Home Office and Branch Accounting

• Branch VS Agency
o Branch
i. Autonomous (can make own decisions)
ii. Can carry its own inventory
iii. Sell to customers
iv. Own books
o Agency (parang free taste or car exhibits sa mall)
i. Not autonomous (does not make decisions)
ii. Does not carry own inventory (can carry samples)
iii. Accept sales orders and submit these sales orders to the home office
iv. No own books (entries are recorded of the home office)

Problem 1:
a. Working Fund - Agency 50,000
Cash in Bank 50,000
Accounting for the working fund is using the imprest system.

b. Samples Inventory - Agency 20,000

Merchandise Inventory 20,000

c. Equipment – Agency 100,000

Cash/Payable 100,000

d. Salaries Expense – Agency 25,000

Cash 25,000

e. No entry

f. Accounts Receivable – Agency 500,000

Sales 500,000

g. No entry

h. Expenses – Agency 45,000

Cash in Bank 45,000
Compound entry: Dr. Expense Cr. Working fund (disbursement) and Dr. Working fund Cr. CIB
(replenishment)

a) Cost of Goods Sold – Agency 300,000

Merchandise Inventory 300,000

b) Depreciation Expense – Agency 10,000

Accumulated Depreciation – Agency 10,000

c) Selling expense 15,000

Samples Inventory 15,000
Branch accounting:
Reciprocal accounts
• POV of HOME OFFICE: INVESTMENT IN BRANCH OR BRANCH CURRENT (asset of the
home office), debit normal balance
• POV of BRANCH: HOME OFFICE CURRENT (equity of the home office in the books of the
branch), credit normal balance

Is the Investment in Branch and Home Office Current always equal? NO because of timing differences
and/or errors (but it should be equal)
• Timing difference = meron nagrecord, merong nahuli sa pagrecord (wrong period)
• Error = may nagkamali sa entry or omission of entry