FIN611 Advanced Financial Accounting

Assignment no 01

Fall 2022

Bc210203938 [ Muhammad Ali Tabassum]

Being an accountant of the Kings Stores chain Limited, the following information has been

disseminated to you by the head office. The King stores of Lahore have a branch in
Karachi.

Goods are sold by the head office on 30% profit on the cost to its customer. At the same
time,

the goods are always invoiced to the branch at a selling price that is 20% of the profit on
the

selling price. The stock was reported at Rs. 10,000 at the beginning year 2020 by the
branch,

whereas the debtors of the branch were Rs. 5,600 at the beginning of the year 2020.
Although

the branch was operating well, due to the recession, the sales declined by 20% as compared
to

the last 10-year average. Therefore, the sales in cash were reported at Rs. 43,200. Whereas
credit

sales have increased by 5% comparing the average of the last five years, reported Rs.
28,000 by

a branch during the year 2020. Pertaining to the fact of recession, the recovery from
debtors was

directly affected as well, which shows that the branch could not collect the full amount
from

debtors, so it could only collect Rs. 26,400 during the year 2020. Goods were invoiced 5%
less

than the two years average, amounting to Rs. 72,800 during the year. Rent of the branch
was
payable for the year Rs. 3,500, from which only Rs. Rs. 3,200 was paid by the head office
during

the year 2020. Wages of the branch were recorded as unpaid Rs. 2,700 in the year. The
Karachi

SEMESTER FALL 2022

branch kept its own sales ledger account and deposited all cash received on a daily basis to
the

head office bank account. All expenses are paid by the head office from Lahore. Pilferage

(Normal Loss) of goods at head office was Rs. 4,000. The net realizable value of the closing

stock of the branch was Rs. 15,000 compared to the book value of the stock of Rs. 12,000.
The

sundry expenses were paid by head office Rs. 650.

Required:

You are required to prepare branch accounts in head office books to ascertain the

profit/loss of the branch during the year 2020.

Book of headoffice

Branch account

Particulars Amount Particulars Amount

Debit side Credit side
Opening balance Cash sale 43200
Stock 10000 Good return 14560
debtor 9000
Good invoiced 87360 Closing balance
Rent expences 3200 Stock 15000
Wages 2700 Debtor 10600
outstanding
Stock return 8833 Net loss transfer to profit 37733
and loss account
Total 121093 121093

Debtor account

Opining balance 9000 Cash received 26400

Credit sale 28000 b/f 10600
Total 37000 37000