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Branch Accounting

Chapter # 2

BRANCH ACCOUNTING

Branch accounting is an accounting system in which each department or Branch of a business is established as a separate cost centre or budget centre. The net profit per Branch may be added together to arrive at the profit for the whole business. Branch accounts may be prepared to show the performance of both a main trading centre (i.e. the Head Office) and subsidiary trading centre (i.e. Branches) but with all the accounting records being maintained by Head Office. Alternatively, separate entity Branch accounts are prepared in which Branches maintain their own records, which are later combined with Head Office records to prepare accounts for the whole business.

ACCOUNTING SYSTEM FOR A BRANCH
There are two alternative systems: 1. The branch does not maintain a complete set of accounting records. The head office serves only as an accounting and control center for the branches. 2. The branch maintains a complete set of accounting records consisting of journal entries and ledger accounts. Financials statements are prepared by the branch account and forwarded to the head office. This chapter focuses on the second system that the branch maintains its own accounting records.

RECIPROCAL LEDGER ACCOUNTS USED BY THE HEAD OFFICE AND BRANCH

 Head Office Ledger Account: This account is used by the branch to account for all transactions with the home office. It is credited for all cash, merchandise or other assets provided by the head office to the branch. It is debited for all cash, merchandise, or other assets sent by the branch to the head office or to other branches. This account represents the net investment by the head office in the branch. At the end of a period, the balance of Income Summary account of a branch is closed to the head office account.  Branch Ledger Account: This account is a reciprocal ledger account (to head office account) used by the head office to account for any transactions with the branches. It is debited for cash, merchandise and services provided to the branch by the head office and for the net income reported by the branch. It is credited for cash, or other assets received from the branch, and for net losses reported by the branch.

METHODS OF BILLING MERCHANDISE SHIPMENT TO BRANCH

Three alternative methods are available to head office in billing the merchandise shipped to the branches: 1. Billed at head office cost. 2. Billed at a percentage above the head office cost. 3. Billed at the branch’s retail selling price.

ALLOWANCE FOR OVER VALUATION

Head Office sells merchandise to Branch more than selling price. This additional profit which is earned by the Head Office from the shipment of merchandise to the Branch is known as allowance for over valuation.

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Branch Accounting
Chapter # 2

COMPUTATION OF ALLOWANCE FOR OVERVALUATION PERCENTAGE:
Allowance for overvaluation percentage = Allowance for overvaluation Cost price

X 100

COMPUTATION OF ALLOWANCE FOR OVERVALUATION:
Allowance for overvaluation =

Billed price x Allowance for overvaluation percentage (%) Billed percentage (%)

 

Billed price means cost price plus allowance for over valuation. Billed percentage (%) means cost percentage (100%) plus allowance for over valuation percentage (%).

COMPUTATION OF REALIZED ALLOWANCE FOR OVERVALUATION:
Particulars Merchandise inventory opening (Branch) Add: Merchandise sent to Branch Less: Merchandise returned by Branch Unadjusted allowance for overvaluation Less: Merchandise inventory ending (Branch) Adjusted allowance for overvaluation Billed XXX XXX (XXX) XXX (XXX) XXX Cost XXX XXX (XXX) XXX (XXX) XXX Allowance for over valuation XXX XXX (XXX) XXX (XXX) XXX

GENERAL ENTRIES:
Head Office Book Branch Book 1. Purchase merchandise on account by Head Office. Purchases Debit No entry Accounts payable Credit 2. Head Office remitted (transferred) cash to Branch. Branch Debit Cash Cash Credit Head Office 3. Head Office sent goods to Branch at above cost. Branch Debit Merchandise supplied Merchandise supplied Credit Head Office Allowance for over valuation Credit Debit Credit Debit Credit

4. Head Office transferred cash to Branch for the salaries expense of Branch. Branch Debit Salaries expense Debit Cash Credit Head Office Credit 5. Head Office paid the liability of Branch. Branch Debit Accounts payable Cash Credit Head Office 6. Head Office received the cash from the customers of Branch. Cash Debit Head Office Branch Credit Accounts receivable
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Debit Credit Debit Credit

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Branch Accounting
Chapter # 2

7. Branch purchase merchandise on account. Purchases No entry Accounts payable 8. Merchandise sold for cash by Branch. Cash No entry Sales 9. Branch sold merchandise on account. Accounts receivable No entry Sales 10. Branch purchase furniture for cash. No entry Furniture Cash

Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit

11. Branch paid the liability of Head Office. Accounts payable Debit Head Office Branch Credit Cash 12. Branch received the receivable of Head Office. Branch Debit Cash Accounts receivable Credit Head Office 13. Branch returned goods to Head Office at billed price. Merchandise supplied returned Debit Head Office Allowance for over valuation Debit Merchandise supplied returned Branch Credit 14. Branch paid the rent expense of Head Office. Rent expense Debit Head Office Branch Credit Cash 15. Branch reported a net profit to Head Office. Branch Debit Expense and revenue summary Profit and loss account Credit Head Office 16. Branch reported a net loss to Head Office. Profit and loss account Debit Head Office Branch Credit Expense and revenue summary 17. Head Office adjusts the allowance for over valuation. Allowance for over valuation Debit No entry Profit and loss account Credit

Debit Credit Debit Credit Debit Credit

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3.000.000 www.000.000 30. SOLUTION # 1: Date 1 2 3 Shah Shoes Company Head Office Book General Journal Particulars P/R 4 5 6 7 Purchases Accounts payable (To record the goods purchased on account) Hyderabad branch Cash (To record the cash remitted to branch) Hyderabad branch Merchandise supplied Allowance for overvaluation (To record the goods supplied to branch) Hyderabad branch Cash (To record the branch’s liability paid) Cash Hyderabad branch (To record the cash received from the customers of branch) No entry No entry Debit 300.35.200 30. o) Branch reported a net profit of Rs.215.19.a4accounting.net Page 34 . b) Cash received by branch from head office Rs.000.152. m) Branch paid the rent expense of the head office Rs.000. c) Goods received by branch from head office Rs. p) Merchandise inventory on 30 June 2005 at branch Rs. The following information of Hyderabad branch and head office for the year ended 30 June 2005: a) Merchandise purchase on account by head office Rs.800 and on account Rs.000 and on account Rs.30.000.15.000. REQUIRED Make entries in the books of head office as well as in branch. k) Cash sent to head office Rs.6.000 30.300. d) Head office paid the liability of branch Rs.000 30.000).000.50. f) Goods purchased by branch for cash Rs.55.000.000 to the head office.200 (billed price).000 50.200 Credit 300.000. g) Sale by branch on cash Rs.000 295.Branch Accounting Chapter # 2 ILLUSTRATION # 1: Shah Shoes Company opened a branch at Hyderabad on 1 July 2004.246.000 49.000 by branch.200.200 (costing Rs.30.10.182. h) Salaries expenses of branch paid by head office Rs.64.13.100. i) Branch paid the liability of head office Rs. j) Collection on account by branch from customers of head office Rs.000 246. n) Furniture sent to branch by head office Rs.295. l) Defective goods returned by branch to head office at billed price of Rs.62.000 50. e) Head office received from the customers of branch Rs.000.

000 (6.000 6.000 10.200 246.200 246.000 195.000 11 12 152.net .200 19.000) 48.000 182.100 152.200 19.000 13 14 15 16 Computation of Realized Allowance for Overvaluation: Particulars Merchandise supplied to branch Less: Merchandise returned by Branch Unadjusted allowance for overvaluation Less: Merchandise inventory ending (Branch) Adjusted allowance for overvaluation Billed Cost 295.000 13.200) 39.000) 289.000 39.000) 234.000) (5.000 Allowance for overvaluation percentage = 20% Page 35 www.200 (1.000 X 100 X 100 Computation of Allowance for Overvaluation Rate: Allowance for overvaluation percentage = Allowance for overvaluation Cost price Allowance for overvaluation percentage = 49.000 Allowance for over valuation 49.a4accounting.000 (55.000 3.200 241.200) (46.000 13.200 (9.100 182.000 3.000 39.000 10.000 5.000 1.000 Credit 62.Branch Accounting Chapter # 2 Date 8 9 10 Shah Shoes Company Head Office Book General Journal Particulars Hyderabad branch Cash (To record the branch’s salaries paid) Accounts payable Hyderabad branch (To record the liability paid by branch) Hyderabad branch Accounts receivable (To record the cash received by branch from the customers of head office) Cash Hyderabad branch (To record the cash remitted by branch) Merchandise supplied returned Allowance for overvaluation Hyderabad branch (To record the goods returned by branch) Rent expense Hyderabad branch (To record the rent expense paid by branch) Hyderabad branch Furniture (To record the furniture sent to branch) Hyderabad branch Profit & loss account (To record the net profit reported by branch) Allowance for overvaluation Profit & loss account (To adjust the allowance for overvaluation account) P/R Debit 62.

000 x 20% 120% Rs.9.000 64.000 8 9 www.000 295.net Page 36 .000 7 279.Branch Accounting Chapter # 2 Computation of Allowance for Overvaluation: Allowance for overvaluation = Allowance for overvaluation = Allowance for overvaluation = Allowance for overvaluation = Allowance for overvaluation = Billed price x Allowance for overvaluation percentage (%) Billed percentage (%) 5.000 50.800 15.200 19.200 30.000 55.a4accounting.200 Credit 30.000 62.800 35.000 6 50.000 30.200 Date 1 2 3 4 5 Shah Shoes Company Hyderabad Branch Book General Journal Particulars No entry Cash Head office (To record the cash received from head office) Merchandise supplied Head office (To record the goods received from head office) Accounts payable Head office (To record the liability paid by head office) Head office Accounts receivable (To record the cash collected from the customers by head office) Purchases Cash Accounts payable (To record the goods purchased on account and for cash) Cash Accounts receivable Sales (To record the goods sold for cash and on credit) Salaries expenses Head office (To record the salaries paid by head office) Head office Cash (To record the payment of liability of head office) P/R Debit 30.200 x 20% 120% Rs.000 215.1.000 50.000 62.200 19.000 295.

a4accounting.000 13.45.4.000 13. REQUIRED Give entries in General Journal of: 1.100 Credit 182.000 15 3. Head Office 2. The Branch “A” dully executed the directives and paid additional freight Rs.100 11 12 13 14 152.200. If the goods had been sent to Branch “B” directly by the Head Office. the freight charges would have been Rs.net . ILLUSTRATION # 2: The Karachi Head Office of Umair Company consigned to Branch “A” goods costing Rs.Branch Accounting Chapter # 2 Date 10 Shah Shoes Company Hyderabad Branch Book General Journal Particulars Cash Head office (To record the cash collected from the customers of head office) Head office Cash (To record the cash remitted to head office) Head office Merchandise supplied return (To record the goods returned to head office) Head office Cash (To record the rent paid for head office) Furniture Head office (To record the furniture received from head office) Expense and revenue summary Head office (To record the net profit reported to head office) P/R Debit 182.000 3.000 10. Branch “A” 3.000 152. Branch “B” (INTER BRANCH TRANSACTIONS) Page 37 www.750. Later on the Head Office directed the Branch “A” to transfer the entire consignment to Branch “B”. Any excess freight costs incurred for the transfer between branches should be expensed.000 10.000 TRANSACTIONS BETWEEN BRANCHES When it is necessary to transfer merchandise or assets from one branch to another branch. The head office will transfer the inventory (or assets) from investment in one branch to another branch. Head Office Ledger account is used by the branches.000 6.000 6.750.3.000 and freight paid Rs.

the head office and branches are a single business entity. www.a4accounting.000 49.750 49.000 3.200 FINANCIAL STATEMENTS Separate financial statements for branches should be prepared so that management can evaluate the performance of each branch.net Page 38 . For investors.500 Date 1 P/R Debit 45.750 3.Branch Accounting Chapter # 2 SOLUTION # 2: Date 1 Umair Company Head Office Book General Journal Particulars P/R 2 Branch “A” Cash Merchandise supplied (To record the goods supplied to branch “A”) Branch “B” Inter branch freight charges Branch “A” (To record the inter branch freight charges) Umair Company Branch “A” Book General Journal Particulars Merchandise supplied Freight charges Head office (To record the goods received from head office) Head office Freight charges Cash Merchandise supplied (To record the goods supplied to Branch “B” under the instruction of head office) Umair Company Branch “B” Book General Journal Particulars Merchandise supplied Freight charges Head office (To record the goods received from Branch “A” under the instruction of head office) Debit 48.000 4. The branch’s financial statements may be revised by the head office to include the allocated expenses incurred by the head office.750 750 45.750 45. Also.750 Credit 3.200 Credit 49. combined financial statements should be prepared for external users.000 2 Date 1 P/R Debit 45. Thus.200 300 49. the financial statements of branches should be revised to eliminate any intra-company profits on merchandise shipments or interest charge on capital investments.500 Credit 48.

a4accounting.Branch Accounting Chapter # 2 INCOME STATEMENT IN BRANCH BOOK Sales revenue Less: Sales return / sales discount Net sales Less: Cost of Goods Sold: Merchandise inventory opening Add: Net purchases Add: Merchandise received from Head Office Total merchandise during the period Less: Merchandise returned to Head Office Merchandise available for sale Less: Merchandise inventory ending Cost of goods sold Gross profit/loss Less: Operating expenses Net profit/loss XXX (XXX) XXX XXX XXX XXX XXX (XXX) XXX (XXX) (XXX) XXX/(XXX) (XXX) XXX/(XXX) INCOME STATEMENT IN HEAD OFFICE BOOK Sales revenue Less: Sales return / sales discount Net sales Less: Cost of Goods Sold: Merchandise inventory opening Add: Net purchases Less: Merchandise send to Branch Total merchandise during the period Add: Merchandise returned by Branch Merchandise available for sale Less: Merchandise inventory ending Cost of goods sold Gross profit/loss Less: Operating expenses Net profit/loss from Head Office Add: Branch Account: Branch net profit/loss Realized allowance for over valuation Adjusted Branch account Adjusted net profit/loss XXX (XXX) XXX XXX XXX (XXX) XXX XXX XXX (XXX) (XXX) XXX/(XXX) (XXX) XXX/(XXX) XXX/(XXX) XXX XXX/(XXX) XXX/(XXX) Page 39 www.net .

Branch Accounting Chapter # 2 CONSOLIDATED INCOME STATEMENT Sales revenue Less: Sales return / sales discount Net sales Less: Cost of Goods Sold: Merchandise inventory opening Add: Net purchases Merchandise available for sale Less: Merchandise inventory ending Cost of goods sold Gross profit/loss Less: Operating expenses Net profit/loss XXX (XXX) XXX XXX XXX XXX (XXX) (XXX) XXX/(XXX) (XXX) XXX/(XXX) BALANCE SHEET IN BRANCH BOOK Assets Current Assets: Cash Accounts receivable Merchandise inventory Total current assets Fixed Assets: Equipment Less: All for depreciation Total fixed assets Total assets XXX (XXX) XXX XXX XXX XXX XXX XXX Liabilities: Accounts payable Salaries payable Total liabilities Owner’s Equity: Head Office Add: Branch profit Total owner’s equity Total equities XXX XXX XXX XXX Equities XXX XXX XXX BALANCE SHEET IN HEAD OFFICE BOOK Assets Current Assets: Cash Accounts receivable Merchandise inventory Branch account Total current assets Fixed Assets: Equipment Less: Allowance for depreciation Total fixed assets Total assets XXX (XXX) XXX XXX Equities XXX XXX XXX XXX XXX Liabilities: Accounts payable Salaries payable Total liabilities Owner’s Equity: Capital Add: Branch profit Add: Head Office net profit Add: Allowance for over valuation Total owner’s equity Total equities XXX XXX XXX XXX XXX XXX XXX XXX XXX www.net Page 40 .a4accounting.

125 ----Sales --41.250) 3.750 Sales Less: Cost of Goods Sold: Merchandise inventory opening Add: Net purchases Add: Merchandise received from Head Office Merchandise available for sale Less: Merchandise inventory ending Cost of goods sold Gross profit Less: Operating expenses Net profit Page 41 www. c) Prepare Consolidated Income Statement.Branch Accounting Chapter # 2 CONSOLIDATED BALANCE SHEET Assets Current Assets: Cash Accounts receivable Merchandise inventory Total current assets Fixed Assets: Equipment Less: All for depreciation Total fixed assets Total assets XXX (XXX) XXX XXX Equities XXX XXX XXX XXX Liabilities: Accounts payable Salaries payable Total liabilities Owner’s Equity: Capital Add: Branch profit Add: Head Office profit Total owner’s equity Total equities XXX XXX XXX XXX XXX XXX XXX XXX ILLUSTRATION # 3: Following are the details of head office and branch on 31 December 2010: Head Office Branch Office Debit Credit Debit Credit Merchandise inventory (opening) 7.750) (27.750 ----Goods received from Head Office ----22. REQUIRED a) Prepare Branch Income Statement.6.750 --Purchases 30.500 (9.000 and Branch Rs.500 --3.500 --Allowance for overvaluation --4.250 22. Closing inventory: Head Office Rs.750 Operating expenses 6.750 11.500 37. (FINANCIAL STATEMENTS) SOLUTION # 3: Branch Book Income Statement For the Period Ended 31 December 2010 33.250 --33.000 (2.750) 6.000 --11.750 purchases from outsiders.750 including Rs.9.a4accounting.750 --2.750 3. b) Prepare Head Office Income Statement.250 --Goods sent to Branch --18.net .250 --Additional Information on 31 December 2010: 1.

750 Allowance for overvaluation percentage = 20% Computation of Allowance for Overvaluation: Allowance for overvaluation = Allowance for overvaluation = Allowance for overvaluation = Billed price x Allowance for overvaluation percentage (%) Billed percentage (%) 9.250 Cost 3.1.000 (18.250 (12.500 30.125 Computation of Realized Allowance for Overvaluation: Particulars Merchandise inventory beginning Add: Merchandise supplied to branch Unadjusted allowance for overvaluation Less: Merchandise inventory ending (Branch) Adjusted allowance for overvaluation Billed 3.500 www.626 6.000 x 20% 120% Rs.500) 14.500 26.750 3.375 18.net Page 42 .250 (9.125 (7.750 22.a4accounting.750) 18.000) 41.000) 17.750) 28.375 28.625 Allowance for over valuation 375 3.750) 21.750 4.750 (6.750 2.125 (1.500) 2.500 (6.750 18.750 22.625 X 100 X 100 Computation of Allowance for Overvaluation Rate: Allowance for overvaluation percentage = Allowance for overvaluation Cost price Allowance for overvaluation percentage = 3.Branch Accounting Chapter # 2 Sales Less: Cost of Goods Sold: Merchandise inventory opening Add: Net purchases Less: Merchandise send to Branch Merchandise available for sale Less: Merchandise inventory ending Cost of goods sold Gross profit Less: Operating expenses Net profit from Head Office operation Add: Branch Account: Branch net profit Realized allowance for over valuation Adjusted Branch account Adjusted net profit Head Office Book Income Statement For the Period Ended 31 December 2010 7.

250) 75.250 52.000 + 11.250) Net profit Consolidated Income Statement For the Period Ended 31 December 2010 10.500 + 3.a4accounting.250) Merchandise available for sale Less: Merchandise inventory ending (6.000 + 750 + 7.net .125 (14.250 + 33.Branch Accounting Chapter # 2 Sales (41.875) 37.000 (37.875 41.750 + 2.750) Less: Cost of Goods Sold: Merchandise inventory opening (7.500) Cost of goods sold Gross profit Less: Operating expenses (6.125 (9.375) Add: Net purchases (30.000) 28.125 Page 43 www.

3. (b) Prepaid operating expenses Rs.000.000.000. Paid operating expenses Rs.750.112. Returned merchandise to the seller worth Rs. The Branch pays Rs. Shipped merchandise to Branch at a cost of Rs. 4.000.500. Give entries that would appear in the books of Head Office and Branch as a result of the following transactions: 1.000.000.500.000.15. 4.a4accounting.112. Purchase furniture for cash Rs.75.000.000 and ending Rs. 2.6.150.000. 6. The Head Office purchases Branch equipment for cash Rs.6. The Branch pays Rs.12.525. 3.500. 2. Sold merchandise for Rs.187. 2. Paid the rent in advance Rs. 5.000. Question # 3: The Head Office of Zubair and Company carries all Branch plant assets in its own ledger. Sold merchandise on credit Rs.000.000.375.150.30.net Page 44 .000. Paid the accounts payable of the Head Office Rs. REQUIRED Entries in Branch General Journal including adjusting and closing entries.500.120. 2. Returned merchandise to Head Office at a billed price of Rs. Paid salaries of the Branch Rs. Received merchandise form Head Office at a billed price of Rs.000 for the insurance of the equipment. 7.52. Other Data: (a) Accrued operating expenses Rs.6. Branch: 1.000.500. Purchase merchandise on credit Rs. www. Received intimation from the Head Office that it had paid Branch operating expenses Rs. Purchased merchandise from the local market for Rs.500. Paid the accounts payable of the Branch Rs. 6. Sold merchandise for cash Rs.500 on account. Collected cash from Branch accounts receivable Rs. REQUIRED Give the necessary journal entries in the books of Head Office and Branch respectively recording the reciprocal transactions in both the books.450.112.123.225. 3.9. (c) Merchandise inventory beginning Rs.Branch Accounting Chapter # 2 PRACTICE QUESTIONS Question # 1: The following are selected transactions of Shalimar Branch working independently for the month of August 1998: 1. Question # 2: Ismail & Company opened a Branch at Hyderabad. The Head Office records depreciation on the equipment Rs. 4. 6.187. The transactions of Head Office and its Branches are as under:Head Office: 1. Purchase merchandise on account Rs.7.000. 4.9. 5.117.000 for the installation of the equipment. 5. 3. Remitted cash to Branch Rs.000.300.000 on account.

45.200 during January.6. The Head Office had followed the practice of billing the Branch at 25% above cost. 3. REQUIRED Give the journal entries on the books of Head Office to record the above transactions and to record overvaluation adjustments. 3.750. REQUIRED (1) Give journal entries in the books of Head Office including adjustment of overvaluation. Page 45 www.6. 2.135.7.54. 1993 Hafiz & Co.075. (2) Give journal entries in the books of Multan Branch. During the month Branch returned merchandise of billed price of Rs.000. Branch reported a loss for January Rs. of Karachi opened a Branch at Multan. Goods returned by Branch at billed price of Rs. Merchandise valued at Branch on March 31. 5. 5. Note: Where computation of overvaluation is required entries without computation will not be accepted.375. 2005 for Rs. Goods supplied to Branch at billed price for Rs. 4. Branch reported net profit of Rs. 1993 Branch inventory at billed price was Rs.500. following is the information for the month of January 1993.net .000. The Head Office followed the practice of billing the Branch at 20% above cost of merchandise.144.000 for the month. The Head Office has followed a practice of billing the Branch at 20% above cost of merchandise.6. (Show necessary computations). 2006. During the month additional shipment was made at billed price of Rs. Following is the information for the month of January 2006: 1. Shifted to the Branch goods billed at Rs.81. At the end of January the inventory (at billed price) held by Branch amounted to Rs. 2005 a company of Karachi opened a Branch at Lahore.90. During the month additional shipment was made at billed price of Rs. Branch returned merchandise of billed price Rs. During the month additional shipment was made at billed price of Rs. Question # 5: On March 1.45. Question # 6: On January 1.3. REQUIRED Give the journal entries in the books of Head Office to record the above transactions and to record overvaluation adjustment.000.a4accounting.200. 3. At January 31.000.000. 5.000. 4. Karachi opened a Branch at Larkana. Sent merchandise to Branch at billed price of Rs.247. Bilal Co.Branch Accounting Chapter # 2 Question # 4: On January 1. 1.000.97. 2. The information for the month is as under: 1. 4. 2.

250. with its Branch at Hyderabad during the year ended June 30. 5.125.135. 4.750 for the year. The Branch reported a loss of Rs. Fahad Traders of Karachi opened a Branch at Islamabad by sending goods at a billed price of Rs. REQUIRED 1) Give entries in General Journal of Multan Branch to record transactions numbered 2.405. The Branch is not authorized to make merchandise purchases from its local market. On 31st Dec. post relevant entries into it.18. A November 30.000.23.000.3. 2007. Multan Branch reported merchandise inventory at November 01 valued at Rs.a4accounting. Balance and rule off the account. Question # 9: Pak Trading Co. The Branch returned merchandise at billed price of Rs. the Branch returned goods worth Rs.162.000.750. 4) Show all the necessary computations on Head Office books. Multan Branch received another shipment from Head Office at billed price of Rs.000. REQUIRED (i) Give journal entries on the books of Head Office to record above transactions. Multan Branch returned merchandise against shipment in (2) at billed price of Rs.2.Branch Accounting Chapter # 2 Question # 7: Following are the transactions entered into by Zafar Co. Given below are the transactions and accounting data concerning Head Office & its Multan Branch for the month of November 2001. 1. 4. 3. (2) Record the above transactions (including incorporation of Branch profit/loss and overvaluation adjustment) in the Head Office journal.500. Ltd.000. 3. 2.250. www. 1.105.750 (comprising exclusively of shipments from Head Office). 2004.12. the Branch reported a net loss of Rs. (ii) Calculate and record the profit it from allowance for overvaluation. the Branch inventory was valued at billed price of Rs. Question # 8: On 1st October 2004. Multan Branch valued its inventory at Rs. with its Head Office in Karachi has a number of Branches operating independently almost in all the cities of Pakistan. additional shipment was made at a billed price of Rs.net Page 46 . On 15th Nov.4. 2) Give an adjusting entry in the General Journal of Head Office to record profit from allowance for over-valuation.400 and goods unsold (inventory) at billed price of Rs. Multan Branch received merchandise shipment from Head Office at billed price of Rs. REQUIRED (1) Show over-valuation adjustment with necessary computation in Head Office books. The Head Office bills merchandise to all its Branches at 25% above cost. The Head Office invoices goods at 25% above cost. The Head Office billed merchandise to Branch at 25% above cost.56.6. On 20th Nov. At June 30. Shipped to the Branch merchandise billed at Rs. 2.28. 3) Set up a T-account for allowance for over-valuation in the ledger of Head Office.000.75. 3 and 4.

Sales by Branch Rs. The Head Office paid Branch accounts payable Rs.000. The Head Office has followed the practice of billing the Branch at 25% above cost.225. 9.000 at a billed price of Rs.000 including 10% of local purchases. The Branch paid Branch shop rent Rs.000 Expenses Paid by Head Office: Rent 4.180.000. 6. Nazeer Company Clifton. The Head Office collected Branch accounts receivable Rs.120. of Karachi opened a Branch at Pindi.000. 10.000. 8. The Head Office and Branch selected transactions for the year ended December 31. 3. 4. The following particulars are available with Branch on January 31.90. Karachi has a Branch in Lahore the goods are billed to the Branch at 20% above cost. Question # 11: Bashir Jan Muhammad & Co. opened a Branch at Quetta. Branch purchased locally Rs. The Branch reported merchandise ending at billed price of Rs.45. 3. The Head Office paid Branch salaries Rs. 2009: Opening Balances of January 1. (b) Branch. 2005 Printlake Co.75. REQUIRED Prepare entries in proper form in General Journals of: (a) Head Office including adjustment of allowance for overvaluation and closing of Branch expense and revenue summary account.150.60. 2. 5.Branch Accounting Chapter # 2 Question # 10: On January 1.600.000.000.60.90.000.a4accounting. All expenses of the Branch are paid by the Head Office.500 Goods received from Head Office at billed price 150. 2005 Rs. 1990 were as under:1.000. 7.000. REQUIRED Give the journal entries in the books of Head Office and Branch office to record the above transactions and to record overvaluation and closing entries.120. Goods supplied to Branch at billed price Rs. 2.72.000. 1.000. 5. Branch incurred operating expenses Rs.750.75. The Branch sold goods for cash Rs.350.000.000. The Branch paid Head Office accounts payable Rs.000.450. Following is the information for the month of January 2005.000. The Head Office sent merchandise to Branch costing Rs. 2009: Merchandise inventory at bill price 82. Merchandise valued at Branch on January 31.000.1. The Branch reported a net loss of Rs.225. During the month additional shipment was made at billed price of Rs. Cash remitted to Branch Rs. 4.250 Page 47 www. The Branch returned goods to Head Office at a billed price of Rs. Goods returned by Branch at billed price of Rs. Question # 12: M/S.000.net .500 Salary and other expenses 8. 8. 7.600. 6.

000.45. Head Office sent merchandise to Branch A and Branch B.45. 5. 7. The Head Office bills merchandise at 20% above cost.a4accounting.500 REQUIRED (1) Prepare entries in the books of Head Office and Branch. Cash Rs.500 Goods returned to head office against the shipment 3.150. Merchandise costing Rs.675.900.300. Question # 13: The following are the selected transactions of Head Office and its Branches: 1.30. 4.000 Merchandise inventory at billed price 97. the first month of E-Branch operations are summarized below: 1.22. 3.000.000.930. Branch B reported net loss of Rs. Equipment and other fixed assets used at Branch are carried in home office books.000.Branch Accounting Chapter # 2 Remittance to Head Office: Cash sales 19. REQUIRED General Journal entries in the books of: (i) E-Branch and (ii) Head Office www.7.000 was shipped by Head Office to E-Branch. 3. Collection of accounts receivable by E-Branch Rs.15.1.500 and ending inventory of Rs.net Page 48 . REQUIRED (a) General Journal entries in Head Office books including entries for adjustments of allowance for overvaluation accounts and closing of Branch income summary accounts. (3) Find profit from allowance from overvaluation & prepare supporting adjusting entry. Cash Rs.500 remitted by E-Branch to Head Office. (b) General Journal entries in the books of the Branches. 2. costing Rs. Operating expenses paid by Head Office and charged to E-Branch amounted to Rs. (2) Prepare allowance for overvaluation account.15.000.000 and ending inventory of Rs.500 cash.000 costing Rs.000. Credit sales by Branch amounted to Rs. Transactions during December 2009.200. Question # 14: Mehdi Corporation bills merchandise to its E-Branch at cost and maintains complete accounting records under perpetual inventory system.000 respectively.000 and Rs. 2. 6.875 Cash collected from customers 157. Branch A reported net income of Rs.120. Equipment was acquired by E-Branch for Rs.000 was forwarded to E-Branch. 8. Payment of operating expenses by E-Branch totaled Rs.562.

150.750.150. The company has two Branches. 1997.75.30.000 cash for transporting the goods.Rs. 6.18. 3.000 to Head Office.000 to Faisalabad Branch and Rs. 1. 1996 was received on 3rd January. one at Islamabad and the other at Faisalabad.Rs.000 and Faisalabad Branch showed a net loss of Rs.500 as dividend from a Multan Co. The Multan Branch paid Rs. On July 1.000. REQUIRED Pass journal entries to record these matters in the Head Office books and then write up the two Branches accounts therein. 5. Head Office paid Faisalabad Branch suppliers Rs.75. 4.a4accounting.500 from a customer of Head Office.000 cash. Page 49 www.22.000 Some of the transactions between the Head Office and the two Branches for the year are listed below: Under the Head Office instructions. 2005 the Head Office books showed the following balances in the Branches accounts: Islamabad Branch -------------------------------------------------------.000 respectively before taking the following information into account.675. Faisalabad Branch transferred merchandise valued Rs.456. 1996 the Hyderabad and the Multan Branches account in the Head Office books showed debit balance of Rs.15.000 were transferred from Hyderabad to Multan Branch under the instruction from Head Office. Merchandise valued Rs. The Hyderabad Branch collected Rs. The Multan Branch received on behalf of the Head Office Rs.000 for certain goods purchased by the Head Office.000 to Islamabad Branch and paid Rs.000 from the customers of Faisalabad Branch and remitted Rs.75. (b) The two Branches accounts in the Head Office books.81.675.180. Islamabad Branch collected Rs. Islamabad Branch paid Head Office suppliers Rs. the Hyderabad Branch showed a net loss of Rs.37. 2.000.000 cash. The Branches keep a complete set of books. REQUIRED (a) Journal entries in the Head Office and the Branches books.225.000 Faisalabad Branch ------------------------------------------------------. Islamabad Branch showed a net profit of Rs. Karachi (Head Office) deals in wholesale grocery.120.Branch Accounting Chapter # 2 Question # 15: A Karachi firm whose accounting year ends on 31st December has two Branches one at Hyderabad and the other at Multan. Question # 16: Next-door Grocers.30.000 remitted by the Hyderabad Branch to the Head Office on 29th December. On 31st December.750 and the Multan Branch a net profit of Rs.300. Rs.750 and Rs. For the year 1996. The Branches keep a complete set of books.net .

Both the Branch and the Head Office use a perpetual inventory system. Question # 18: The following home office account with selected entries is taken from the Pindi Branch ledger: HOME OFFICE 1999 1999 March 5 Returns against Jan. Rs.500 Feb. Head Office notified Branch that operating expenses Rs.000 Dec. Debit inventory account on Branch books. The income summary account in the accounts of the Branch showed a debit balance of Rs.36.000/=. the following transactions affected the two accounts.500 which had been recorded in the accounts of the Head Office in the operating expense account were chargeable to Hyderi Branch. REQUIRED Give all reciprocal entries in the home office general journal including adjusting entry to record profit from allowance for overvaluation for 1999.a4accounting.550.27.600.600 June 8 Goods shipments 54.500 bad debts for 1998 Pindi Branch reported inventories at billed price: at Jan.000/= and at December 31. 1. Branch returned shop supplies costing Rs. 10 Corrected overstated 7. Rs.9. December 6. Head Office shipped auto parts to Hyderi Branch. December 12.150 to the Head Office.000 Goods shipments 13. (c) Determine the balance in the Head Office account and the Hyderi Branch account at the end of Dec.258. 1999 Rs. 1 Balance 270. December 30.27. 31 Net loss 18. The home office bills merchandise to its Branches at 20% above cost. December 19. A decentralized accounting system is used by each Branch. The reason for the discrepancy in the amount shown in the two accounts is that the Branch net income for November Rs.net Page 50 .250 from its bank account to the bank account of the Head Office.16.269. Branch transferred Rs.750. Entries without supporting computations are not acceptable. Head Office records: Hyderi Branch (debit balance) Rs.15.108.74. 6 Goods shipments 90.000 and a cash deposit made by the Branch to the account of the Head Office. During December 2006. 1999 Rs. have not been recorded by the Head Office.000 Dec.150. credit inventory account on the Head Office books. (b) Record the two transactions relating to the month of November and all transactions for December in the accounts of the Head Office. December 31.850 at the end of December. REQUIRED (a) Record the transactions listed above in the accounts of the Hyderi Branch. Supplies are recorded in the shop supplies account in both sets of accounts. www. At the end of November 2006 the following reciprocal accounts appear in the accounting records of the Hyderi Branch and the Head Office: Branch records: Head Office (credit balance) Rs.Branch Accounting Chapter # 2 Question # 17: Auto Parts Company operates several sales and service outlets (Branches) throughout Karachi. and closing entry.8.

250.10.75.000 Question # 20: On July 31.Branch Accounting Chapter # 2 Question # 19: The Head Office account appears in the books of its Branch as shown below: Head Office 1990 1990 June 12 Remittance to H/O 22. The merchandise was not received by the Branch till June 30.500 June 1 Balance June 14 Merchandise returns 1.000 21.200 and the Head Office account in the books of Branch shows a balance of Rs. 3. 2.60.151. Question # 21: On June 30.800 was supplied by the Head Office to the Branch on June 28.230.790 for freight on merchandise but the Branch recorded the amount as Rs. The following items are responsible for the difference: 1. 3.000 but forgot to intimate the Branch.500 depreciation of 1989 June 30 Payment of Head Office June 24 Collection of Head expense 4.18. REQUIRED a) Prepare a reconciliation statement. The Head Office recorded the profit of the Branch for the month of May Rs. 1995 the Branch account in the Head Office books of the Paramount (Pvt. but the merchandise was received by the Head Office after July 31.870 in respect of merchandise returned by the Branch to the Head Office. shows a balance of Rs. Merchandise billed at Rs.25. 4. as the Branch reported a profit of Rs. The merchandise was in transit.20. The Head Office paid Rs.000 but failed to inform the Head Office. This was an error. REQUIRED Give adjusting entries on the books of Head Office and the Branch respectively for the above items.000 REQUIRED Entries in General Journal of Head Office affecting Branch account. The Branch returned merchandise of Rs.21. The Head Office paid Rs.a4accounting.170.net . 4. 1990 the balance of Branch account on the books of Head Office and the balance of Head Office account on the books of Branch are not agreed.12.000 to the Head Office on July 20. 75.800 6.) Ltd. Page 51 www.950. On comparison the following items were detected: 1.175.000 for Branch expense but the item was not recorded by the Branch.11.500 Office accounts June 30 Payment of H/O note 6. 2. The Head Office collected Branch accounts receivable of Rs.500 June 5 Merchandise shipments June 25 Payment of H/O June 20 Overstatement of accounts payable 7. The Branch collected a Head Office accounts receivable of Rs.000 1. b) Pass necessary journal entries in the books of the Head Office and Branch. The Head Office has not charged Rs.22. 1990.

2.000 to Faisalabad Branch.11. Lahore Branch 3. If the merchandise had been sent by the Head Office direct to Multan Branch.700.Branch Accounting Chapter # 2 Question # 22: Seiko (Pvt.12.000 billed at 25% above cost and Rs.7.000.750 transportation charges. The Lahore Branch dully executed the directives and paid additional freight Rs.net Page 52 .90. Head Office 2.500. Seiko (Pvt. 1 Lahore and paid transporting cost Rs. advised Lahore Branch to transfer the same shipment to Faisalabad Branch. (3) Faisalabad Branch. Lahore Branch 6.90.300. Islamabad Branch compiled with instructions and paid transportation charges of Rs.000. Islamabad Branch and Multan Branch.1. Lahore Branch sent the same to Faisalabad and paid Rs.8. REQUIRED Journal entries in the books of: 1. www.90.000 to his Branch No. Head Office 5. Later on the Head Office directed the Lahore Branch to transfer the entire consignment to Jhelum Branch. Lahore Branch sent the same to Faisalabad Branch and paid transportation charges Rs.2.750 for sending the shipment to Multan Branch. REQUIRED Give entries in General Journal of: 4.3.500.) to Faisalabad Branch the transportation charges would have been Rs. Asad Ltd.) Ltd. sent merchandise costing Rs.a4accounting. On request of the Faisalabad Branch.250 as transportation charges of the same. 2 Faisalabad.000 which was billed at 20% above cost to its Lahore Branch and paid transportation cost of Rs. Faisalabad Branch It is noted that if the merchandise had been supplied from the Head Office to the Faisalabad the transporting charges would have been Rs.1. Jhelum Branch Question # 24: Head Office in Karachi shipped merchandise to its Islamabad Branch costing Rs. If the goods had been sent to Jhelum Branch directly by the Head Office. On the request of Branch No.400. Subsequently Head Office instructed Islamabad Branch to send this merchandise shipment to Multan Branch.) Ltd.700 for the same.3.3.000 and freight paid Rs. Seiko advised to Lahore Branch to transfer the same consignment of Rs.90.575. the freight charges would have been Rs.30. Question # 25: Asad Ltd. REQUIRED Pass journal entries in the books of: (1) Asad Ltd. REQUIRED Record the above transactions in the general journal of Head Office. Note: If the merchandise had been supplied directly by the Head Office (Asad Ltd. Question # 23: The Karachi Head Office of Al-Amin Company consigned to Lahore Branch goods costing Rs. (2) Lahore Branch. sent merchandise worth Rs. the normal transportation charge would have been Rs.

Cash collected from customers Rs.000 Office supplies 12. Goods received from Head Office at billed price Rs. Remitted cash to Head Office Rs. REQUIRED (a) Prepare journal entries (including adjusting and closing) in the Branch.000. Data for Adjustment on 31-12-2003 (1) Accrued operating expenses Rs.500 Accounts payable 105. 2. 7.22.000 and sales for cash Rs. (2) Ending inventory of merchandise: Rs. 5.000 Page 53 www.25.net .Branch Accounting Chapter # 2 Question # 26: Bilal Corporation at Karachi newly established its Branch at Sukkur.500 Sales 900.000. (c) Show computation of overvaluation adjustment. 2001 is given below.105.000 Head Office 796. Returned goods to Head Office Rs.276.000 Land 180.000 Accounts receivable 225.000.270.000 Office equipment 120. 8.000 consisted of local purchases and Rs.000.000 Sales returns & allowances 45.000 Total 1. 3.9.200.000 Transportation – in 6.000 Merchandise received from Head Office 750.1.000.a4accounting. Summarized data of the Branch’s transactions for the year 2003.375.000 General expenses 90. are as under: 1.893.180. 6. Branch expenses paid by Branch Rs.900.000 Purchases 75.24. Paid to suppliers Rs.000 Merchandise inventory January 1 240.000 Merchandise returned to Head Office 30.000.000 Selling expenses 75. Credit sales to customers Rs.000. The Head Office supplies goods to the Branch at 125% of cost.000 Notes payable 45. Title of Account Debit Credit Cash 75.720. The Head Office bills the Branch for merchandise at cost plus 25%.000 1. Local purchases on account Rs.893.200 and by Head Office Rs.000 Allowance for depreciation – Office equipment 7.000 Purchases returns & allowances 9. Question # 27: The trial balance of Pindi Branch of Ashraf Corporation on December 31. (b) Journal entries in the Head Office books to incorporate Branch profit or loss and adjustment of overvaluation.450. 4.500 consisted of shipment from Head Office.

000 www. The Head Office bills the Branch for merchandise at cost plus 20%.500 The Head Office notifies the Branch on December 31 that it has paid off the Branch note for Rs.225.Branch Accounting Chapter # 2 Additional Information on December 31.000 Amount purchased from outsider at cost 63.750. (d) Prepaid selling expenses Rs.000 Head Office 236.600 Selling expenses 67.7.3. (e) Merchandise inventories: Received from Head Office at bill price Purchase from outsiders at cost REQUIRED (a) Prepare adjusting and closing entries in the books of Pindi Branch.000 58. (c) Accrued general expenses Rs.500.000 Sales 427.000 265.500 Merchandise 243.12.2001 Rs. 1.500 Lands 135.000 Purchases 67. REQUIRED (a) Prepare adjusting and closing entries in the books of Branch A – 1. Merchandise Inventories: December 1 December 31 Amount received from Head Office at billed price 180.500 Allowance for depreciation – Merchandise supplies from Store equipment 6.500. (b) Prepaid selling expenses Rs. (b) Give journal entries on the books of Head Office summarizing Branch operations for the month.000 207.500 Total 243.180. 1997 the end of monthly trial balance for W.500.000 The following data is available on December 31: (a) Physical store supplies inventory Rs.200.22. Question # 28: On December 31. Company Branch number A1 shows balances as listed below. (b) Accrued selling expenses Rs.000 282.000 Head Office 450.S.000 57.000.500.net Page 54 .7.1. 2001 (a) Office supplies used Rs.000 31.a4accounting. (d) Depreciation on office equipment Rs.600.1. (c) Depreciation of equipment to be charged for December 1997 @ 1% per month.000 General expenses 69.12.10.500 Accounts payable 75. Cash 34. (b) Prepare entries in the journal of Head Office to incorporate Pindi Branch profit or loss and to adjust the allowance for overvaluation account and also close out the Pindi Branch profit & loss account.3.000 Total 240.250 Store supplies 9.350 Notes payable 22.000 60.000 Store equipment 120.2001 Rs.

net .000.350.45. (b) Pass General Journal entries to record the Branch net income and adjustment of net income as reported by the Branch (in the books of Head Office). Sales by the Branch.12. f) Cash remitted to Head Office Rs. b) Cash remitted to Branch Rs. Page 55 www.000 of purchase from local market and Rs.6.438. billed price Rs. 4.000.600. Rent & rates expenses Rs. e.1. Data relating to the Branch for 1991 are summarized below: a) Goods supplied to Branch.000.135.30.90. 9.000. Advertising expenses paid in advance Rs. 2. Depreciate equipment at 10%. d) Operating expenses paid by Branch Rs.75.000. Prepaid operating expense Rs. d.250. 7. Cash remitted to Head Office Rs.000. Purchase by the Branch. 5.750.500 Amount received from Head Office 187. Utilities expenses Rs. Goods supplies to Branch invoiced at cost plus 25% Rs. g) Branch sold merchandise for cash Rs. 3.300.525.187. c. Gas and electric charges accrued and not paid Rs. 2. 4. Cash collection from customers Rs. Merchandise inventory on December 31. The summary of transaction (2 months) is narrated below.500.262. You are asked to: (a) Pass journal entries in the books of the Branch (including adjusting and closing).Branch Accounting Chapter # 2 Question # 29: A new independent Branch has opened by M/S.750. 3.000. Delivery expenses Rs.000. Payment to creditors Rs. at Hyderabad.2.500.500 and on account Rs.500. 3. c) Branch purchased goods from local market on account Rs. Adjustments: 1.000. The Head Office supplies goods to Branch at 20% above cost.1. Ending inventory values at Rs.500 210.3.125. b.000 and on credit Rs. The practice of the trader is that the goods are sent to Branch at 25% above cost.600.800. 6. Expenses charged by the Head Office to the Branch office Rs. Advertising expenses Rs. Decentralized accounting is followed.600.45. Karimi & Co.2. Salesman salary Rs.000 Question # 30: Karachi Head Office has a Branch at Multan.a4accounting.4.1.12. Salaries expenses Rs.500. 2.1. cash Rs. Office salary accrued Rs.000. Equipment supplied by the Head Office Rs. f.000. Expenses paid by the Branch: a. 1994: Purchase from local market 22. cash Rs.1.60.000 and remitted cash Rs.360.500 of goods supplied by Head Office.500 8.250.52.90. 5. Summary of the Transactions: 1. Data for Adjustments on 31 – 12 – 1991: 1. Accrued operating expense Rs.112.000. e) Head Office paid Branch operating expenses Rs.

000 Accrued expenses 54.120.Branch Accounting Chapter # 2 REQUIRED 1. 1994 is as follows: Assets: Rupees Rupees Cash 243.345. 1993 – June 30. Shipment from Head Office Rs. 1994 are as under:1.000) 103.3. The income statement data of the Branch is as follows: Merchandise inventory (Jan.800. Salaries expenses (paid by Head Office) Rs.294. Rent expenses Rs. 2002) Rs.600.000 5. (ii) Give all reciprocal entries in the Head Office books including adjusting entry to record profit from overvaluation for 2002 & also pass the necessary closing entry. and for adjustment of overvaluation. Sales on account 3.098.500 Less: Allowance for depreciation (243. Question # 31: The Nishat Corporation of Karachi sends merchandise to its Branch at Lahore at 140% of cost.500) 1.000 2. Goods received from Head Office billing at cost 1. 2002.500 Total equities 2.116. REQUIRED (i) Branch income statement for the year ended Dec. Merchandise returned to Head Office Rs. Expenses paid 1.150. 2.485.000 Head Office 2. 2002 Rs.000 Prepaid expenses 31. Question # 32: M/S.884.27.000. Bad debts written off 57. The Branch balance sheet as on June 30.500 Merchandise inventory 1.a4accounting.404.884.25.000 remitted to Head Office) Rs.500 Branch transactions during July 1.500 Furniture 346. Purchases on account 765.800. Cash remittance to Head Office 1. Merchandise inventory Dec. (Show the necessary computations).240.500 Total assets 2. Nisar & Co.000 Less: Allowance for bad debts (76. Journal entries including adjusting and closing entries in the books of the Branch. Collection of accounts 3.16. 31.000.695.500 Equities: Rupees Rupees Accounts payable 135.net Page 56 . of Karachi have established a Branch at Hyderabad. Sales (including cash sales of Rs. Journal entries in the books of the Head Office to record Branch net income or loss.33. Expenses paid by Head Office and charged to Branch 72.200.000. 31.000 www.000 7.000 8.000 9.021.000 6.000 Accounts receivable 1. Payment on account 729.000 4. 1.000 3.000.

250 --Inventory merchandise Jan. b) Prepare balance sheet and income statement of Branch as on June 30.000 and prepaid rent Rs.000 Goods sent to Branch 90.500 --Shipment from Head Office (at billed price) --37. December 31 (at billed price) --8.800 Inventory.22. Prepaid salaries Rs.000. Accrued salaries Rs.500 and rent expired during the period Rs.000 Depreciation for the year 54.Branch Accounting Chapter # 2 Adjustments: Merchandise on hand 1.  In 1996.net Page 57 .675 Purchases 123.000 --On December 31.000 Prepaid expenses 40. Question # 34: Following are some of the items extracted from the books of Khursheed & Hassan Company Karachi and its Lahore Branch: Head Office Branch Cash 600. 25% above cost.300 --The Head Office bills the Branch for merchandise shipments as follows:  In 1995.000 Prepaid rent 18.775 Operating expenses 57.500 and of local purchases Rs. 1 (at cost) 17. www.000.500 Salaries expense 30.000 Allowance for bad debts to be kept at 72.375 --Inventory.500 450.000 --Inventory merchandise Jan. Computations are necessary.000 Purchases 270.a4accounting.12.000 Inventory (opening) 225.000 --Goods received from Head Office --112. 1 (at billed) --6. REQUIRED Prepare Head Office income statement showing on it the Branch net loss of Rs.000 270. Branch: Inventory with respect to Head Office Rs.18.22.3.000 Allowance for overvaluation 30. 1994.3.000 300. with its Head Office at Karachi and its Bless Branch at Hyderabad for 1996 as follows: Head Office Bless Branch Sales 159.000 90.000 REQUIRED a) Prepare necessary journal entries in the books of Branch for the year to record the above transactions including adjusting and closing entries. 2008 data for adjustment: Head Office: Inventory valued Rs.18. Question # 33: Partial financial data from Pony Sales Co. December 31 (at cost) 21.000 Sales revenue 481.000.980.000 --Shipment to Bless Branch (at cost) 31.000 15.500 Accrued expenses 72.750 and the profit from overvaluation for 1996.000. 20% above cost.45.000 12.

Entries in the books of Head Office to incorporate Branch net income and adjustment of income resulting from overvaluation of merchandise. The ending stock of the Branch amounted to Rs.41. Sales Rs.6.000 30.Branch Accounting Chapter # 2 REQUIRED 1. 2009 to its Head Office in Karachi: Debit: Balance at bank Rs. Allowance for overvaluation in opening inventory.000. 2008.337.500.500 750 REQUIRED 1.000 Accrued salaries --1.500 1. Question # 36: Hyderabad Branch of AK Farooqui Company submitted the following trial balance data of December 31.15.000. Salaries expenses Rs.000 Purchases 450.500) Credit: Accounts payable Rs.18.000 --Goods received from Head Office --120.500 Prepaid salaries 3.net Page 58 .000.500 Miscellaneous general expense 7.750 (Total Rs. Adjusting entry of allowance for overvaluation. Income Statement of Branch.142.500 Sales revenue 450.532.112.500) Additional Information: The salaries include a sum of Rs.000. Rent & rates Rs.60.500 37.532. 2009) Rs.250.000 --Purchase discount 7.000 --Depreciation on equipment 4.750 paid to the Branch manager. Stock (January 1. 1992: Head Office Branch Merchandise inventory (Opening) 43. Purchases Rs. Head Office Rs.250.000 --Salaries expense 30.500 and utilities expenses payable Rs. Utilities expenses Rs. 2. Accounts receivable Rs.500 --Goods sent to Branch 96.11.500. Cash in hand Rs. who is further entitled to a commission at 7% on the net profit of the Branch before charging such commission. 4. Consolidated Income Statement of Head Office and Branch.150. Prepare Consolidated Income Statement for the year ended December 31. REQUIRED From the above information prepare: (i) Income statement of Hyderabad Branch (ii) Balance sheet as of Hyderabad Branch www. which is payable after a month.500 Adjustment Data: Head Office Branch Merchandise inventory (Ending) 60. Rate of allowance for overvaluation. Question # 35: The following are some of the selected balances taken out from the trial balance of Head Office and Branch on December 31.93.60. 3.750.135. 2.000 7.000 (Total Rs. 3.000 Allowance for overvaluation 27.a4accounting.48.000.000 225.

500 ----Goods received from Head Office ----45.19.000 --1. Closing inventory: Head Office Rs.500 --67.000 ----Branch / Head office ? ----? Page 59 www.250.000 --12. d) Prepare Branch Balance Sheet.500 Capital --167.000 --28.000 --Equipment 20.000 --22.) Cash 86. 1992 were as under: Head Office Branch Office Debit Credit Debit Credit Cash 129.000 --8.a4accounting.Branch Accounting Chapter # 2 Question # 37: The trial balance of Head Office and Branch office as June 30. Current year depreciation on equipment of Head Office Rs. b) Prepare Head Office Income Statement.000 --Accounts payable --16. as 30 June 2003 were as under: Head Office Pindi Branch Debit (Rs. f) Prepare Consolidated Balance Sheet.) Credit (Rs.3. e) Prepare Head Office Balance Sheet.000 Goods returned by branch ? ------Allowance for over valuation --12.750 and Branch Rs.500 --4. REQUIRED a) Prepare Branch Income Statement.000 --Accounts receivable 30.000 --7.000 --7. 1992: 1.000 Goods returned to head office ------5.500 Operating expenses 13.000 --17.12.500 --Additional Information on June 30. Question # 38: The trial balance of head office and Pindi branch of Shah Ltd.000 --Merchandise inventory (opening) 15.500 --Goods sent to Branch --37. 2.1.000 --Allowance for overvaluation --8.000 --Merchandise inventory 10.500 --Equipment 18.500 --Accounts receivable 30.) Debit (Rs.net .000 --11.000 --25.000 --Goods sent to branch --40.000 ----45.000 and Branch Rs.000 --18.000 ----Goods received from head office ----50.500 purchases from outsiders.000 --9.250 ----Branch / Head Office 45.000 --13.000 --Purchase return and allowance --2.250 ----Purchases 60.500 including Rs. c) Prepare Consolidated Income Statement.000 Sales --82.) Credit (Rs.000 --Accounts payable --15.000 Capital --? ----Purchases 53.2.

000 ------. b) Prepare head office income statement showing branch profit or loss and allowance for over valuation on 30 June 2003.Rs. www.2.Rs.Rs.000 --Store supplies 20.000 --8.20.1.000 ? Additional Information on 30 June 2003: Head Office Pindi Branch i.000 --9.18.12.000 --Total ? ? 164.Rs. Store supplies on hand ----------------------.3.Rs.Rs.000 ----.000 ------.000 ----.000 iii.8.000 --20.000 --General expenses 2. d) Prepare Pindi branch balance sheet as on 30 June 2003.000 ------.000 --Salaries expenses 18.000 --1.7. c) Prepare consolidated income statement for the period 30 June 2003. Depreciation on equipment -----------------. f) Prepare consolidated balance sheet as on 30 June 2003.000 Sales discount 3.Rs.Rs.Rs.000 --Prepaid rent 4. Salaries expenses for the year -------------.Branch Accounting Chapter # 2 Sales --120.net Page 60 .2. Closing inventory at cost ---------------------.000 --90. Commission receivable -----------------------.18.000 ii.5.Rs.a4accounting.000 --5. e) Prepare head office balance sheet as on 30 June 2003.000 purchase from outside) REQUIRED a) Prepare income statement in the books of Pindi Branch at 30 June 2003.000 v.000 (Including Rs.000 iv.