DON HONORIO VENTURA STATE UNIVERSITY

COLLEGE OF BUSINESS STUDIES

1ST SEMESTER – ACADEMIC YEAR 2021-2022
MODULE IN ACCTNG 117 (ACCOUNTING INTERNSHIP - BUSCOM)

Lesson 1: Home Office and Branch Accounting

Home Office (HO) – base of the operation.

Extensions:

Agency – a local sales organization that operates under the direction of a home office and carries no
stock other than sample of the goods offered for sale to customers.
Branch – an organization that sells goods out of a stock that it maintained and possesses the
authority to engage in transactions as an independent business unit.
Consignment – a form of agency where goods are sent to an outside / external entity who
undertakes to sell the goods at a commission.

Agent
 Funds is petty cash.
 An extension of existing sales territories.
 No accounting books or complete set of
books
 Determination of net income separately,
HO will maintain distinct expense
account and if not, HO will record to its
own account.
 Sales is subject for approval by HO.
Branch
 Own bank accounts and regular stocks
from HO or outside
 Maintain separate accounting books and
accounting system.
 Approves own sales.
 *HO and Branch will combine their
financial statements.
 *Elimination of necessary transactions.
 *Transactions between HO and Branch
are recorded in intracompany accounts.

*Consolidated Financial Statements

Home Office and Branch will combine their financial statements. Transactions between HO and
Branch are recorded in intracompany account. Intracompany accounts or reciprocal accounts:

Investment in Branch – the account the home office use to track its net investment in the branch.
An Asset in Home Office’s POV
Home Office – the account the branch uses to track the home office’s equity in the branch.
An Equity in Branch’s POV

Home Office Books

Debit to Investment in Branch / Credits to Home Office account:

1. Transfers of assets to the branch from HO

Investment in Branch xx Cash xx
Cash xx Home Office xx

2. Expenses and Liabilities of the branch paid by the home office

Investment in Branch xx
Cash xx

3. Allocation (or charge) of common expenses incurred by the home office for the branches.
4. Adjustment for profits earned by the branch.
Branch Books
Debit to Home Office account / Credit to Investments in Branch:

1. Transfer of assets from branch to HO

Cash xx Home Office xx
Investment in Branch xx Cash xx

2. Expenses and Liabilities of the home office paid by the branch

Expense xx
Home Office xx

3. Remittances of the branches to the home office.

4. Loss incurred by the branch.

*Shipments to Branch – deducted from beginning inventory and purchases of HO in the computation
of COGS.
*Shipments from HO – addition to purchases, therefore, increases COGS.

Reconciliation of Reciprocal Accounts

Investment in Branch Account Home Office Account

Unadjusted/Beginning Balance Unadjusted/Beginning Balance

+Transfer in Transit +Transfer in Transit
+/- Unrecorded Debit or Credit Memo +/- Unrecorded Debit or Credit Memo
+/- Error +/- Error

_______________________________________________________________________________
=Adjusted Balances =Adjusted Balances

Home Office Books from Branch data

Sales xx
Cost of Goods Sold:
Shipments from HO xx
Shipments to Branch (xx)
Beginning Inventory xx
Ending Inventory (xx) xx
Gross Profit xx
Expenses (xx)
Net Income/Loss xx - Home Office NI/NL
Home Office Balance xx
Adjusted Home Office xx - Adjusted Investment in Branch Account/ Home Office
 JOURNAL ENTRIES: Transactions made separately, recorded separately with the same format.

Transactions Home Office Books Branch Books

The home office shipped P20,000 Investment in Branch 30,000 Cash 20,000
cash and P10,000 supplies to Cash 20,000 Supplies 10,000
establish the branch. Supplies 10,000 Home Office 30,000
The home office shipped and Investment in Branch 40,000 *Shipments from HO 40,000
billed the branch inventory at cost *Shipments to Branch 40,000 Home Office 40,000
of P40,000
The HO and branch purchased Purchases 80,000 Purchases 40,000
goods on account P80,000 and Accounts payable 80,000 Accounts payable 40,000
P40,000, respectively.
The HO sent the branch Investment in Branch 20,000 Equipment 20,000
equipment costing P20,000 with 4 Equipment 20,000 Home Office 20,000
useful life, which shall be carried
in the branch books
The branch returned P2,000 Shipments to Branch 2,000 Home Office 2,000
defective goods to home office Investment in Branch 2,000 Shipments from HO 2,000
The HO purchased a P50,000 Equipment 50,000 Memo entry
with 10-year useful life, machine Cash / AP 50,000
for the branch’s use but shall be Equipment – branch 50,000
carried in the HO books Equipment 50,000
HO and branch made sales on Accounts receivable 200,000 Accounts receivable 100,000
account of P200,000 and Sales 200,000 Sales 100,000
P100,000, respectively.
HO and branch incurred and paid Expenses 20,000 Expenses 10,000
expenses of P20,000 and Cash 20,000 Cash 10,000
P10,000, respectively.
The home office and branch paid Accounts Payable 20,000 Accounts Payable 10,000
P20,000 and P10,000 of their Cash 20,000 Cash 10,000
account purchases, respectively.
The home office billed the branch Investment in Branch 4,000 Expenses 4,000
for its share of common marketing Expenses 4,000 Home Office 4,000
expenses, P4,000
HO and branch collected Cash 120,000 Cash 80,000
P120,000 and P80,000 on their Accounts Receivable 120,000 Accounts Receivable 80,000
respective account
The home office collected a Cash 10,000 Home Office 10,000
P10,000 branch account Investment in Branch 10,000 Accounts Receivable 10,000
The branch collected a P20,000 Investment in Branch 20,000 Cash 20,000
home office account Accounts Receivable 20,000 Home Office 20,000
The branch paid a home office Expenses 5,000 Home Office 5,000
expense totaling P5,000 Investment in Branch 5.000 Cash 5,000
The home office also paid P2,000 Investment in Branch 2,000 Expenses 2,000
expenses of the branch Cash 2,000 Home Office 2,000
The branch remitted P20,000 Cash 20,000 Home Office 20,000
cash to the home office Investment in Branch 20,000 Cash 20,000
The home office sends the branch Investment in Branch 2,500 Depreciation Expense 2,500
debit memo for half-year Accumulated Depreciation 2,500 Home Office 2,500
depreciation on the machinery
held by the branch.
The branch adjusted its records at No entry Depreciation Expense 2,500
year-end and took up full year Home Office 2,500
depreciation on the equipment. Supplies Expense 8,000
Supplies and inventories were Supplies 8,000
P2,000 and P20,000 at year-end.
The branch closed its results of No entry Sales 100,000
operations. Income Summary 100,000

Income Summary 58,000

Inventory 20,000
Shipments from HO 38,000
Purchases 40,000

Income Summary 29,000

Expenses 29,000

Income Summary 13,000

Home Office 13,000