable
Home office
Common stock, $ 10 par
Retained earnings (from statement of retained
earnings above)
Totals
Eliminations
Dr (Cr)
Combined
Dr (Cr)
(400,000)
235,000
90,000
(80,000)
45,000
23,000
(480,000)
280,000
113,000
75,000
0
12,000
0
87,000
0
(70,000)
(75,000)
40,000
(12,000)
(70,000)
(87,000)
40,000
117,000
0
25,000
39,000
45,000
26,000
150,000
(10,000)
(20,000)
5,000
18,000
15,000
30,000
57,000
60,000
(26,000)
150,000
(10,000)
(20,000)
(26,000)
26,000
(150,000)
(150,000)
(117,000)
0
Illustration 3
Preparation
38
Illustration 3
SBH COMPANY
Working Paper for Combined Financial Statements of Home Office and Branch
For Year Ended December 31, 2002
(Perpetual Inventory System: Billings above Cost)
Adjusted Trial Balances
Home Office
Branch
Dr (Cr)
Dr (Cr)
Income Statement
Sales
Cost of goods sold
Operating expenses
Net Income (loss) (to statement of retained
earnings below)
Totals
Statement of Retained Earnings
Retained earnings, beginning of year
Net (Income) loss (from income statement
above)
Dividends declared
Retained earnings, end of year (to balance
sheet below)
Totals
39
Balance Sheet
Cash
Trade accounts receivable (net)
Inventories
Investment in Branch
Allowance for Overvaluation of Inventories:
Branch
Equipment
Accumulated depreciation of equipment
Trade accounts payable
Home office
Common stock, $ 10 par
Retained earnings (from statement of retained
earnings above)
Totals
(400,000)
235,000
90,000
(80,000)
67,500
23,000
75,000
0
(10,500)
0
Eliminations
Dr (Cr)
Combined
Dr (Cr)
(22,500)
(480,000)
280,000
113,000
22,500
(70,000)
(75,000)
40,000
87,000
0
(70,000)
10,500
(22,500)
(87,000)
40,000
117,000
0
25,000
39,000
45,000
56,000
5,000
18,000
22,500
(30,000)
150,000
(10,000)
(20,000)
(7,500)
(56,000)
30,000
(56,000)
56,000
(150,000)
30,000
57,000
60,000
0
150,000
(10,000)
(20,000)
0
(150,000)
(117,000)
0
1.
2.
40
Reconciliation of
Reciprocal Ledger Accounts
41