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Presented By:

Bilal Yasir
M.Rahat Javaid
Razi-ud-din
Zuhaib Farooq
Asad Sattar
Ateeq Taj
Noree n Malik
Uswah Tahir
Ayesha Tahir

Branch Accounting
Branch Accounting
In tro d u ctio n
A s a b u sin e ss flo u rish e s , it
b e co m e s n e ce ssa ry to o p e n u p
b ra n ch e s in v a rio u s o th e r
to w n s a n d citie s in o rd e r to
m a rk e t its se rv ice s / p ro d u cts
w h ich re su lts in th e in cre a se
o f its p ro fits .

“ A b ra n ch is g e n e ra lly d e fin e d
a s a se ctio n o f a n e n te rp rise
th a t is g e o g ra p h ica lly
se p a ra te d fro m th e re st o f th e
b u sin e ss . ”

T h e a ctiv itie s o f th e b ra n ch
a re co n tro lle d b y a h e a d o ffice
a n d u su a lly it ca rrie s o n th e
sa m e fu n ctio n s a s o f
e n te rp rise s . F o r e x a m p le
Branch Accounting
vBranch is not a separate legal
entity; it is simply a segment of
business.

vIn order to exercise great control


over the branches it is
necessary to ascertain profit or
loss made by such branches
separately.

vThe head office and branch keep


Need for Branch
Accounting
vAscertain profit of each branch
separately
vAscertain the financial position
of each branch
vAsses the progress and
performance of each branches.
vFulfill the audit requirement
under companies ordinance
1984.
vAscertain the quantity of stock
held by each branch at the end
Types of Branches
Types of Dependent
Branches

Goods transferred
Wholesale price
From Head office at cost

Goods transferred
From head office at loaded (invoice) price
Accounting arrangement
of Retail Dependent
Branches
vThe Accounting arrangement of
a branch depends upon its size,
the type of activities, the
method of operation and
degree of control to be
exercised by head office.
vThe Main methods of accounting
for branch transaction are:
1.Debtors System
2.Stock and Debtor system
Accounting arrangement
of Retail Dependent
Branches
vDebtor system
vThis 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.
vHead office may send goods to branch
at either at cost price or selling price.
1.Cost price method
2.Selling price method (Invoice
price)
Accounting arrangement
of Retail Dependent
Branches
1.Cost price method:
• Under this method at the beginning of the year branch
account is debited with the opening balance of assets
such as stock (at cost), debtors, petty cash, furniture,
prepaid expenses, accrued income, lying with the
branch.
• Similarly, it is credited with the opening balances of
liabilities of the branch such as creditors, outstanding
salaries, rent.
 Branch Account Dr.
Journal
Branch
Branch Assets Account (Individual)
entry:
Liabilities Account (Individual) Dr.
 Branch Account

Accounting arrangement
of Retail Dependent
Branches
 In the books of Head office
 Branch Account
Date Particulars Rs Date Particulars
Rs

Jan. 1 Branch b/d Jan.1 Balance b/d


Stock Creditors
Debtors Outstanding Salaries
Petty Cash
Furniture
Prepaid expenses
Accounting arrangement
of Retail Dependent
Branches
1.Cost price method:
• Branch Accounting is then debited with the
amount of goods sent to the branch (at
cost) and other amount remitted to
meet various expenses such as, salaries
rent and taxes etc.
• Branch account is credited with the return
of goods (at cost) by the branch and
receipts from debtors and cash sales.
• At the year end, branch account is debited
with the closing values of liabilities and
credited with the closing values of
assets.
Accounting arrangement
of Retail Dependent
Branches
1.Cost price method:
Journal entries

For goods sent to branch:


BranchAccount Dr.
Goods sent to Branch Account
Accounting arrangement
of Retail Dependent
Branches
 In the books of Head office
 Branch Account
Date Particulars Rs Date Particulars
Rs

Jan. 1 Branch b/d Jan.1 Balance b/d


Stock Creditors
Debtors Outstanding Salaries
Petty Cash
Furniture
D e c . 3 1 Prepaid
G o o d s expenses
s e n t to b ra n ch
A /c
Accounting arrangement
of Retail Dependent
Branches
1.Cost price method:
Journal entries

For goods sent to branch:


BranchAccount Dr.
Goods sentoftoCash/cheque
For remittance Branch Account
to branch for expenses e.g Salaries, rent, petty expenses
Branch Account Dr.
Cash/bank Account
Accounting arrangement
of Retail Dependent
Branches
 In the books of Head office
 Branch Account
Date Particulars Rs Date Particulars
Rs

Jan. 1 Branch b/d Jan.1 Balance b/d


Stock Creditors
Debtors Outstanding Salaries
Petty Cash
Furniture
D e c . 3 1 Prepaid
G o o d s expenses
s e n t to b ra n ch
A /c
B a n k A /c
R e n t, R a te s & Ta x e s
P e tty C a s h re m itta n ce
Accounting arrangement
of Retail Dependent
Branches
1.Cost price method:
Journal entries

For goods sent to branch:


BranchAccount Dr.
Goods sent toof Branch
For remittance Account
Cash/cheque to branch for expenses e.g Salaries, rent, petty
expenses
Branch Account Dr.
For cash/cheque
Cash/bank received from branch (Cash sales plus
Account
collection from debts)
Cash/Bank Account Dr.
Branch Account
Accounting arrangement
of Retail Dependent
Branches
 In the books of Head office
 Branch Account
Date Particulars Rs Date Particulars
Rs

Jan. 1 Branch b/d Jan.1 Balance b/d


Stock Creditors
Debtors Outstanding Salaries
Petty Cash
Furniture
D e c . 3 1 Prepaid
G o o d s expenses
s e n t to b ra n ch Dec . 31 Bank A / c
A /c Cash sales
B a n k A /c Collection from debts
R e n t, R a te s & Ta x e s
P e tty C a s h re m itta n ce
Accounting arrangement
of Retail Dependent
Branches
1.Cost price method:
Journal entries

For goods sent to branch:


BranchAccount Dr.
Goods sent toof Branch
For remittance Account
Cash/cheque to branch for expenses e.g Salaries, rent, petty
expenses
Branch Account Dr.
For cash/cheque
Cash/bank Account received from branch (Cash sales plus
collection from debts)
Cash/Bank
For closingAccount
balance of assets at the branch: Dr.
Branch
B ra n ch AAccount
sse t A / c D r.
B ra n ch A cco u n t
Accounting arrangement
of Retail Dependent
Branches
 In the books of Head office
 Branch Account
Date Particulars Rs Date Particulars
Rs

Jan. 1 Branch b/d Jan.1 Balance b/d


Stock Creditors
Debtors Outstanding Salaries
Petty Cash
Furniture
D e c . 3 1 Prepaid
G o o d s expenses
s e n t to b ra n ch Dec . 31 Bank A / c
A /c Cash sales
B a n k A /c Collection from debts
Balance c / d
R e n t, R a te s & Ta x e s Stock
P e tty C a s h re m itta n ce Debtors
Petty Cash
Furniture
Prepaid expenses
Accounting arrangement
of Retail Dependent
Branches
1.Cost price method:
Journal entries

For Closing balances of liabilities at the branch:


Branch Account Dr.
Liabilities account (Individual)
For transferring profit and loss; if profit
Branch Account Dr.
To General Profit and loss A/c
For transferring profit and loss; if loss
General profit and loss Account Dr.
To Branchbe
It should Account
noted that the closing balances of branch asset
and liabilities are shown in balance sheet
Accounting arrangement
of Retail Dependent
Branches
 In the books of Head office
 Branch Account
Date Particulars Rs Date Particulars
Rs

Jan. 1 Branch b/d Jan.1 Balance b/d


Stock Creditors
Debtors Outstanding Salaries
Petty Cash
Furniture
Prepaid expenses
Dec . 31 Goods sent to branch A / c Dec . 31 Bank A / c
Bank A / c Cash sales
Rent , Rates & Taxes Collection from debts
Petty Cash remittance Balance c / d
Balance c / d Stock
Creditors Debtors
Outstanding Expenses Petty Cash
Furniture
General Profit and loss Prepaid expenses
A/c
( Profit ) General Profit and loss A/c
(Loss)
Accounting arrangement
of Retail Dependent
Branches
1.Cost price method:
Journal entries

For Abnormal loss:


Abnormal loss account Dr. (Total)
Branch Account
Generalprofit and loss Account Dr. (Loss)
Insurance claim Account Dr. (Claim)
Abnormal loss Account
Accounting arrangement
of Retail Dependent
Branches
Illustration
 A ltd had a branch office at Sialkot. The following were
the transactions took place between Head office and its
branch office for the year ending 31 December 2009.

Branch openingStock 1.1.2009



3000
Goods sent to Branch 67000
Goods sent to branch for
expenses:
Cash sent to Head office 4950
79000
Salaries, Rent,onTelephone,
Branch stock 31.12.2009Petty 8000
Cash
Branch cash balance 100
Accounting arrangement
of Retail Dependent
In theBranches
 books of Head office
 Sialkot branch Account
 For the year ended 31 Dec. 2009
Particulars Rs Particulars Rs
Opening Stock 3,000 Cash (from 79,00
Goods sent to 67,000 branch) 0
branch Closing balances 8,000
stock 100
Cash for salaries Closing balance
Cash for rent 4,950 cash
Cash for telephone
Cash for petty cash
12150
General profit and
Loss (Net profit) 87,100 87,10
0
Accounting arrangement
of Retail Dependent
Branches
2. Invoice Price Method

• It is the method of sending goods to


its branches at sale price.

• Methods of selling goods at invoice
price is excellent from the point of
view of stock control.

• Goods may be invoiced at selling
price to keep the margin of profit a
secret from the branch manager.
Accounting arrangement
of Retail Dependent
Branches
2. Invoice Price Method

• Journal Entries

 For loading on opening stock



Stock reserve Account Dr.
Branch Account
1. F o r g o o d s se n t to b ra n ch

B ra n ch A cco u n t D r.
 G o o d s se n t to b ra n ch a cco u n t

For return of goods


Goodssent to branch account Dr.
Branch Account
For loading (Net) on goods sent to branch
Goods sent to branch Dr.
Branch Account
Accounting arrangement
of Retail Dependent
Branches
2. Invoice Price Method

• Journal Entries

 For loading on Closing Stock



Branch Account Dr.
Stock Reserve Account
1.

For transferring profit and loss; if profit

Branch Account Dr.
General profit and loss account
For transferring profit and loss ; if loss
General profitand loss Dr.
Branch Account
Rest of the entries are same as of cost price method.
Accounting arrangement
of Retail Dependent
Branches
2. Invoice Price Method

• Journal Entries

 For Abnormal loss


Abnormal loss Dr.(Invoice price)

Branch Account
1. Branch Account

Dr. (Loading on

abnormal loss)
Abnormal loss
Bank Account Dr. (Insurance claim
received)
Generalprofit and loss account Dr. (Loss)
Abnormal loss Account
Accounting arrangement
of Retail Dependent

Branches
2. Invoice Price Method
 Illustration
 The Naveed Stores ltd, Multan has a branch at hyderabad.
Goods are invoiced to the branch at a selling price, being cost
plus 25%. The branch keeps its own sales ledger and deposits all
cash received daily to the credit of the head office account
opened at the MCB, Hyderabad. All expenses are paid by cheque
Stock onmultan.
from 1.1.01 30,0000 Cash sales for the 1,29,600

Stock on 36,000 year
Credit sales 84,000
31.12.01
Sundry debtors 16,800 Cash received from
1.1.01 the debtors 79,200
Sundry debtors 21,600
Wages paid 8,960
31.12.01
Goods invoiced 2,18,400
from
Rent, H.O
rates and 9,600
taxes
Sundry Expenses 1920
Accounting arrangement
of Retail Dependent
 Branches
Books of Naveed Stores Ltd.
 Hyderabad Branch A/c
 For the year ended 31 Dec. 2001
D a te Particulars Rs  Date Particulars Rs
01.01. Balances 31.12. Cash—sales 129600
01 Stock 30,000 01 Cash--- 19200
Debtors 16800 debtors
Goods sent to Balances: 36000
2,18,400 21600
branches Stock
Cash----Expenses 9,600 Debtors
Rent, rates and
taxes 1,920 Goods sent to 43680
Sundry expenses 8,960 branches
Wages (218400*1/5) 6000
3,16,080
7200 3,16,080
Stock reserve
23200 Stock reserve
(36000*1/5)
Accounting arrangement
of Retail Dependent
Branches
 2. Stock and Debtor System
 Stock and debtor system is generally used when the
goods are sent to the branches at an invoice price and
the size of the branch is large.

 These accounts usually are


i. Branch Stock Account;
ii. Branch Debtor Account
iii.Goods sent to branch account
iv. Branch adjustment account
v. Branch cash account
vi. Branch Expense Account
vii.Branch Profit and loss Account
viii.Branch Fixed Asset Account
Stock and Debtor
System
 A. Branch Stock Account;
a) Branch Stock Account is a practical means of controlling
stock at branch.
b) It is maintained at invoice price
c) Actual Stock with the branch is shown as the balance in
Date this account.
Particulars Rs Date Particulars
Rs
Jan. 1 Branch b/d Jan.1 Balance b/d
In transit Creditors
At branch Outstanding Salaries

D e c . 3 1 G o o d s s e n t to b ra n ch A / c Dec . 31 Bank A / c
B a n k A /c Cash sales
R e n t, R a te s & Ta x e s Collection from debts
Balance c / d
P e tty C a s h re m itta n ce at branch
In transit
Stock and Debtor
System
 B. Branch Debtors Account
 When branch is allowed to sell goods on credit. It is
used to exercise control over branch debtors. It is
prepared like sundry debtors account.
Date Particulars Rs Date Particulars
Rs
 Jan. 1 Branch b/d Jan.1 Balance b/d

D e c. 3 1 Branch Stock A / c Dec . 31 Bank A / c Collection


( Credit sales ) Branch expense A / c
Discount allowed
Bad debts
Branch Stock A / c
____ ( Returned )

Jan . 1 Balance b / d
__ Balance c / d __
__
Stock and Debtor
System
 C. Goods sent to Branch Account
 Goods sent to branch account is credited with the
invoice price of goods sent to the branch by the head
office and transferred from other branches and
debited with the invoice price of the goods
Date Particulars Rs Date Particulars
returned/transferred by the branch. Rs
Jan. 1 Branch b/d Jan.1

D e c. 3 1 Branch Stock A / c Dec . 31 Branch Stock A / c


( Returns ) Branch Stock A / c
Branch Account A / c ( Transfer )
( Transfer )
Branch adjustment
account
( Loading )

Purchases / trading A/c*


Stock and Debtor
System
 D. Branch Cash Account
 Branch Cash Account is prepared with a view to
exercise control over the branch cash. The account is
generally opened where the branch is allowed to hold
cash received from debtors and use it for branch
expenses and remit the balance to head office after
Date Particulars Rs Date Particulars
certain interval. Rs
Jan. 1 Branch b/d Jan.1 Balance b/d
Creditors
Outstanding Salaries

D e c . 3 1 G o o d s s e n t to b ra n ch A / c Dec . 31 Bank A / c ( Remittance to


B a n k A / c ( R e m itta n ce ) H.o)
B a n k A / c ( Tra n sfe r fro m Branch expense a / c
Bank A / c ( Transfer to
o th e r b ra n ch ) other branch )
Balance c / d
Stock and Debtor
System
 E. Branch Expense Account
 Branch expense records all branch expenses in cash.
In addition, this account is debited with the item like bad
debts, discount allowed, depreciation on branch fixed
assets, etc. The balance of this account is transferred to
branch profit and loss account and thereby closed.
Date Particulars Rs Date Particulars
Rs
Jan. 1 Branch b/d Jan.1 Balance b/d
Creditors
Outstanding Salaries

D e c . 3 1 B ra n ch C a sh A / c Dec . 31 Branch Profit and loss


( Returns ) A/c
B ra n ch A s s e ts
A / c ( D e p re cia tio n )
B ra n ch D e b to rs A / c
B a d d e b ts
D is co u n t a llo w e d
Stock and Debtor
System
 F. Branch (Stock) Adjustment
Account
 It is prepared to ascertain gross profit of the branch.
This account summarizes the profit “loading” on all
transactions. This account is credited with the stock
Date Particulars Rs Date Particulars
reserve on opening stock and loading on net good sent Rsto
branch.
Jan. 1 Itb/d
Branch is credited with the loading
Jan.1 on
Balance b/dsurplus in stock.
Creditors
Outstanding Salaries
D e c . 3 1 S h o rta g e in s to ck A / c Dec . 31 Stock reserve A / c *
( Loading ) ( Loading on opening
L o s s b y fire A / c stock )
Goods sent to branch A / c
( Loading ) ( Loading on net goods
L o s s in tra n s it ( L o a d in g ) sent )
L o s s b y th e ft( lo a d in g ) Surplus in stock A / c
P ilfe ra g e A / c ( L o a d in g ) ( Loading on surplus )
S to ck re s e rv e *
Gross Loss c / d
( Loading on closing
s to ck )
G ro s s p ro fit c / d
Stock and Debtor
System
G. Branch Fixed assets
Account

The head office may maintain
separate asset accounts for
each fixed assets. This account
is debited with the opening
value of asset and purchase of
an asset, if any. This account is
credited with the depreciation
provided on the asset.
THANK YOU !
Made by :
Mr . Bilal Yasir
+ 92345 - 8703330