Anch Accounting

Chapter-12
BRANCH
ACCOUNTING
After studying this chapter, you will be able to:
 Understand concept of branches and their classification from accounting point of view.
 Distinguish between the accounting treatment of dependent branches and independent
branches.
 Learn various methods of charging goods to branches.
 Solve the problems, when goods are sent to branch at wholesale price.
 Prepare the reconciliation statement of branch and head office transactions after finding the
reasons for their disagreement.
 Incorporate branch balances in the head office books.
 Prepare branch accounts even on the basis of incomplete information.
 Differentiate between integral and non-integral foreign branches.
 Learn the techniques of foreign currency translation.
BRANCH ACCOUNTING 12. 2
DEPENDENT BRANCH
I- STOCK AND DEBTORS SYSTEM

WHEN GOODS SENT TO BRANCH AT COST
QUESTION 1.
Pappadwala of Bombay has a branch at Delhi to which goods are sent at cost price to be sold
For cash and credit. Transactions during the year were as under: - `
Branch stock at cost as on 1.1.1994 9,000
Branch debtors as on 1.1.1994 3,000
Branch Bank balance as on 1.1.1994 2,800
Transaction during 1994:
Goods sent to branch at cost 18,000
Goods returned by branch (at cost to H.O.) 360
Cash sales paid into bank 4,800
Credit sales 24,000
Goods returned by customers at selling price 180
Cheques received from credit customers 22,000
Discount allowed to customers 440
Bad debts written off 260
Cash remitted to H.O. by branch 25,000
Expenses paid by branch:
Wages and salaries 400
Miscellaneous expenses 200
Rent, rates and insurance paid by H.O. 500
Balance as on 31.12.1994:
Branch stock (at cost to H.O.) 6,420
Branch debtors ?
Branch bank ?
Required:
Compute the profit made by the branch stock and debtors system after opening the necessary
accounts.
QUESTION 2.
The Empire Store Ltd. invoice goods to their various branches at cost and the branches sell on credit as
well as for cash. For the following details relating to the Bombay branch, prepare the necessary
accounts in the Head office books:
`
Debtors, 1st January, 1992 26,200
Debtors, 31st December, 1992 3,000
st
Cash Balance, 1 January, 1992 300
CA IQTIDAR A. MALIK [B.COM, ACA, CS]
Stock, 1st January, 1992 15,000

Stock, 31st December, 1992 13,900
Goods received from Head Office 50,800
Cash received from Head Office 1,500
Goods returned to Head Office 700
Cash sales 33,500
Credit sales 60,000
Allowances in Customers 320
Returns from Customers 580
Discount allowed to Customers 2,400
Bad Debts 600
Remittance to Head Office 74,900
Rent and Rates 1,800
Wages and Salaries 6,000
General Trade Charges 1,300
Normal loss of goods due to wastage 1,200
Abnormal loss of goods due to pilferage 3,000
Solution: Branch Stock Account
Particular Amounts (`) Particular Amounts (`)
To Balance b/d 15,000 By Br. Cash a/c (Sales) 33,500
To GSTB a/c 50,800 By Br. Debtors (Sales) 60,000
To Br. Debtors (SR) 580 By Abnormal Loss 3,000
To Br. P & L a/c (b/f) 44,720 By GSTB a/c 700
By Balance c/d 13,900
1,11,100 1,11,100
Branch Debtors Account

To Balance b/d 26,200 By Discount 2,400
To Br. Stock a/c (Credit Sales) 60,000 By Allowance 320
By Bad debts 600
By Br. Stock (SR) 580
By Cash (b/f) 79,300
86,200 86,200
Branch Cash Account
To Balance b/d 300 By H.O. Cash a/c 74,900
To H.O. Cash a/c 1,500 By Expenses 9,100
To Br. Debtors a/c 79,300 (1,800 + 6,000+ 1300)
To Br. Stock ( Cash Sales) 33,500 By Balance c/d 30,600
1,14,600 1,14,600

Branch Expenses Account

To Br. Cash a/c 9,100 By P & L a/c 12,420
To Bad debts 600
To Allowance 320
To Discount 2,400
12,420 12,420
Branch Profit and Loss Account

To Br. Expenses 12,420 By Br. Stock a/c 44,720
To Abnormal Loss 3,000
To Net Profit 29,300
44,720 44,720
GSTB Account a/c

To Br Stock 700 By Br. Stock a/c 50,800
To Purchase a/c 50,100
50,800 50,800
QUESTION 3.
Sumana Ltd. invoices goods to its various branches at cost and the branches sell for cash as well as on
credit. From the following particulars, prepare the necessary ledger accounts in the books of head
office:
Particular Amounts(`) Particular Amounts(`)
st
Stock, 1 January 10,000 Allowance to customers 400
Stock, 31st December 8,000 Bad debts 600
st
Debtors,1 January 14,000 Returns from Customers 1,000
Debtors, 31 December 15,000 Remittance by Branch 46,000
Cash, 1st January 400 Wages and Salaries 4,000
Goods sent to Branch 30,000 Rent and Taxes 2,000
Goods returned by Branch 2,000 Normal loss of goods due
Credit Sales 30,000 to wastage 500
Cash Sales 25,000 Abnormal loss due to pilferage 1,500
Cash remitted to Branch 4,500
[Ans. 17,000]

WHEN GOODS SENT TO BRANCH AT INVOICE VALUE

QUESTION 4.
Concept and Co. with its Head Office at Mumbai has a branch at Nagpur. Goods are invoiced to the
Branch at cost plus 33.33%. The following information is given in respect of the branch for the year
ended 31st March, 2006:-
Particular `
Goods sent to Branch (invoice Price) 4,80,000
Stock at Branch on 1.4.2005 (invoice price) 24,000
Branch debtors balance on 1.4.2005 30,000
Cash sales 1,80,000
Return of goods by customers to the branch 6,000
Branch expenses (paid in cash) 53,500
Discount allowed 1,000
Bad Debts 1,500
Collection from Debtors 2,70,000
Branch debtor’s cheques returned dishonored 5,000
Stock at Branch on 31.3.2006 (Invoice price) 48,000
Branch debtors balance on 31.3.2006 36,500
Prepare, under the Stock and Debtors system, the following Ledger Accounts in the books of the Head
Office:-
(i) Nagpur Branch Stock Account
(ii) Nagpur Branch Debtors Account
(iii) Nagpur Branch Adjustment.
Also compute shortage of stock of Branch, if any. (May 2006 & Nov 2009 – 16 Marks)
To Balance b/d 24,000 By Br. Cash a/c 1,80,000
To GSTB a/c 4,80,000 By Br. Debtors (Sales) 2,80,000
To Br. Debtors a/c 6,000 By Shortage (b/f) 2,000
5,10,000 5,10,000
To Balance b/d 30,000 By Br. Stock a/c (SR) 6,000
To Bank (dish.) 5,000 By Discount Allowed 1,000
To Br. Stock a/c (Credit Sales) 2,80,000 By Bad debts 1,500
(B/f) By Cash 2,70,000
3,15,000 3,15,000

Branch Adjustment Account

To Shortage (Loading) 500 By Stock Reserve (OP) 6,000
To Stock Reserve (Clos.) 12,000 By GSTB (Loading) 1,20,000
To Gross Profit c/d 1,13,500
1,26,000 1,26,000
To Br. Expenses 53,500 By Gross Profit c/d 1,13,500
To Discount Allowed 1,000
To Bad debts 1,500
To Shortage (Cost) 1,500
To Net Profit (b/f) 56,000
1,13,500 1,13,500
QUESTION 5.
Red and Co. of Mumbai started a branch at Bangalore on 1.4.2006 to which goods were sent at
20% above cost. The branch makes both cash sales and credit sales. Branch expenses are met
from branch cash and balance money remitted to H.O. The branch does not maintain double
entry books of account and necessary accounts relating to branch are maintained in H.O.
Following further details are given for the year ending on 31.3.2007:
`
Cost of goods sent to branch 1,00,000
Goods received by branch till 31.3.2007 at invoice price 1,08,000
Credit sales for the year 1,16,000
Closing debtors on 31.3.2007 41,600
Bad Debts written off during the year 400
Cash remitted to H.O. 86,000
Closing cash on hand at branch on 31.3.2007 4,000
Cash remitted by H.O. to branch during the year 6,000
Closing stock in hand at branch at invoice price 12,000
Expenses incurred at branch 24,000
Draw up the necessary Ledger Accounts like Branch Debtors Account, Brach Stock Account,
Goods sent to branch account, Brach Cash Account Branch Expenses Account and Branch
Adjustments A/c for ascertaining gross profit and Branch profit and loss A/c for ascertaining
Branch Profit. (May 2007 – 16 Marks, (PE II)

To Balance b/d - By Br. Cash a/c (Sales) 34,000
To Br. Adjustment a/c 54,000 By Balance c/d
- In hand 12,000
- In Transit 12,000
1,74,000 1,74,000


To Balance b/d - By Bad debts 400
To Br. Stock a/c (Credit Sales) 1,16,000 By Cash (b/f) 74,000
1,16,000 1,16,000
Branch Cash Account
To H.O. Cash a/c 6,000 By H.O. Cash a/c 86,000
To Br. Debtors a/c 74,000 By Expenses 24,000
To Br. Stock ( Cash Sales) 34,000 By Balance c/d 4,000
(B/f)
1,14,000 1,14,000
Branch Expenses Account
To Br. Cash a/c 24,000 By P & L a/c 24,400
To Bad debts 400
24,400 24,400
To Stock Reserve (Clos.) 4,000 By Stock Reserve (OP) -
To By P & L a/c 70,000 By GSTB (Loading) 20,000
By Br. Stock a/c 54,000
74,000 74,000
To Br. Expenses 24,400 By Br. Adjustment a/c 70,000
70,000 70,000
GSTB Account a/c
To Br Adjustment (Loading) 20,000 By Br. Stock a/c 1,20,000
To Purchase a/c 1,00,000
1,20,000 1,20,000
QUESTION 6.
P.O. Ltd Calcutta started a branch in Bombay on 1st April, 2015 to which goods were sent at 20% above
cost. The branch does not maintain double entry books of account and necessary accounts relating to
branch are maintained in H.O. Following further details are given for year Ended on 31st March, 2016
Cost of goods sent to Branch 50,000
Goods received by Branch till 31st March, 2016 at invoice price 54,000
Credit sales for the year 58,000
Debtors as on 31st March, 2016 20,800
Bed Debts and Discount written off 200

Cash remitted to H. O. 43,000
Cash in hand at Branch on 31st March, 2016 2,000
Cash remitted by H.O. to Branch during the year 3,000
Closing stock at Branch (at invoice price) 6,000
Expenses incurred at Branch 12,000
st
Determine the Profit or Loss of the Branch for the year ended on 31 March, 2016, according to Stock
and Debtors system in the books of the Head Office. [Ans. 22,800]
QUESTION 7.
Hindustan Industries Bombay has a branch in Cochin in which office goods are invoiced at cost
plus 25%. The branch sells both for cash and on credit; Branch Expenses are paid direct from
head office and the Branch has to remit all cash received into the Head Office Bank Account.
From the following details, relating to calendar year 2002, prepare the accounts in the Head Office
Ledger and ascertain the Branch Profit. Branch does not maintain any books of account, but sends
weekly returns to the Head office.
`
Goods received from head office at invoice price 6,00,000
Returns to head office at invoice price 12,000
st
Stock at Cochin as on 1 January, 2002 60,000
Sales in the year – Cash 2,00,000
Credit 3,60,000
st
Sundry debtors of Cochin as on 1 January, 2002 72,000
Cash received from Debtors 3,20,000
Discount allowed to Debtors 6,000
Bad Debts in the year 4,000
Sales returns of Cochin Branch 8,000
Rent,Rates, Taxes at Branch 18,000
Salaries, Wages, Bonus at Branch 60,000
Office Expense 6,000
Stock at Branch on 31st December, 2002 at invoice price 1,20,000
(May 2010 – 8 Marks, modified)
Solution:
Branch Stock Account
To Balance b/d 60,000 By Br. Cash a/c (Sales) 2,00,000
To Br. Debtors a/c 8,000 By GSTB (Return) 12,000
To Br. Adjustment a/c (b/f) 24,000 By Balance c/d 1,20,000
6,92,000 6,92,000


To Balance b/d 72,000 By Bad debts 4000
To Br. Stock a/c (Credit Sales) 3,60,000 By Discount 6,000
By Br. Stock (SR) 8,000
By Cash 3,20,000
By Balance c/d (b/f) 94,000
4,32,000 4,32,000

To Stock Reserve (Clos.) 24,000 By Stock Reserve (OP) 12,000
To By P & L a/c 1,29,600 By GSTB (Loading) 1,17,600
By Br. Stock a/c 24,000
153,600 153,600

To Br. Expenses 84,000 By Br. Adjustment a/c 1,29,600
To Discount 6,000
To Bad debts 4,000
GSTB Account a/c

To Br. Stock a/c 12,000 By Br. Stock a/c 6,00,000
To Br Adjustment (Loading) 1,17,600
To Purchase a/c (b/f) 4,70,400
6,00,000 6,00,000
QUESTION 8.
During the year ended 31st December, 2002, X & Co. of Madras sent to their Branch at Bombay goods
costing ` 1,00,000. They used to invoice to the Branch at a price designed to show a gross profit of 33-
1-/3 per cent on invoice price.
Collections at the Branch from debtors amounting to ` 26,390 were all sent to Head Office.
Branch Transactions during the year were:
Cash sales – ` 1,21,050
Credit sales – ` 27,600
Goods returned by Customers – ` 300.
Goods returned to Head Office – ` 780 (invoice price)

On 31.12.2001 On 31.12.2002
` `
Stock (at invoice price) 2,250 2,700
Sundry Debtors 1,320 2,230
Goods at the Branch of Rs, 1,260 (invoice price) were lost. Insurance Company paid ` 730 on the claim.
Branch expenses, paid by Head Office, amount to ` 36,780.
Show the necessary Ledger Accounts as would appear in the Head Office books recording the above
transactions relating to the Branch Profit and Loss Account.
Solution:
To Balance b/d 2,250 By Br. Cash a/c (Sales) 1,21,050
To GSTB a/c 1,50,000 By Br. Debtors (Sales) 27,600
To Br. Debtors a/c 300 By GSTB (Return) 780
To Br. Adjustment a/c (b/f) 840 By Abnormal Loss 1,260
1,53,390 1,53,390
To Balance b/d 1,320 By Br. Stock (SR) 300
To Br. Stock a/c (Credit Sales) 27,600 By Cash (b/f) 26,390
28,920 28,920
To Stock Reserve (Clos.) 900 By Stock Reserve (OP) 750
To Abnormal Loss(loading) 420 By GSTB (Loading) 49,740
To By P & L a/c 50,010 By Br. Stock a/c 840
51,330 51,330
To H.O. Cash a/c (Exp) 36,780 By Br. Adjustment a/c 50,010
To Abnormal Loss( Cost) 840 By Insurance Co. 730
50,740 50,740
GSTB Account a/c
To Br. Stock a/c 780 By Br. Stock a/c 1,,50,000
To Br Adjustment (Loading) 49,740
To Purchase a/c (b/f) 99,480
1,50,000 1,50,000

QUESTION 9.
Dreams Unlimited opened a Branch at Delhi on 1st April, 200I. The goods were sent by the Head Office
to the Branch and invoiced at selling price of the Branch which was 125% of the cost price of the head
office. The following are the particulars relating to the transactions of Delhi Branch:
`
Goods sent to branch (at cost to Head Office) 2,80,000
Sales:
Cash 1,25,000
Credit 1,75,000
Cash collected from Debtors 1,56,000
Discounts allowed 4,000
Returns from Debtors 5,000
Cash sent to branch for:
Wages 3,000
Freight 11,000
Other Expenses 6,000 20,000
Spoiled cloth in bales written off at invoice price 500
Closing Stock 55,500
Ascertain the profit or loss for the Delhi Branch for the year ended 31 st March, 2002 after preparing
Branch Stock Account and Branch Debtors Account.
Ans.NP ` 35,400
QUESTION 10.
Bombay traders Ltd. sends goods to its madras Branch at cost plus 25 percent. The following
particulars are available in respect of the branch for the year ended 31 st March 1988.
`
Opening stock at branch at cost to branch 80,000
Goods sent to branch at invoice price 12,00,000
Loss in transit at invoice price 15,000
Pilferage at invoice price 6,000
Sales 12,19,000
Expenses 60,000
Closing stock at branch at cost to branch 40,000
Recovered from insurance company against loss in transit 10,000
Show ledger Accounts in the head office books for:
(a) Branch stock account (c) Goods sent to branch account
(b) Branch adjustment account (d) Branch profit and loss account
Solution:
To Balance b/d 80,000 By Loss in Transit 15,000
To GSTB a/c 12,00,000 By Pilferage 6,000
By Sales 12,19,000
12,80,000 12,80,000

GSTB Account a/c

To Br Adjustment (Loading) 2.40,000 By Br. Stock a/c 12,00,000
To Purchase a/c (b/f) 9,60,000
12,00,000 12,00,000

To Stock Reserve (Clos.) 8,000 By Stock Reserve (OP) 16,000
To Loss in Transit (loading) 3,000 By GSTB (Loading) 2,40,000
To Pilferage( Normal Loss) 6,000
To P & L a/c 2,39,000
256,000 256,000
To Br. Expenses 60,000 By Br. Adjustment a/c 2,39,000
To Loss in Transit ( Cost) 12,000 By Insurance Co. 10,000
To Net Profit 1,77,000
2,49,000 2,49,000
QUESTION 11.
T of Calcutta has a branch at Dibugarh. The branch does not maintain separate books of accounts. The
branch has the following assets and liabilities on 31st August, 1997 and 30th September 1997.
31stAugust 1997(`) 30thSeptember 1997 (`)
Stock of tea 1,80,000
1,80,000 1,50,000
1,50,000
Advance to suppliers 5,00,000
5,00,000 4,50,000
4,50,000
Bank Balance 75,000
75,000 1,00,000
1,00,000
Prepaid expenses 10,000
10,000 12,000
12,000
Outstanding expenses 13,000
13,000 11,000
11,000
Creditors for purchase 3,00,000 ?
During the month, Dibrugarh branch.
(a) Received by electronic mail transfer ` 10,00,000 from Calcutta head office:
(b) Purchased tea worth ` 12,00,000;
(c) Sent tea costing ` 12,30,000 to Calcutta freight of ` 80,000 being payable at the destination by the
receiver;
(d) Spent ` 25,000 on office expenses.
(e) Paid ` 3,00,000 as advanced to suppliers;
(f) Paid ` 6,50,000 to suppliers in settlement of outstanding dues.
In addition T informs you that the Calcutta office has directly paid ` 3,50,000 to Dibrugrh supplies by
cheques drawn on bank accounts in Calcutta during the month.
T informs you that for the purpose of accounting, Dibrugarh branch is not treated as an outsider. He
wants you to write the detailed accounts relating to the transactions of the Dibrugarh branch as would
appear in the books of Calcutta Head Office. [Nov-97]

DEBTORS SYSTEM
QUESTION 12.
From the following information, prepare Delhi Branch Account in the books, of head office for the year
ending on 31st March 2001:
Opening Stock (at cost) 1,78,000 Discount allowed to Customers
Opening Debtors 14,000 Bad Debts written off 500
Opening Petty Cash 250 Credit sales 1,000
Furniture (in the beginning) 6,000 Cash Sales 7,29,400
Opening Creditors 6,000 Petty Expenses paid by Branch 32,000
Goods sent to Branch (at Cost) 5,22,000 Cheques sent to Branch for
Goods returned by Branch to H.O expenses: 8,000
(at cost) 7,800 - Salaries 30,000
Goods returned by Customers 5,700 - Rent and Insurance 12,000
Cash received by Branch from - Petty Cash 7,870
its Customers 6,11,000
Goods are sold to customers at cost plus 50%. Depreciate the furniture @ 10% p.a.
Solution: Branch Account
For the year ended 31st March,2001
To Balance b/d: By Balance c/d
- Stock 1,78,000 - Creditors 6,000
- Debtors 14,000 By GSTB a/c (Return) 7,800
- Furniture 6,000 By Cash (Remittance) 6,37,000
- Petty Cash 250 (32,000 + 6,11,000 – 6,000)
To GSTB a/c 5,22,000 By Balance c/d:
To Cash (Expenses) 49,870 - Stock 1,88,400
(30,000 + 12,000 + 7,870) - Debtors 1,25,200
To Profit (b/f) 1,99,800 - Furniture 5,400
- Petty Cash 120
9,69,920 9,69,920

To Balance b/d 14,000 By Sales Return 5,700
To Credit Sales 7,29,400 By Cash 6,11,000
By Discount Allowed 500
By Bad debts 1,000
By Balance c/d (B/F) 1,25,200
7,43,400 7,43,400


To Balance b/d 1,78,000 By Cost of Sales
To GSTB a/c 5,22,000 (32,000 + 7,29,400 – 5700) X 100/150 5,03,800
By GSTB (Return) 7800
By Balance c/d (B/F) 1,88,400
7,00,000 7,00,000
QUESTION 13.
Sonaly Chain Stores of Calcutta has a branch in Burdwan. Goods are sent to branch at cost. Branch sell
only goods received from head office. Branch sales are partly cash and partly credit. All cash collected
by branch are sent to head officer immediately and branch expenses are paid by head office. Following
are the details of transactions relating to branch for the year ended on 31 st December 1992 (all figures
in rupees)
Particular ` Particulars `
Stock at branch on 1.1.1992 6,800 Returns by branch
Debtors at branch on 1.1.1992 7,000 customers 500
Goods in transit on 1.1.1992 4,800 Cash received on Ledger
Goods sent to branch during the year 78,600 Account 33,000
Goods received by branch during the Branch salary and wages
year 74,800 paid by H.O. 6,700
Returned goods received by H.O. during Branch sundry expenses
the year 1,600 paid by H.O. 400
Cash sales at branch during the year 54,000 Wastage of stock at branch 1,200
Credit sales at branch during the year 35,500 Branch outstanding salary 500
Goods returned by branch 2,000 Bad debts written –off 200
Branch prepaid wages 800
Other Particulars are as under:
(a) Goods-in-transit ` 4,800 included goods costing ` 3,200 sent by H.O. to branch and goods costing `
1,600 returned by branch to H.O. in previous year.
(b) During this year cash ` 5,000 sent by branch to H.O. on 27,12,1992 which is received by H.O. on
3.1.1993.
(c) Branch maintains a steady gross profit @ 20% on sales.
Show Branch Account in the books of head office to record the above transactions.
Ans. Profit 9,000
QUESTION 14.
From the following information, prepare Delhi Branch Account in the books of head office for the year
ending on 31st March 2013:
Particulars ` Particulars `
Opening Stock (at cost) 17,80,000 Discount allowed to Customers 5,000
Opening Debtors 1,40,000 Bad Debts written off 10,000
Opening Petty Cash 2,500 Credit sales 72,94,000
Furniture (in the beginning) 60,000 Cash Sales 3,20,000
Opening Creditors 60,000 Petty Expenses paid by Branch 80,000
Goods sent to Branch (at Cost) 52,20,000 Cheques sent to Branch for
Goods returned by Branch to expenses:
H.O (at cost) 78,000 Salaries 3,00,000
Goods returned by Customers Rent and Insurance 1,20,000
to Branch 57,000 Petty Cash 78,700
Cash received by Branch from
its Customers 61,10,000
Goods returned by Branch
Customers directly to H.O. 12,000
Cash remitted by Branch
Customers directly to H.O. 2,80,000
Goods are sold to customers at cost plus 50%. Depreciate the furniture @ 10% p.a.
Ans. Net Profit ` 19,94,000
QUESTION 15.
The following information and particulars relate to New Delhi Branch for the year 1989 - 1990
31/3/1989 (`) 31/3/1990 (`)
Stock 50,000 75,000
Debtors 70,000 95,000
Petty Cash 250 120
Goods costing ` 5,50,000 was sold by the Branch @ 25% on cost. Cash sales amounted to ` 1,50,000
and the rest credit sales. Branch spent ` 30,000 for salaries, ` 12,000 for rent and ` 8,000 for petty
expenses (all expenses were remitted by Head Office)
You are requested to show the New Delhi Branch Account in the books of Head office for the year
1989-90 and prove your answer by preparing a Branch Trading and Branch P/L A/c.

For the year ended 31st March,1990
To Balance b/d: By Cash (Remittance) 6,62,500
- Stock 50,000 (1,50,000 + 5,12,500)
- Debtors 70,000 By Balance c/d:
- Petty Cash 250 - Stock 75,000
To GSTB a/c 5,75,000 - Debtors 95,000
To Cash (Expenses) 49,870 - Petty Cash 120
(30,000 + 12,000 + 7,870)
To Profit (b/f) 87,500
8,32,620 8,32,620

To Balance b/d 70,000 By Cash (B/F) 5,12,500
To Credit Sales 5,37,500 By Balance c/d 95,000
(6,87,500 – 1,50,000)
6,07,500 6,07,500


To Balance b/d 50,000 By Cost of Sales 5,50,000
To GSTB a/c (B/F) 5,75,000 By Balance c/d 75,000
6,25,000 6,25,000
Branch Petty Cash Account

To Balance b/d 250 By Petty Expenses Incurred 8,000
To Cash Sent (B/F) 7,870 By Balance c/d 120
8,120 8,120
QUESTION 16.
Shahrukh Ltd. of Delhi has a branch at Bhivani. Goods are invoiced to the branch at cost plus 25%. The
branch does not maintain account books and all collections at the branch are remitted to head office.
The expenses of the branch are reimbursed by the office. From the following particulars, prepare the
branch account in the books of head office for the six months ending on 30th September, 2001.
Opening Stock 55,000 Bad debts 400
(at cost to head office) Trade discount to customers
Opening Debtors 15,000 (already taken into account 12,000
Opening Furniture 12,000 while invoicing)
Opening Petty Cash 500 Goods sent to branch on 27.9.
Transactions for six months: 2001, received by branch on
Goods received from head office 2,25,000 5.10.2001. 1,500
Cash sales 1,95,000 Cash sent to branch for expenses 10,500
Credit sales 80,000 Cash discount allowed to
Goods returned to head office 12,750 customers 800
Normal loss 1,000 Balances on 30.9.2001:
Sales returns by customers to branch 500 Stock 5,600
Cash received from debtors 50,000 Debtors ?
Bills receivable received from Petty cash 500
Customers at branch 15,000 Depreciate Furniture @ 20% ?
Ans. Profit 40,080
QUESTION 17.
Modi Sales Ltd. Modinagar has branch at Delhi. Goods are supplied to branch at a profit of 20% on sale price.
A/cs are kept at head office from where all expenses (except petty expenses) are paid. Such petty expenses are
paid by the branch which is allowed to maintain petty cash balance of `500 on imprest system. From the
following balances as shown by books, prepare Branch A/c.
st
Balance as on 1 Jan., 2015: Cash paid by branch to creditors 8,000
Petty cash in hand at Branch 500 Creditors as on 31.12.1992 3,000
Stock at Invoice price 20,000 Payments made by H.O.:
Sundry Debtors at Branch 4,000 Rent for one year 2,000
Furniture at Branch 10,000 (Paid on 1st April 2015)
Rent prepaid (up to 31st March 2015) 400 Salaries 3,000
Sundry Creditors at Branch 1,200

Transactions for the year ended 31st Dec., Insurance paid for the year ended 31st
1992 were follows: March 2016) 800
Goods sent to Branch 1,05,000 Payment made by Branch:
Cash Sales at Branch 80,000 Petty Expenses 300
Credit Sales at Branch 45,000 Balance on 31 Dec., 1992
Bad debts written off 500 Stock at cost 30,000
Allowances to Debtors 200 (Cost of goods supplied by H.O.)
Collection from Debtors 80,000 Write off Dep. @ 20% p.a on furniture.

For the year ended 31st March
To Balance b/d: By Balance c/d
- Stock 20,000 - Creditors 1,200
- Debtors 4,000 By Stock Reserve(Op) 5,000
- Furniture 10,000 By GSTB a/c (Loading) 21,000
- Petty Cash 500 By Cash (Remittance) 1,12,000
- Rent Prepaid 400 (80,000 + 40,000 – 8,000)
To GSTB a/c 1,05,000 By Balance c/d:
To Cash (Expenses) 6,100 - Stock
(2,000 + 3,000 + 800 + 300) (30,000 +7500) 37,500
To Stock Reserve (Clos) 7,500 - Debtors 8,300
To Profit (b/f) 37,700 - Furniture 8,000
To Balance c/d - Petty Cash 500
- Creditors 3,000 - Rent Prepaid 500
- Insurance Paid 200
1,94,200 1,94,200

To Balance b/d 4,000 By Cash 40,000
To Credit Sales 45,000 By Allowance 500
By Bad debts 200
By Balance c/d (B/F) 8,300
49,000 49,000
QUESTION 18.
Pawan & Co. of Delhi has a Branch at Jaipur. Goods are invoiced to the Branch at cost plus 25%.
The Branch is instructed to deposit everyday in the head office account with the bank. All the
expenses are paid through cheque by the Head Office except petty cash expenses which are
paid by the Branch.
From the following information, you are required to prepare Branch Account in the books of Head
Office:
`
Stock at invoice price on 1.4.08 1,64,000
Stock at invoice price on 31.3.09 1,92,000
Debtors as on 1.4.08 63,400
Debtors as on 31.3.09 84,300
Furniture & fixtures as on 1.4.08 46,800
Cash sales 8,02,600
Credit sales 7,44,200

Goods invoiced to Branch by Head Office 12,56,000
Expenses paid by Head Office 2,64,000
Petty expenses paid by the Branch 20,900
Furniture acquired by the Branch on 1.10.08
(Payment was made by Branch from cash sales and collection from debtors) 5,000
Depreciation to be provided on Branch furniture and fixtures @ 10% on WDV basis.
(Nov 2009 – 8 Marks)
For the year ended 31st March, 2009
To Balance b/d: By Stock Reserve(Op) 32,800
- Stock 1,64,000 By GSTB a/c (Loading) 2,51,200
- Debtors 63,400 By Cash (Remittance) 15,00,000
- Furniture 46,800 By Balance c/d:
To GSTB a/c 12,56,000 - Stock 1,92,000
To Cash (Expenses) 2,64,000 - Debtors 84,300
To Stock Reserve (Clos) 38,400 - Furniture 46,870
To Profit (b/f) 2,74,570
21,07,170 21,07,170

To Balance b/d 63,400 By Cash (B/F) 7,23,300
To Credit Sales 7,44,200 By Balance c/d 84,300
8,07,600 8,07,600
Branch Cash Account

To Cash Sales 8,02,600 By Petty Expenses 20,900
To Debtors 7,23,300 By Furniture 5,000
By H.O Cash (Remittance) (BF) 15,00,000
15,25,900 15,25,900

QUESTION 19.
Widespread Ltd. invoices goods to its branch at cost plus 20%. The branch sells goods for cash as well
as on credit. The branch meets its expenses out of cash collected from its debtors and cash sales and
remits the balance of cash to head office after withholding ` 10,000 necessary for meeting immediate
requirements of cash. On 31st March, 2000 the assets at the branch were as follows:
` (‘000)
Cash in hand 10
Trade Debtors 384
Stock at invoice Price 1,080
Furniture and fittings 500
During the accounting year ended 31st March, 2001 the invoice price of goods dispatched by the head
office to the branch amounted to ` 1 crore 32 lakhs. Out of the goods received by it, the branch sent
back to head office goods invoiced at ` 72,000. Other transactions at the branch during the year were
as follows:
` (‘000)
Cash Sales 9,700
Credit sales 3,140
Cash collected by Branch from Credit Customers 2,842
Cash Discount allowed to Debtors 98
Returns by Customers 102
Bad Debts written off 37
Expenses paid by Branch 842
On 1st January, 2001 the branch purchased new furniture for ` 1 lakh for which payment was made by
head office through a cheque.
On 31st March, 2001 branch expenses amounting to ` 6,000 were outstanding and cash in hand was
again ` 10,000. Furniture is subject to depreciation @ 16% per annum on diminishing balance method.
Prepare Branch Account in the books of head office for the year ended 31 st March, 2001.
Ans.:- Profit – ` 10,56,000. (May 2001– 16 Marks)
QUESTION 20.
X Ltd, Bombay, started on 1 April 98, has two branches at Kanpur and Lucknow. All goods at the
Branches are received from the Head Office invoiced at cost plus 25%. All expenses relating to
Branches are paid by the H.O. Each branch has it own sales ledger and sends weekly statements. All
Such collections are remitted daily to Head Office by the branches.
The following particulars relating to the year ended 31 March 1999 have been extracted from the
weekly statement sent by the branches:
Kanpur Lucknow
` `
Credit sales 1,25,200 1,10,000
Cash sales 78,600 85,200
Sales Returns 2,300 1,200
Sundry Debtors 34,500 23,600
Rent and Rates 3,200 4,500
Bad Debts 6,000 ----

Salaries 16,000 18,000
General expenses 2,600 1,500
Goods received from H.O. 1,50,000 1,25,000
Advertisement 7,500 5,200
st
Stock on 31 March 1999 45,000 35,000
You are required to prepare the branch accounts as they would appear in the books of the Head Office,
showing the profit and loss for the period and the Trading and Profit and loss account separately for
each branch.
Ans.:- Profit Kanpur – ` 82,200; Lucknow – ` 92,800.
QUESTION 21.
M invoice goods to is Kanpur branch at 20% less than the list price which is cost plus 100% with
Instructions that cash sales were to be made at invoice price and credit at list price.
From the following particulars available from Kanpur branch prepare
(a) Branch Stock Account
(b) Branch Debtors Accounts and
(c) Kanpur Branch Account to reveal the profit for the year.
`
Stock in beginning of invoice price 18,000
Debtors in the beginning 10,000
Personal computer (P.C.) at branch 50,000
Goods received from HO at invoice price 1,80,000
Cash sales 82,000
Credit sales 1,20,000
Goods in transit at the end 10,000
Cash sent to branch for expenses 32,000
Actual Expenses at branch 30,000
Stock at the end at invoice price 16,000
Bad debts written off 400
Goods returned by customers direct to H.O. at list price 1,500
Debtors at the end 8,000
Depreciate personal computer by 20%
Verify profit by preparing branch adjustment account and branch profit and loss account.
Ans. ` 47,100.

QUESTION 22.
Raju Industries, Kolkata has a branch in Delhi to which office goods are invoiced at cost plus 25%. The
branch sells both for cash and on credit. Branch expenses are paid direct from head office and branch
has to remit all cash received to the Head office Bank Account.
From the following details, relating to calendar year 2014, prepare the accounts in the Head Office
Ledger and ascertain the Branch Profit. Branch does not maintain any books of account, but sends
weekly returns to the Head Office.
Particulars Amount (`)
Goods received form Head Office at Invoice Price 6,00,000
Returns to Head Office at Invoice Price 12,000
Stock at Delhi as on 1st Jan. 2014 60,000
Sales during the year – cash 1,80,000
- Credit 3,80,000
st
Sundry Debtors at Delhi as on 1 Jan. 2014 72,000
Discount allowed to debtors 8,000
Bad Debts in the year 6,000
Sales returns at Delhi Branch 6,000
Rent, Rates, Taxes at Brach 16,000
Salaries, Wages, Bonus at Branch 62,000
Office Expenses 6,000
st
Stock at Branch on 31 December, 2014 1,20,000
(Nov – 2015, 12 Marks)
Ans. Net Profit ` 33,600

FINAL ACCOUNTS SYSTEM

Branch Trading & P/L A/c (Always on cost)
To Opening stock (at cost ) By sales : Cash & Credit
To Goods sent to Branch Less : returns from Branch Debtors
Less : Returns to H.O. By Abnormal loss
To Direct Purchases By closing stock : In hand & In transit
To Gross Profit C/d
To Branch Expenses (on accrual Basis) By Gross profit B/d

To Abnormal Loss (cost) By Insurance Claim
To Net Profit (General P&L A/c)
QUESTION 23.
M/s Bright &., Co with its head office in Madras, invoiced goods to its branch at Bombay, at 20% less
than the catalogue price which is cost plus 50%, with instructions that cash sales were to be made at
invoice price and credit sales at catalogue price. Discount on credit sale at 15% on prompt payment will
be allowed. From the following particulars available from the branch, prepare the branch trading and
profit and loss account for the year ended 31st March, 1992 in the head office books, so to show the
actual profit / loss of the branch for the year
Stock 1.4.1991 (Invoice price ) 12,000 Discount allowed to debtors 13,365
Goods received from head office Expenses at the branch 6,000
(invoice price ) 1,32,000 Remittance to head office 1,20,000
Debtors on 1.4.1991 10,000 Debtors on 31/3/1992 11,000
Sales (Cash ) 46,000 Cash in hand on 31/3/1992 5,635
Sales (Credit) 1,00,000 Stock on 31/3/1992 (invoice 15,000
Cash realised from debtors 85,635 price)
It was reported that a part of stock at the branch was lost by fire during the year whose value is to be
ascertained; and provision should be made for discount to be allowed to debtors as on 31 st March,
1992 on the basis of the year’s trend of prompt payment.
Ans. Profit 17,650

QUESTION 24.
The Delhi stores invoiced goods to its Patna Branch at cost which sells both for cash and credit. Cash
received by the branch is remitted to H.O. Branch expense are paid direct from the H.O. except petty
expense which are met by the branch.
Opening Balance: Rates & Taxes 9,000
Stock 15,000 Salary & Wages 18,000
Debtors 60,000 Petty expense by the branch 3,000
Petty Cash 3,000 Pilferage of goods 3,000
Goods from H.O. 1,50,000
Cash Sales 90,000 Closing Balance: 24,000
Credit Sales 1,20,000 Stock 75,000
Sales Return 12,000 Debtors 2,400
Bad Debts 3,000 Petty Cash
Discount Allowed 3,000
Goods returned to H.O. 15,000
From the above particulars prepare Branch Trading and Profit and Loss Account in the books of Head
Office.
Ans. Net Profit ` 36,000
QUESTION 25.
X Ltd. has its H.O. in Delhi and a branch in Mumbai. H.O. supplied goods to its branch at cost plus
3313%. From the particulars given below prepare a Branch Trading Account in the books of H.O.
Opening Stock (I.P.) 1,60,000 Sales:
Goods sent to Branch (I.P.) 10,00,000 Cash 4,00,000
Return to H.O. (I.P.) 40,000 Credit 12,00,000
Discount allowed to customers 40,000
Closing Stock (I.P.) 2,40,000
It is estimated that 2% of the goods received are lost through natural wastage.
Ans. Net Profit ` 9,00,000

WHOLESALE BRANCH
QUESTION 26.
Rahul Ltd. operates a number of retail outlets to which goods are invoiced at wholesale price
which is cost plus 25%. These sell the goods at the retail price which in wholesale price plus
20%. Following is the information regarding one of the outlets for the year ended 31.3.2002:
`
Stock at the outlet 1.4.2001 30,000
Goods invoiced to the outlet during the year 3,24,000
Gross profit made by the outlet 60,000
Goods lost by fire ?
Expenses of the outlet for the year 20,000
Stock at the outlet 31.3.2002 36,000
You are required to prepare the following accounts in the books of Rahul Ltd. for the year
ended. 31.3.2002:
(a) Outlet Stock Account.
(b) Outlet Profit & Loss Account.
(c) Stock Reserve Account. (May 1997– 10 Marks)
Ans.:- (a) Goods lost ` 18,000; (b) Gross profit transferred to outlet profit & Loss Account ` 60,000;
Profit transferred from outlet profit and loss account ` 22,000; (c) Balance of stock Reserve
Amount ` 7,200.
QUESTION 27.
M/s Maheshwari Bros. with their head office at Bombay have a branch at Sholapur. They supply goods
to its branch at selling price less 20%. The company as well as the branch sells goods to their
consumers at profit of 100% on cost. Maheshwari Bros. also sell goods to their approved stockiest at
the same price at which they are selling to their branch at Sholapur. From the following particulars
prepare trading accounts of the head office and of the branch for the second year of their business and
show the provision for unrealized profits of stock at the branch comprising of goods supplied by the
head office.
Particulars Head office (`) Branch (`)
Stock in the beginning 3,000 160
Purchase during the year 25,600
Goods sent to the branch 4,000
Goods received from the H. O. 4,000
Goods sold to approved stockiest 6,000
Goods sold to customers 12,000 3,600
Expenses 200 100
[Ans. G.P. for H.O. – ` 9750, Br. – 720]

QUESTION 28.
New Textiles Limited operates a number of retail shops to which goods are invoiced at
Wholesale Price which is cost plus 20%. Shops sell the goods at the list price which is wholesale
price plus 10%. From the following particulars ascertain the profit or loss for 2002 at shop No.
143.
`
Stock at shop on January 1,2002 15,000
Goods invoiced to shop during 2002 1,40,000
Sale at the shop during the year 1,54,770
Goods destroyed by accident (retail value) 660
Expenses at the shop 7,200
(Ans. Net Profit 6,270; gross Profit 14,070)

INDEPENDENT BRANCH
Steps:-
1. Maintain independent set of books of accounts both at Branch and H.O.
– Journal; – Ledgers; & – Trial Balance.
2. At year end reconcile Branch books and H.O. books for omissions or mistakes.
3. Prepare separate Profit and Loss Account of both to find out individual profit & Loss and transfer
them to General P/L A/c and prepare individual B/S.
4. Incorporate Branch Assets and liabilities into H.O. trial balance
5. Prepare Consolidated Balance Sheet and P/L A/c.
Step- 1— Maintenance of separate books of accounts
H.O. Books Branch Books

1. When goods sent to Branch
Branch A/c … Dr. Goods Received from H. O. A/c …Dr.
To Goods sent to Br. A/c To H. O. A/c
2. When goods returned from Branch
Goods sent to Br. A/c … Dr. H. O. A/c …Dr.
To Branch A/c To Goods received from H.O. A/c
3. When cash sent to Branch
Branch A/c …Dr. Cash A/c ...Dr.
To Cash A/c To H.O. A/c
4. When cash received from Branch
H.O. A/c …Dr.
Cash A/c … Dr. To Cash A/c
To Branch A/c At Sending Branch
5. When Goods are transferred from H. O. A/c A/c … Dr.
one Branch to other Branch To Goods received from H. O. A/c
Receiving branch A/c … Dr. At Receiving Branch
To Sending branch A/c Goods received from H. O. A/c …Dr.
To H. O. A/c
6. When H.O. creditors are paid by Branch H.O. A/c … Dr.

Creditors A/c … Dr. To cash A/c
To Branch A/c
7. When Branch creditors are paid by H. O.

Branch A/c … Dr. Creditors A/c … Dr.
To cash A/c To H. O. A/c
8. When H.O. exp. chargeable to Branch
Branch A/c … Dr. H.O. Exps. A/c … Dr.
To H. O. A/c
(b) Br. F.A. Purchased by Branch

Br. F.A. A/c …Dr H.O. A/c … Dr.
To Branch To Bank A/c
(c) Dep. Charged.
Branch A/c ….Dr. Depreciation A/c … Dr.
To Branch Fixed Assets A/c To H. O. A/c
To Exp. A/c
9. When Br. F.A. a/c is maintained at H.O. No entry
(a) Br. F.A. Purchased by H.O.
Br. F.A. A/c …Dr.
To Bank A/c
Note: - A transaction will be recorded in both books, Only if it effects both H.O. and Branch other wise
it will be recorded only in one’s book.
Step - 2 – Reconcile entries
Books of H. O. Br. Books
1. Goods sent to branch but not received by branch till year end.
Stock-in-transit A/c … Dr. Goods received for H.O. ...Dr.
To Branch A/c To H.O. A/c
2 Cash sent by branch but not received by H.O. till year end .
Cash-in-transit A/c … Dr. Cash in transit A/c …Dr.
To Branch A/c To H.O. A/c
Step - 3 – Prepare Separate P/L A/c for Branch and H.O. and transfer profit/ loss to General P/L A/c

Step- 4 – Incorporation of Branch Balance in H.O. books.

In H.O Books In Branch books
1. Current year profit , if loss reverse entry.
Branch A/c – Dr. Profit & Loss A/c -- Dr.
To General profit & loss A/c . To H.O. A/C
2. For Branch Assets
Br. Assets A/c – Dr. [ individual ] H.O.A/C – Dr.
To Branch A/c To Assets A/c [ individual ]
3. For Branch liabilities
Branch A/c – Dr . Liabilities A/c – Dr. [ individual]
To Branch liabilities A/c [individual] To H.O. A/c
(After incorporation Branch A/c. must be closed ( H.O. must be closed in Branch Books)
in H.O .Books . )
QUESTION 1.
A Bombay firm whose accounting year ends on 31st December has two branches-one at Allahabad and
the other at Varanasi. The branches keep a complete set of books on 31 st December, 1986 the
Allahabad and Varanasi Branch Accounts in the Bombay books showed debit balances of ` 30,450 and
` 45,000 Respectively before taking the following information into account:
(a) Goods valued ` 2,000 were transferred from Allahabad to Varanasi under instructions from Head
Office.
(b) The Allahabad Branch collected ` 2,500 from an Allahabad customer of the Head office.
(c) The Varanasi Branch paid ` 5,000 for certain goods purchased by the Head Office in Varanasi.
(d) ` 5,000 remitted by the Allahabad Branch on 29th December, 1986, was received on 3rd January
following.
(e) The Varanasi Branch received on behalf of the Head Office ` 1,500 as dividend from a Varanasi
Company.
(f) Pass journal entries in the Head Office books and then write up the two Branch Accounts therein.
Ans. In the books of the Head Office-- Journal
Date Particulars L.F. Dr. (`) Cr. (`)
(i) Varanasi Branch A/c. Dr. 2,000
To Allahabad Branch A/c. 2,000
(Being goods transferred from Allahabad branch to
Varanasi branch under head office instruction)
(ii) Allahabad Branch A/c. Dr. 2,500
To Sundry Debtors A/c. 2,500
(Being cash collected by Allahabad branch from
head office Debtors at Allahabad)
(iii) Purchases A/c. Dr. 5,000
To Varanasi Branch A/c. 5,000
(Being the amount paid by Varanasi branch in
respect of Purchases of head office)
(iv) Cash-in-Transit A/c. Dr. 5,000
To Allahabad Branch A/c. 5,000

(Being cash remitted by Allahabad branch on 29th
December 1993 received by the head office on 3rd
Jan. 1994)
(v) Varanasi Branch A/c. Dr. 1,500
To Dividend received A/c. 1,500
Allahabad Branch Account

To Balance b/d 30,450 By Varanasi Branch a/c 2,000
To Sundry Debtors 2,500 By Cash in Transit 5,000
By By Balance c/d (B/F) 25,950
32,950 32,950
Varanasi Branch Account

To Balance b/d 45,000 By Purchase a/c 5,000
To Allahabad Branch a/c 2,000 By Balance c/d (B/F) 43,500
To Dividend 1,500
48,500 48,500
QUESTION 2.
Head office passes adjustment entry at the end of each month to adjust the position arising of inter-
branch transactions during the month. From the following inter-branch transactions in January 1996,
make the entry in the books of Head Office;
(a) Bombay Branch :
1. Received Goods ` 6,000 from Calcutta branch, ` 4,000 from Patna branch. Sent Goods to: ` 10,000
to Patna, ` 8,000 to Calcutta.
2. Received B/R ` 6,000 from Patna
3. Sent Acceptance : ` 4,000 to Calcutta, Rs, 2,000 to Patna
(b) Madras Branch (Apart from above)
1. Received Goods ` 10,000 from Calcutta. ` 4,000 from Bombay
2. Cash sent ` 2,000 to Calcutta ` 6,000 to Bombay.
(c) Calcutta Branch (Apart from the above);
1. Sent Goods to Patna : ` 6,000
2. Paid B/P: ` 4,000 to Patna. ` 4,000 cash to Patna.
Ans. Madras Branch A/c Dr. 6,000

Patna Branch A/c Dr. 16,000
To Bombay Branch A/c 6,000
To Calcutta Branch A/c 16,000

QUESTION 3.
On 1st April, 2015, a head office purchased a plant costing ` 66,000 for the branch. On 1st Jan, 2016,
the branch purchased furniture for ` 10,000. The rate of depreciation on plant is 33-1/3% p.a. and on
furniture 10% p.a. The accounting year of the head office and branch is the financial year. Give the
necessary journal entries in the books of H.O. and Branch if fixed assets accounts are maintained (a) at
Head Office (b) at Branch.
Solution:
(a) If Fixed Assets Accounts are maintained at H.O.)
Journal Entries (in the books of H.O.)
st
1 April, 15 Plant a/c a/c Dr. 66,000
To Bank a/c 66,000
(Being H.O. purchased Plant for Branch)
1stJan, 16 Furniture a/c Dr. 10,000
To Branch a/c 10,000
(Being Branch Purchased Furniture)
31st March, Branch a/c Dr. 22,250
16 To Plant a/c (For 12 months) 22,000
To Furniture a/c (3 months) 250
(Being Depreciation charged on Branch Fixed Assets)
Journal Entries (in the books of Branch)

1st April, 15 No entry for purchase of Plant
1stJan, 16 H.O. a/c Dr. 10,000
To Bank a/c 10,000
31st March, Depreciation a/c Dr. 22,250
16 To H.O. a/c 22,250
(b) If Fixed Assets Accounts are maintained at Branch)

Journal Entries (in the books of H.O.)
st
1 April, 15 Branch a/c a/c Dr. 66,000
To Bank a/c 66,000
(Being H.O. purchased Plant for Branch)
1stJan, 16 No entry for purchase of furniture by branch
st
31 March, No entry for Depreciation in H.O. Books
16


st
1 April, 15 Plant a/c Dr. 66,000
To H.O. a/c 66,000
(being H.O. purchased Plant)
1stJan, 16 Furniture a/c Dr. 10,000
To Bank a/c 10,000
31st March, Depreciation a/c Dr. 22,250
16 To Plant a/c 22,000
To Furniture a/c 250
QUESTION 4.
A & Co. having its Head Office at Delhi with Branch at Lucknow and Allahabad close its annual
accounts on 31st December, 2015, when the following transactions have taken place:
(a) Remittance of ` 4,500 made by Lucknow Branch to its Head Office on 30 th December was
received by the Head Office on 5th January next.
(b) Goods valuing ` 2,200 dispatched by Allahabad Branch on 27th December under
instructions from the Head Office, was received by the Lucknow Branch on 30 th January
next.
(c) Depreciation amounted to ` 1,100 on Lucknow Branch Fixed Assets (accounts of such
assets are maintained by Head Office).
(d) Goods worth ` 9,000 dispatched by the Head Office to Lucknow Branch on 30th December,
was received by that Branch on 7th January following.
Show the entries in the books of Head Office and the Lucknow Branch as at the close of the year.
Solution: Journal Entries (in the books of H.O.)
Cash in Transit a/c Dr. 4,500
To Lucknow Branch a/c 4,500
(Being remittance by branch is in Transit on 31st December,
2015)
Lucknow Branch a/c Dr. 1,100
To Br. Fixed Assets a/c 1,100
(Depreciation on Lucknow Branch Fixed Assets charged)
Journal Entries (in the books of Lucknow Branch)
Goods in Transit a/c Dr. 2,200
To H.O. a/c 2,200
(Being Allahabad Branch sent goods but Lucknow branch
not received upto 31st December, 2015)
To H.O. a/c 9,000
(Being H.O sent goods but Lucknow branch not received
upto 31st December, 2015)

QUESTION 5.
Show adjustment Journal entry in the books of Head Office at the end of April, 2003 for
Incorporation of inter branch transactions assuming that only Head Office maintain different
Branch accounts in its books.
A. Delhi Branch:
(1) Received goods from Mumbai – ` 35,000 and ` 15,000 from Kolkata.
(2) Sent goods to Chennai – ` 25,000, Kolkata – ` 20,000.
(3) Bill Receivable received – ` 20,000 from Cheenai.
(4) Acceptances sent to Mumbai – ` 25,000, Kolkata – ` 10,000.
B. Mumbai Branch (apart from the above):

(5) Received goods from Kolkata – ` 15,000, Delhi – ` 20,000.
(6) Cash sent to Delhi – ` 15,000, Kolkata – ` 7,000.
C. Chennai Branch (apart from the above)

(7) Received goods from Kolkata – ` 30,000
(8) Acceptances and Cash sent to Kolkata – ` 20,000 and R. 10,000 respectively.
D. Kolkata Branch (apart from the above)

(9) Sent goods to Chennai – ` 35,000
(10) Paid cash to Chennai – ` 15,000.
(11) Acceptances sent to Chennai – ` 15,000.
All working should form part of the answer.
Ans.:- Delhi – ` 15,000(Cr.); Mumbai – ` 3,000(Dr.); Chennai – ` 70,000(Dr.);

Kolkata – ` 58,000(Cr). (May 2003 – 8 Marks)
QUESTION 6.
Calcutta H.O. passes one entry at the end of each month is adjusting the position arising out of
inter Branch transactions during the month. From the following inter-branch transactions in
April ………make the entries in the books of Calcutta Head Office: (Give detail of the workings).
(a) Delhi Branch
(i) Received goods from Nagpur Branch ` 9,000 and Ahmadabad Branch ` 6,000
(ii) Sent goods to Ahmadabad branch ` 15,000 and Nagpur Branch ` 12,000.
(iii) Received Bills receivable from Ahmadabad Branch ` 9,000.
(iv) Sent acceptances to Nagpur ` 6,000 and Ahmadabad 3,000.
(b) Kanpur Branch (In addition to (a) above)
(i) Received goods from Nagpur Branch ` 15,000 and Delhi Branch ` 6,000.
(ii) Cash rent to Nagpur Branch ` 3,000 and Delhi Branch ` 6,000.
(c) Nagpur Branch (In addition to (a) and (b))
(i) Sent goods to Ahmadabad Branch ` 9,000.
(ii) Received bills receivable from Ahmadabad Branch ` 9,000.
(iii) Received cash from Ahmadabad Branch ` 5,000.
Ans.:- Debit Kanpur Branch – 12,000; Credit Debit branch – 12,000; Debit Nagpur Branch – 2,000;
Credit Ahmadabad Branch – 2,000.
QUESTION 7.
Alpha & Co. having head office in Mumbai has a branch in Nagpur. The branch at Nagpur is an
Independent branch maintaining separate books of account. On 31.3.2007, it was found that
The Goods dispatched by head office for ` 2,00,000 was received by the branch only to the
Extent of ` 1,50,000. The balance goods are in transit. What is the accounting entry to be
Passed by the branch for recording the goods in transit, in its books?
Ans.:- Nagpur branch must include the inventory in its books as goods in transit.
Goods in transit A/c Dr. 50,000
To Head Office A/c 50,000 (May 2007 – 2 Marks)
QUESTION 8.
Pass necessary Journal Entries (with narration) in the books of Branch to rectify or adjust
the following:
(i) Branch Paid ` 24,000 as Salary to HO Supervisor and the amount was debited to Salaries Account
by the Branch.
(ii) Head Office Expenses allocated to Branch were ` 22,500, but these expenditure were not
recorded by the Branch.
(iii) HO collected ` 50,000 directly from the Customer on Branch’s behalf.
(iv) Branch has sent remittance of ` 1,20,000 but the same has not year been received by HO.
(Nov - 2015 – 4 Marks)
Solution: Journal Entries in the books of Branch
Dates Particulars L.F. Dr.(`) Cr.(`)
H.O. a/c Dr. 24,000
To Salaries a/c 24,000
(Being Salary to Branch Supervisor rectified)
Expenses a/c Dr. 22,500

To H.O. a/c 22,500
(Being Head office expenses allocated are recorded)
Head Office a/c Dr. 50,000
To Debtors a/c 50,000
(Being Debtors are collected by H.O)
No Entry in Branch Books because H.O is receiving party

QUESTION 9.
Ring Bell Ltd. Delhi has a Branch at Bombay where a separate set of books is used. The
following is the trial balance extracted on 31st December, 2015.
Head Office Trial Balance
` `
Share Capital (Authorized: 10,000 equity shares of ` 100 each)
Issued: 8,000 Equity Shares 8,00,000
Profit and Loss A/c 1.1.2015 25,310
Interim dividend paid – Aug. 2015 30,000
General Reserve 1,00,000
Fixed Assets 5,30,000
Stock 2,22,470
Debtors and Creditors 50,500 21,900
Profit for 2015 82,200
Cash Balance 62,730
Branch Current Account 1,33,710
10,29,410 10,29,410
Branch Trial Balance

` `
Fixed Assets 95,000
Profit for 2015 31,700
Stock 50,460
Cash Balance 6,550
Head Office Current Account 1,29,010
1,71,110 1,71,110
The difference between the balances of the current account in the two sets of books is accounted for
as follows:-
(1) Cash remitted by the Branch on 31st December, 2015, but received by the Head Office on 1st
January 2016 – ` 3,000.
(2) Stock stolen in transit from Head Office and charged to Branch by the Head Office, but not
credited to head office in the Branch books as the Branch Manager declined to admit any
liability (not covered by insurance) – ` 1,700.
Give the Branch Current Account in Head Office books. Also prepare the company’s Balance Sheet as
on 31st December, 2015.
Ans.:- Branch Profit – ` 31,700; Total Profit – ` 1,07,510.

QUESTION 10.
On 31st March, 2016 Kanpur Branch submits the following Trial Balance to its Head Office at
Lucknow:
Debit Balances ` in lacs
Furniture and Equipment 18
Depreciation on furniture 2
Salaries 25
Rent 10
Advertising 6
Telephone, Postage and stationery 3
Sundry Office Expenses 1
Stock on 1st April 2015 60
Goods Received from Head Office 288
Debtors 20
Cash at bank and in hand 8
Carriage inwards 7
448
Credit Balances:
Outstanding Expenses 3
Goods Returned to Head Office 5
Sales 360
Head Office 81
448
Additional Information:
Stock on 31st March, 2000 was valued at ` 62 Lakhs. On 29th March, 2016 the Head Office dispatched
Goods costing ` 10 Lakhs to its branch. Branch did not receive these goods before 1st April, 2016.
Hence, the figure of goods received from Head Office does not include these goods. Also the head
office has charged the branch ` 1 lac for centralized services for which the branch has not passed the
entry. You are required to:
(i) Pass Journal Entries in the books of the Branch to make the necessary adjustments.
(ii) Prepare Final Accounts of the Branch including Balance Sheet, and
(iii) Pass Journal Entries in the books of the Head Office to incorporate the whole of the
Branch Trial Balance. (May 2002 – 16 Marks)
Solution:
(i) Journal Entries (in the books of Branch)
Date Particulars L.F. Dr. Cr.
(` in Lakh) (` Lakhs)
Goods in Transit a/c Dr. 10
To H.O. a/c 10
(Being H.O. sent goods but branch not received up to
31st March, 2016)
H.O service expenses a/c Dr. 1
To H.O. a/c 1
(Being H.O. charged expenses for central service to

branch )
Closing Stock a/c Dr. 62
To Trading a/c 62
(Being Closing Stock Transferred)
(ii) Trading and Profit & Loss Account
For the year ended 31st March, 2016
Particular (` in Lakhs) Particular (` in Lakhs)
To Opening Stock 60 By Slaes 360
To Goods Received from H.O 288 By Closing Stock 62
Less: Goods return 5 283
To Carriage Inward 7
To Gross Profit 72
422 422
To Depreciation on furniture 2 By Gross Profit 72
To Salaries 25
To Rent 10
To Sundry Office Expenses 1
To Telephone, Postage sta. 3
To Advertising 6
To H.O Service Cost 1
To Nep Profit 24
72 72
Balance Sheet of Branch
As at 31-03-2016
Liabilities (` in Lakhs) Assets (` in Lakhs)
H.O. a/c 81 Furniture and Equipment 18
Add: Net Profit 24 105 Closing Stock 62
Outstanding Expenses 3 Sundry Debtors 20
Cash in Hand and Bank 8
108 108
(iii) Journal Entries (in the books of H.O.)

(` in Lakh) (` Lakhs)
Branch Trading a/c Dr. 355
To Branch a/c 355
(being Opening Stock, Goods Received From H.O. and
Carriage inward are transferred)
Branch Profit & Loss a/c Dr. 48
To Branch a/c 48
(being branch Depreciation on furniture, Salaries, Rent
Sundry Office Expenses, Telephone, Postage sta.,
Advertising and H.O Service Cost are transferred)
Branch a/c Dr. 427

To Branch Trading a/c 427
(Being Sales and Goods return to H.O. and closing Stock
are Transferred)
Furniture and Equipment a/c Dr. 18
Closing Stock a/c Dr. 62
Sundry Debtors a/c Dr. 20
Cash in Hand and Bank a/c Dr. 8
Goods in Transit a/c Dr. 10
To Branch 118
(being Branch Aseets are transferred)
Branch a/c Dr. 3
To outstanding Expenses a/c 3
(being branch liabilities transferred)
QUESTION 11.
Sri Sundram commenced business on 1st April, 2002 with head office at Madras and a branch at
Nagpur. Purchases were made exclusively by the head office where the goods were processed before
sale. There was no loss or wastages in processing. Only the processed goods received from head office
were handled by the branch and these were charged thereto at processed cost plus 10%.
All sales, whether by head office or by the branch, were at a uniform gross profit of 25% on cost to
Head Office. Following is the Trial Balances of Sri Sundram and Branch as on 31st March, 2003:
Particulars Head Office Brach Office
Dr. Cr. Dr. Cr.
Capital -- 62,000 -- --
Drawings 11,000 -- -- --
Purchases 3,93,900 -- -- --
Cost of processing 10,100 -- -- --
Sales -- 2,56,000 1,64,000
Goods sent to Branch -- 1,84,800 -- --
Goods Received From H.O. -- -- 1,76,000 --
Administrative Expenses 27,800 -- 3,000 --
Selling Expenses 10,000 -- 1,240 --
Debtors / Creditors 61,920 1,20,280 22,720 2,160
Branch / H.O. current A/c 77,960 -- -- 52,300
Balance of Bank 30,400 -- 15,500 --
6,23,080 6,23,080 2,18,460 2,18,460
The following further information’s are also available.
(i) Goods sent by head office to the branch in March, 2003 at ` 8,800 were not received by
the branch until April 2003
(ii) A remittance of ` 16,860 from the branch to head office were not received until April,
2003.
(iii) Stock taking at the branch disclosed a shortage of goods of ` 4,000 (at selling price)
(iv) Cost of unprocessed goods at head office on 31st March, 2003 was ` 20,000.

Prepare Trading and Profit & Loss Account in Columnar form and Balance Sheet of the business as a
whole as on 31st March, 2003. (Nov 1993 – 15 Marks)
Ans. Gross Profit H.O. – ` 68,000; Branch ` 19,680; Net profit H.P. 30,200; Branch – ` 11,920; Total
of Balance sheet – ` 2,12,200; Unrealized Profit on Stock – ` 3,360.
H.O. Profit after unrealized Profit on stock – ` 26, 840.
QUESTION 12.
The following is the Trial Balance of Malabar Hills Branch as at 30th June, 2015:
H.O. Account 32,400
Stock on July 1, 2014 60,000
Purchases 1,78,000
Goods received from H.O. 90,000
Sales 3,80,000
Goods supplied to H.O. 60,000
Salaries 15,000
Debtors 37,000
Creditors 18,500
Rent 9,600
Office Expenses 4,700
Cash in hand and at Bank 17,800
Furniture 14,000
4,58,500 4,58,500
Additional Information:-
(a) Stock on hand was valued at ` 27,000.
(b) The Branch Account in the Head Office Books on 30 th June, 2015 stood at ` 4,600 (Debit
Balance).
(c) On 28th June, 2015, the Head Office forwarded goods to the value of ` 25,000 to the
branch where they were received on 3rd July, 2015.
(d) A cash remittance of ` 12,000 by branch on 24th June were received by H.O on July 1.
You are required:
(1) To prepare Trading and Profit and loss account and Balance sheet at Branch.
(2) Journal entries necessary to incorporate the above trial balance.
(3) Malabar Hills Brach Account in the H.O. Books.

Solution:
(i) Trading and Profit & Loss Account
For the year ended 30th June, 2015
Particular (`) Particular (`)
To Opening Stock 60,000 By Slaes 3,80,000
To purchase 1,78,000 By Goods supplied to H.O. 60,000
To Goods Received from H.O 90,000 By Closing Stock 27,000
To Gross Profit 1,39,000
4,67,000 4,67,000
To Salaries 15,000 By Gross Profit 1,39,000
To Rent 9,600
To Office Expenses 4,700
To Nep Profit 1,09,700
1,39,000 1,39,000
Balance Sheet of Branch
As at 30-06-2015
Liabilities (`) Assets (`)
Profit & Loss Account 1,09,700 Furniture 14,000
Sundry Creditors 18,500 Closing Stock 27,000
Sundry Debtors 37,000
Cash in Hand and Bank 17,800
H.O. account 32,400
1,28,200 1,28,200
(ii) Incorporation Journal Entries (in the books of H.O.)

Branch Trading a/c Dr. 3,28,000
To Branch a/c 3,28,000
(being Opening Stock, Goods Received From H.O. and
Purchased are transferred)
Branch a/c Dr. 4,67,000
To Branch Trading a/c 4,67,000
(Being Sales and Goods Supplied to H.O. and closing
Stock are Transferred)
Branch Profit & Loss a/c Dr. 29,300
To Branch a/c 29,700
(being branch Salaries, Rent, Office Expenses are
transferred)
Furniture a/c Dr. 14,000
Closing Stock a/c Dr. 27,000
Sundry Debtors a/c Dr. 37,000
Cash in Hand and Bank a/c Dr. 17,800
To Branch 1,20,800

(being Branch Aseets are transferred)

Branch a/c Dr. 18,500
To Sundry Creditors a/c 18,500
(being branch liabilities transferred)
(iii) Malabar Hills Branch Account (in H.O. Books)

To Balance b/d 4,600 By Branch Trading a/c 3,28,000
To Branch Trading a/c 4,67,000 By Branch Profit & Loss a/c 29,300
To Sundry Creditors 18,500 By Furniture a/c 14,000
By Closing Stock a/c 27,000
By Sundry Debtors a/c 37,000
By Cash in Hand and Bank a/c 17,800
By Goods in Transit a/c 25,000
By Cash in Transit 12,000
4,90,100 4,90,100
QUESTION 13.
The Head Office of Canpat Co. and its Branch keep their own books and prepare own Profit and Loss
Account. The following are the balances appearing in the two sets of the books as on 31.3.2004
after ascertainment of profits and after making all adjustments except those referred to below:-
Dr. Cr. Dr. Cr.
Capital -- 10,00,000 -- --
Fixed Assets 3,60,000 -- 1,60,000 --
Stock 3,42,000 -- 1,07,400 --
Debtors & Creditors 78,200 39,600 48,400 19,200
Cash 1,07,400 -- 14,200 --
Profit & Loss -- 1,46,600 -- 30,600
Head Office Account -- -- -- 2,80,200
Branch Account 2,98,600 -- -- --
11,86,200 11,86,200 3,30,000 3,30,000
Set out the Balance Sheet of the business as on 31.3.2004 and the journal entries necessary (in both
sets of books) to record the adjustments dealing with the following:
(1) On 31.3.2004, the branch had sent a cheque for ` 10,000 to the head office, not received
by them nor credited to the branch till next month.
(2) Goods valued at ` 4,400 had been forwarded by the head office to the branch and
invoiced on 30.3.2004, but were not received by the branch nor dealt with in their books
till next month.
(3) It was agreed that the branch should be charged with ` 3,000 for Administration Services,
rendered by the Head Office during the year.
(4) Stock stolen in transit from the Head Office to the Branch and charged to the Branch by
the Head Office but not credited to the Head Office in the Branch Books as the Manager
declined to admit any liability, ` 4,000 (not covered by insurance)

(5) Depreciation of Branch Assets, of which accounts are maintained by the Head Office, not
provided for ` 2,500.
(6) The balance of Profits shown by the Branch is to be transferred to HO Books.

To H.O a/c 4,400
(Being Goods forwarded to Branch by H.O. is in Transit)
P & L a/c Dr. 3,000
To H.O. a/c 3,000
(Being Administrative expenses charged for service
rendered by H.O.)
Profit & Loss a/c Dr. 2,500
To H.O. a/c 2,500
(Being Depreciation charged on Branch Assets account
of which maintained at H.O.)
Head Office a/c Dr. 3,34,400
To Fixed Assets a/c 1,60,000
To Stock a/c 1,07,400
To Sundry Debtors a/c 48,400
To Cash a/c 14,200
To Goods in Transit a/c 4,400
(Being Aseets are transferred to H.O.)
Sundry Creditors a/c Dr. 19,200
Profit & Loss a/c (30,600 – 3,000 – 2,500) Dr. 18,500
To Head Office a/c
(being Creditors and Profit are transferred to H.O)
Journal Entries (In the books of H.O)

Cash in Transit a/c Dr. 10,000
To H.O a/c 10,000
(Being remittance by Branch to H.O. is in Transit)
P & L a/c Dr. 4,000
To Branch a/c 4,000
(Being goods stolen in transit charged to branch now
rectified)
To Fixed Aseets a/c 2,500
(Being Depreciation charged on Branch Assets account)
To Profit & Loss a/c 3,000
(Being Administrative Expenses charged on Branch)

Fixed Assets a/c Dr. 1,60,000

Closing Stock a/c Dr. 1,07,400
Sundry Debtors a/c Dr. 48,400
Cash in Hand and Bank a/c Dr. 14,200
To Branch 3,34,400
(Being Branch assets are transferred)
To Sundry Creditors a/c 19,200
To Br. Profit & Loss a/c (30,600 – 3,000 – 2,500) 25,100
(Being Creditors and Profit are transferred from
Branch)
Br. Profit & Loss a/c Dr. 25,100
To Profit & Loss a/c 25,100
(Being Branch Profit transferred to Profit & Loss a/c)
Balance Sheet of Whole Business

As at 31-03-2004
Capital 10,00,000 Fixed Assets:
Add: Profit 1,67,700 11,70,700 H.O. 3,60,000
(1,46,600 + 25,100 + 3,000 – 4,000) Branch 1,60,000
Creditors: Less: Depreciation (2,500) 5,17,500
H.O. 39,600 Stock:
Branch 19,200 58,800 H.O. 3,42,000
Branch 1,07,400
In Transit 4,400 4,53,800
Debtors:
H.O. 78,200
Branch 48,400 1,26,600
Cash:
H.O. 1,07,400
Branch 14,200
In Transit 10,000 1,31,600
12,29,500 12,29,500

QUESTION 14.
Ashwin, trader commenced business on 1st January, 2005 with a head office and one branch. Purchases
were made exclusively by the head office where the goods were processed before sale. There was no
loss or wastage. Only processed goods received from head office were handled by the Branch and
these were charged to the branch at processed cost plus 10 per cent. All sales, whether by head office
or the branch, were at uniform gross profit of 25 percent on their respective cost. The following Trial
balance as on 31st December, 2005 was extracted from the books
Dr. Cr. Dr. Cr.
Capital -- 2,20,000 -- --
Drawings 25,000 -- -- --
Purchases 19,93,350 -- -- --
Cost of processing 34,650 -- -- --
(Manufacturing cost)
Sales -- 14,20,000 -- 6,40,000
Goods sent to Branch -- 6,51,200 -- --
Goods Received From H.O. -- -- 6,40,200 --
Debtors / Creditors 2,30,000 5,83,350 92,000 2,400
Branch / H.O. current A/c 2,05,550 -- -- 1,50,800
Selling & General Exp. 2,24,000 -- 27,000 --
Balance of Bank 1,62,000 -- 34,000 --
28,74,550 28,74,550 7,93,200 7,93,200
Further details are:
(i) Goods charged by head office to branch in December, 2005 at ` 11,000, were not
received by the branch until January, 2006. A remittance of ` 43,750 from the branch to
head office in December 2006, is still in transit.
(ii) Stock – taking at Branch disclosed shortage of ` 5,000 (at selling price).
(iii) Cost of unprocessed goods at head office as on 31st December, 2005 was ` 1,80,000.
You are required to prepare, in columnar form profit and Loss Account and Balance Sheet of the
Head Office, branch and the business as a whole. (Nov 2005 – 16 Marks)
Trading and Profit & Loss Account
For the year ended 31st December, 2005
Particulars H.O. Branch Particulars H.O. Branch
To purchase 19,93,350 -- By Sales 14,20,000 6,40,000
To Cost of Processing 34,650 -- By GSTB 6,51,200 --
To Goods Received from By Shortage 4,000
H.O -- 6,40,200 (5,000 x 110/137.5)
To Gross Profit 3,43,200 1,28,000 By Closing Stock
- Unprocessed 1,80,000 --
- Processed (wn 1) 1,20,000 1,24,200
23,71,200 7,68,200 23,71,200 7,68,200
To Selling & General By Gross Profit 3,43,200 1,28,000
Expenses 2,24,000 27,000
To Cost of Shortage -- 4,000
To Nep Profit 1,19,200 97,000
3,43,200 1,28,000 3,43,200 1,28,000

Balance Sheet of Whole Business

As at 31-12-2005
Capital 2,20,000 Stock:
Add: Profit 2,16,200 H.O. 3,00,000
(1,19,200 + 97,000) Branch 1,24,200
Less: Stock Reserve (12,291) In Transit 11,000
Less: Drawing (25,000) 3,98,909 Less: Stock Reserve (12,291) 4,22,909
Creditors: (1,39,000 x 10/110)
H.O. 5,83,350 Debtors:
Branch 2,400 5,85,750 H.O. 2,30,000
Branch 92,000 3,22,000
Cash:
H.O. 1,62,000
Branch 34,000
In Transit 43,750 2,39,750
9,84,659 9,84,659
Wn 1. Calculation of Processed Closing stock at H.O and at Branch

H.O. Branch
Purchased/ Goods Rec 19,93,350 6,40,200

Add: Cost of Processing 34,650
Less: Cost of Goods Sold 14,20,000 x 100/125 (11,36,000) 6,40,000 x 110/137.5 (5,12,000)
Less: Cost of GSTB 6,51,200 x 100/110 (5,92,000)
Less: Cost of
Unprocessed Stock (1,80,000)
Less: Cost of Shortage 4,000
Cost Processed Stock 1,20,000 1,24,200

QUESTION 15.
AFFIX Ltd of Kolkata has a branch at Delhi to which the goods are supplied from Kolkata but the
cost thereof is not recorded in the Head Office books. On 31 st March, 2008 the Branch Balance
Sheet was as follows:
Liabilities ` Assets `
Creditors Balance 40,000 Debtors balance 2,00,000
Head office 1,68,000 Building extension A/c closed by
transfer to H.O. A/c --
Cash at Bank 8,000
2,08,000 2,08,000
During the six months ending on 30.9.2008, the following transactions took place at Delhi.
` `
Sales 2,40,000 Manager’s Salary 4,800
Purchases 48,000 Collections from debtors 1,60,000
Wages paid 20,000 Discounts allowed 8,000
Salaries (inclusive of advance 6,400 Cash paid to Creditors 60,000
Of ` 2,000)
General expenses 1,600 Building account 4,0000
(Further payment)
Fire insurance (paid for one year) 3,200 Cash in hand 1,600
Remittance to H.O. 38,400 Cash at Bank 28,000
Set out the Head Office Account in Delhi books and the Branch Balance Sheet as on 30.09.2008. Also
give journal entries in the Delhi books.

FOREIGN BRANCH
Step. 1. Up to trial balance – same as independent Branch. 2. Reconcile item wise.
2A. Convert Branch trail Balance in H.O. Currency.
3. For Rest same as in dependent branch
- Prepare Br. P/L A/c
- Incorporate Br. Trail Balance
- Prepare consolidated B/S
Step. 2 - Relevant Rate for conversion of Branch trial balance
1. Revenue Items — Average Rate.

— All incomes
— All Exps.
2. Opening stock — Opening Rate
3. Closing Stock — Closing Rate
4. Current Assets — Closing Rate
5. All Liabilities — Closing Rate
6. Fixed Assets and depreciation –Rate on date of acquisition
7. H. O. A/c — Amt. Of Br. A/c in H. O. Books
8. Goods Received from H. O. — Amt. Of Goods sent to Br. A/c in H.O. Books
— and difference in Trial balance due to this conversion is transferred to foreign exchange
fluctuation A/c and transfer to P/L A/c.
QUESTION 1.
How will you translate the following items of the London Branch as on 31.3.2002:
Opening Stock $ 4,100, Goods from H.O. $ 29,400,
Salaries & Wages $ 7,600, Sales $ 52,600,
Closing Stock $ 1,200.
Goods sent to London Branch in the H.O. Books amounted to ` 10,73,100,
Exchanges rate:
on 1.4.2001 $ 1 = ` 26.40, on31.3.2002 $ 1 = ` 42.20,
Average of 2001 – 2002 $ 1 = ` 36.50.

QUESTION 2.
The New York Branch of Fine Textiles Limited, Delhi sent the following Trial Balance (in Dollars) as on
31st Dec., 2003:
Trial Balance for the year ended 31-12-2003
$
Dr. Cr.
Fixed Assets 1,20,000 --
Opening Stock 56,000 --
Goods From H.O. 3,20,000 --
Selling Expenses 25,000 --
Debtors 24,000 --
Cash at Bank 6,000 --
Sales -- 4,20,000
H.O. a/c -- 1,14,000
Creditors -- 17,000
5,51,000 5,51,000
In the H.O. Books, the Branch Account stood as shown below:

Particulars Amounts Particulars Amounts
To Balance b/d 10,05,000 By Cash 26,08,000
To Goods sent to Branch 24,63,000 By Balance c/ d 8,60,000
34,68,000 34,68,000
(a) Goods are invoiced to the branch at cost plus 10% and the branch has instruction to sell at invoice
price plus 25%.
(b) Fixed assets were acquired on 1st Jan., 20Xl when $100 = Rs 380.
(c) Rates of exchange were :
1st January, 2003 $ 100 = Rs 760
st
31 December, 2003 $ 100 = Rs 770
Average $ 100 = Rs 750
(d) Fixed Assets have to be depreciated by 10%.
(e) The Branch Manager is entitled to commission of 5% on the profit of the branch (on invoice price
basis) after charging such commission.
You are required to:
(i) Prepare Branch Trading and Profit & Loss Account and Branch Balance Sheet in Dollars;
(ii) Convert the Branch Balance Sheet prepared in dollar into rupees;
(iii) Convert the Branch Trial Balance into rupees and prepare the Branch Trading & Profit & Loss
Account and the Branch Account and Branch Balance Sheet in ; rupees;

Solution:
(i) Branch Trading and Profit & Loss Account (in Dollars)
Particulars $ Particulars S
To Opening Stock 56,000 By Sales 4,20,000
To Goods from H.O. 3,20,000 By Closing Stock (b/f) 40,000
To Gross Profit 84,000
(4,20,000 x 27.5/137.5)
4,60,000 4,60,000
To Selling Expenses 25,000 By Gross Profit 84,000
To Depreciation 12,000
To Manager Commission 2,238
84,000 84,000
Balance Sheet as at 31-03-2003
Liabilities $ Assets $
Head office 1,14,000 Fixed Assets 1,20,000
Add: Profit 44,762 1,58,762 Less: Depreciation 12,000 1,08,000
Sundry Creditors 17,000 Stock 40,000
O/S Manager Commission 2,238 Debtors 24,000
Cash at Bank 6,000
1,78,000 1,78,000
(ii) Balance Sheet as at 31-03-2003 (conversion from dollars to Rupees)
Head office 8,60,000 Fixed Assets (1,08,000 x 3.8) 4,10,400
Add: Profit 3,35,715 11,95,715 Stock (40,000 x 7.7) 3,08,000
(44,762 x 7.5) Debtors (24,000 x 7.7) 1,84,800
Sundry Creditors (17,000 x 7.7) 1,30,900 Cash at Bank (6,000 x 7.7) 46,200
O/S Manager Commission 17,233 Exchange Difference (b/f) 3,94,448
(2238 x 7.7)
13,43,848 13,43,848
Trial Balance for the year ended 31-03-2003
Rates $ `
`/$ Dr. Cr. Dr. Cr.
Fixed Assets 3.8 1,20,000 -- 4,56,000 --
Opening Stock 7.6 56,000 -- 4,25,600 --
Goods From H.O. Actual 3,20,000 -- 24,63,000 --
Selling Expenses 7.5 25,000 -- 1,87,500 --
Debtors 7.7 24,000 -- 1,84,800 --
Cash at Bank 7.7 6,000 -- 46,200 --
Sales 7.5 -- 4,20,000 -- 31,50,000
H.O. a/c Actual -- 1,14,000 -- 8,60,000
Creditors 7.7 -- 17,000 -- 1,30,900
Exchange Difference (b/f) 3,77,800 --
5,51,000 5,51,000 41,40,900 41,40,900
Branch Trading and Profit & Loss Account (in Rupees)

To Opening Stock 4,25,600 By Sales 31,50,000
To Goods from H.O. 24,63,000 By Closing Stock (40,000 x 7.7) 3,08,000
34,58,000 34,58,000
To Selling Expenses 1,87,500 By Gross Profit 5,69,400
To Depreciation 45,600 By Net Loss 58,733
To Manager Commission 17,233
(2,238 x 7.7)
To Exchange Difference 3,77,800
6,28,133 6,28,133

Less: Loss 58,733 8,01,267 Stock 3,08,000
Sundry Creditors 1,30,900 Debtors 1,84,800
O/S Manager Commission 17,233 Cash at Bank 46,200
9,49,400 9,49,400

QUESTION 3.
Following are the Balances of Bombay Head Office and New York Branch on 31.12.2015:
H.O. (Dr) ` (Cr.) ` Branch (Dr ) $ Branch Cr. $
Capital A/c 7,50,000

Land and Building 1,50,000
Goodwill 75,000
Plant & Machinery 12,00,000 1,80,000
Furniture and Fittings 45,000 12,000
Stock 1.1.15 5,10,000 84,000
Purchases 31,68,000 3,60,000
Goods from H.O. 1,20,000
Goods to N.Y. Branch 11,78,000
Sales 34,82,000 6,24,000
Salaries and Wages 1,44,000 12,000
Rent, Rates &Taxes 18,000 3,000
Insurance 10,500 1,500
Trade Expenses 27,000 3,000
Head Office 1,71,000
N.Y. Branch 12,33,500 16,69,000
Sundry Debtors 3,30,000 36,000
Sundry Creditors 25,500
Cash in Hand and with banks 1,68,000 9,000
70,79,000 70,79,000 8,20,500 8,20,500
1. Stock as on 31.12.2015 was valued at: Head Office ` 4,38,000 N.Y. Branch $ 78,000
2. Depreciation on Plant and Machinery and Furniture and Fittings to be provided at 10% p.a.
3. Rates of Exchange were
(i) When Plant and Machinery and Fixtures were purchased $ 100=` 780
(ii) On 1.1.15: $ 100 = ` 850
(iii) On 31.12.2015: $ 100 = ` 950
(iv) Average Rate $ 100=` 970.
You are required to prepare a Combined Columnar Profit and Loss Account and Balance Sheet of Head
Office and the Branch.

Solution: Trail Balance of Branch in Dollars and in Rupees

Rate $ `
$/` Dr. Cr. Dr. Cr.
Plant & Machinery 7.8 1,80,000 14,04,000 --
Furniture and Fittings 7.8 12,000 93,600 --
Stock 1.1.87 8.5 84,000 7,14,000 --
Purchases 9.7 3,60,000 34,92,000 --
Goods from H.O. Actual 1,20,000 11,78,000 --
Sales 9.7 6,24,000 -- 60,52,800
Salaries and Wages 9.7 12,000 -- 1,16,400 --
Rent, Rates &Taxes 9.7 3,000 -- 29,100 --
Insurance 9.7 1,500 -- 14,550 --
Trade Expenses 9.7 3,000 -- 29,100 --
Head Office Actual 1,71,000 -- 12,33,500
Sundry Debtors 9.5 36,000 -- 3,42,000 --
Sundry Creditors 9.5 25,500 -- 2,42,250
Cash in Hand and with banks 9.5 9,000 85,500 --
Exchange Difference (B/F) 30,300
8,20,500 75,28,550 75,28,550
8,20,500
Trading and Profit & Loss Account
For the year ended 31st December, 2015
Particulars H.O. Branch Particulars H.O. Branch
To Opening Stock 5,10,000 7,14,000 By Sales 34,82,000 60,52,800
To purchase 31,68,000 34,92,000 By GSTB 11,78,000 --
To Goods Received from -- By Closing Stock 4,38,000 7,41,000
H.O 11,78,000
To Gross Profit 14,20,000 14,09,800
50,98,000 67,93,800 50,98,000 67,93,800
To Salaries and Wages 1,44,000 1,16,400 By Gross Profit 14,20,000 14,09,800
To Rent, Rates &Taxes 18,000 29,100
To Insurance 10,500 14,550
To Trade Expenses 27,000 29,100
To Depreciation on: --
- P&M 1,20,000 1,40,400
- Furniture 4,500 9,360
To Exchange Difference -- 30,300
To Nep Profit 10,96,000 10,40,590
14,20,000 14,09,800 14,20,000 14,09,800


Liabilities H.O. Branch Assets H.O. Branch
Capital a/c 18,46,000 -- Goodwill 75,000 --
(7,50,000 + 10,96,000) Land and Building 1,50,000 --
H.O. a/c -- 22,74,090 Plant & Machinery 10,80,000 12,63,600
(12,33,500 + 10,40,590) Furniture and Fittings 40,500 84,240
Sundry Creditors 16,69,000 2,42,250 Closing Stock 4,38,000 7,41,000
Sundry Debtors 3,30,000 3,42,000
Cash and Bank 168,000 85,500
Branch a/c 12,33,500 --
35,15,000 25,16,340 35,15,000 25,16,340
QUESTION 4.
DM Ltd., Delhi has a branch in London. London branch is an integral foreign operation of DM
Ltd. At the end of the year 31st March, 2009, the branch furnishes the following trial balance in
U.K. Pound:
Particulars £ £
Dr. Cr.
Fixed Assets (Acquired on 1st April, 2005) 24,000
st
Stock as on 1 April, 2008 11,200
Goods from Head Office 64,000
Expenses 4,800
Debtors 4,800
Creditors 3,200
Cash at Bank 1,200
Head Office Account 22,800
Purchases 12,000
Sales 96,000
1,22,000 1,22,000
In head office books, the branch account stood as shown below:
London Branch A/c
Dr. Cr.
Particulars Amount Particulars Amount
` `
To Balance b/d 20,10,000 By Bank A/c 52,16,000
To Goods sent to branch 49,26,000 By Balance c/d 17,20,000
69,36,000 69,36,000

The following further information is given:

(a) Fixed assets are to be depreciated @ 10% p.a. on straight line basis.
(b) On 31st March, 2009:
Expenses outstanding £400
Prepaid expenses £200
Closing stock £8,000
(c) Rate of Exchange:
1st April, 2005 ` 70 to £1
st
1 April, 2008 ` 76 to £1
st
31 March, 2009 ` 75 to £1
You are required to prepare:
(1) Trail Balance, incorporating adjustments of outstanding and prepaid expenses, conversing
U.K. pound into Indian rupees.
(2) Trading and Profit and Loss A/c for the year ended 31 st March, 2009 and the Balance Sheet
as on that date of London branch as would appear in the books of Delhi head Office of DM
Ltd.
Solution: Trial Balance for the year ended 31-03-2009
Rates £ `
`/$ Dr. Cr. Dr. Cr.
Fixed Assets 70 24,000 -- 16,80,000 --
Opening Stock 76 11,200 -- 8,51,200 --
Goods From H.O. Actual 64,000 -- 49,26,000 --
Expenses (4800 + 400 - 200) 75.5 5,000 -- 3,77,500 --
Outstanding Expenses 75 -- 400 -- 30,000
Prepaid Expenses 75 200 15,000 --
Debtors 75 4,800 3,60,000 --
Creditors 75 -- 3,200 -- 2,40,000
Cash at Bank 75 1,200 -- 90,000 --
H.O. a/c Actual -- 22,800 -- 17,20,000
Purchase 75.5 12,000 -- 9,06,000 --
Sales 75.5 -- 96,000 -- 72,48,000
Exchange Difference (b/f) -- 32,300 --
1,22,400 1,22,400 92,38,000 92,38,000
Branch Trading and Profit & Loss Account (in Rupees)
To Opening Stock 8,51,200 By Sales 72,48,000
To Purchase 9,06,000 By Closing Stock (8,000 x 75) 6,00,000
To Goods from H.O. 49,26,000
78,48,000 78,48,000
To Expenses 3,62,400 By Gross Profit 11,64,800
To Depreciation 2,40,000
(16,80,000 x 10/70)
To Exchange Difference 32,400
To Net Profit 5,30,000
11,64,800 11,64,800


Add: Profit 5,30,000 22,50,000 Stock 6,00,000
Sundry Creditors 2,40,000 Debtors 3,60,000
Cash at Bank 90,000
24,90,000 24,90,000
QUESTION 5.
The Washington branch of XYZ Ltd., Mumbai sent the following trail balance as on 31st
December, 2007:-
$ $
Head Office A/c --- 22,800
Sales --- 84,000
Machinery 24,000 ---
Cash at Bank 1,200 ---
Stock 1 January, 2007 11,200 ---
Goods from H.O. 64,000 ---
Expenses 5,000 ---
1,10,200 1,10,200
In the books of head office, the Branch A/c stood as follows:
Washington Branch A/c
` `
To Balance b/d 80,000 By cash 28,76,000
To goods sent to branch 29,26,000 By Balance c/d 8,60,000
37,36,000 37,36,000
Goods are sent to the branch at cost plus 10% and the branch sell goods at Invoice price plus 25%.
Machinery was acquired on 31st January, 2002.
When $ 1.00 = ` 40.
Rates of Exchange were:
1st January 2007 $ 1.00 = ` 46
31st December, 2007 41.00 – ` 48
Average $1.00 = ` 47
Machinery is depreciated @ 10% and the branch manager is entitled to a commission of 5% on the
profit of the branch.
You are required to:
(i) Prepare the branch Trading & Profit & Loss /c in Dollars.
(ii) Covert the trail balance a/c in the books of head office.

QUESTION 6.
Carlin & Co. had head office at New York (U.S.A) and branch at Mumbai furnishes you
with its trial balance as on 31st March, 2016 and the additional information given thereafter.
Rupees in thousands
Dr. Cr.
st
Stock on 1 April, 1998 300 ---
Purchases and sales 800 1200
Sundry debtors and creditors 400 300
Bills of exchange 120 240
Wages and salaries 960 ---
Rent, rates and taxes 360 ---
Sundry charges 160 ---
Computers 240 ---
Bank balance 420 ---
New York office A/c --- 1,620
3,360 3,360
Additional Information:-
(a) Computers were acquired from a remittance of US $ 6,000 received from New York head
office and paid to the supplier. Depreciate computers at 60% for the year.
(b) Unsold stock of Mumbai branch was worth ` 4,20,000, on 31 March, 2016.
(c) The rates of exchange may be taken as follows:-
(i) On 1.4.2015 @ ` 40 per US $
(ii) On 31.3.2016 @ ` 42 per US $
(iii) Average exchange rate for the year @ ` 41 per US $
(iv) Conversion in $ shall be made up to two decimal accuracy.
You are asked to prepare is US dollars the revenue statement for the year ended 31 st March, 2016 and
the balance sheet as on that date of Mumbai branch as would appear in the books of New York head
office of Carlin & Co. You are informed the Mumbai branch showed a debit balance of US $ 39,609.18
on 31.3.2016 in New York books and there were no items pending reconciliation.
Ans.:- Net Loss – 17,685; Total of Balance Sheet – 34,780.95.

QUESTION 7.
An Indian Company has a branch at Washington. Its Trial Balance as at 30 th September, 1998 is
as follows:-
Dr. Cr.
US $U S$
Plant and machinery 1,20,000 ----
Furniture and fixtures 8,000 ----
Stock, Oct. 1997 56,000 ----
Purchases 2,40,000 ----
Sales ---- 4,16,000
Goods from Indian Co. (H.O.) 80,000 ----
Wages 2,000 ----
Carriage inward 1,000 ----
Salaries 6,000 ----
Rent,Rates and taxes 2,000 ----
Insurance 1,000 ----
Trade expenses 1,000 ----
Head Office A/c ---- 1,14,000
Trade debtors 24,000 ----
Trade creditors ---- 17,000
Cash at bank 5,000 ----
Cash in hand 1,000 ----
US $ 5,47,000 US $ 5,47,000
The following further information is given:-
(1) Wages outstanding - $ 1,000.
(2) Depreciate Plant and Machinery and Furniture and Fixtures @ 10 per cent p.a.
(3) The Head office has sent goods to Branch for ` 39,40,000.
(4) The Head Office shows as amount of ` 43,00,000 due from Branch.
(5) Stock on 30th September, 1998 - $ 52,000.
(6) There were no in transit items either at the start or at the end of the year.
(7) On September 1, 1996, when the fixed assets were purchased, the rate of exchange was `
38 to one $.
On October 1, 1997, the rate was ` 39 to one $.
On September 30, 1998, the rate was ` 41 to one $.
Average rate during the year was ` 40 to one $.
You are asked to prepare:
(a) Trial balance incorporating adjustments given under 1 to 4 above, converting dollars into
rupees.
(b) Trading and profit and loss account for the year ended 30 th September, 1998 and Balance
Sheet as on that date depicting the profitability and net position of the branch as would
appear in India for the purpose of incorporating in the main Balance Sheet.
Ans.:- Net Profit – ` 27,01,600; Balance Sheet – ` 77,39,600; G.P. – ` 28,88,000.

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Chapter-12

I- STOCK AND DEBTORS SYSTEM

Stock, 1st January, 1992 15,000

Branch Debtors Account

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Branch Expenses Account

Branch Profit and Loss Account

GSTB Account a/c

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

WHEN GOODS SENT TO BRANCH AT INVOICE VALUE

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Branch Adjustment Account

Solution: Branch Stock Account

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Branch Debtors Account

Bed Debts and Discount written off 200

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Branch Debtors Account

Branch Adjustment Account

Branch Profit and Loss Account

GSTB Account a/c

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

GSTB Account a/c

Branch Adjustment Account

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Branch Debtors Account

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Branch Stock Account

Solution: Branch Account

Branch Debtors Account

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Branch Stock Account

Branch Petty Cash Account

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Solution: Branch Account

Branch Debtors Account

Credit sales 7,44,200

Branch Debtors Account

Branch Cash Account

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Bad Debts 6,000 ----

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

FINAL ACCOUNTS SYSTEM

To Branch Expenses (on accrual Basis) By Gross profit B/d

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Step- 1— Maintenance of separate books of accounts

H.O. Books Branch Books

6. When H.O. creditors are paid by Branch H.O. A/c … Dr.

7. When Branch creditors are paid by H. O.

(b) Br. F.A. Purchased by Branch

CA IQTIDAR A. MALIK [B.COM, ACA, CS]

Step- 4 – Incorporation of Branch Balance in H.O. books.

To Allahabad Branch A/c. 5,000

Allahabad Branch Account

Varanasi Branch Account

Ans. Madras Branch A/c Dr. 6,000

CA IQTIDAR A. MALIK [B.COM, ACA, CS]