HOME OFFICE, AGENCY & BRANCH ACCGT

Shipment = Inventory Investment in Branch (Asset account)

Shipment to Branch = @cost Home office (Equity account)
Shipment from Home Office = @BP Allowance for Overvaluation(creditside)

RECIPROCAL ACCOUNTS
HOME OFFICE BRANCH
1. Investment in branch or Branch Current 1. Home Office Current or Home Office Account
- debit balance - credit balance
- asset account - capital account
2. Shipment to branch 2. Shipment from home office
- credit balance - debit balance
- nominal account and is deducted to determine - nominal account and is added to determine the
the total goods available for sale total goods available for sale

BASIC TRANSACTIONS BETWEEN HOME AND BRANCH

HOME OFFICE BRANCH
a. transfer of cash by home Investment in branch Cash
office to branch Cash Home office
b. Transfer of cash by branch to Cash Home office
home office Investment in branch Cash
c. Transfer of inventory by Investment in branch Shipment from HO
home office to branch Shipment to branch Home office
d. Return of inventory by Shipment to branch Home office
branch to home office Investment in branch Shipment from HO
e. Allocation of expenses paid Investment in branch Expenses
by the home office Expenses Home office
f. Transfer of equipment by Equipment – branch Memo entry
home office to branch. The Equipment
home office will still record the
equipment
g. Equipment purchased by Equipment – branch Memo entry
home office to be used by the Cash
branch. The home office will
record the equipment
h. Equipment purchase by home Investment in branch Equipment
office to be used by the branch. Cash Home office
The branch will record the
equipment
i. Equipment purchased by Equipment Home office
branch to be used by the home Investment in branch Cash
office. The home office will
record the equipment
j. Equipment purchased by Memo entry Equipment – HO
branch to be used by the home Cash
office. The branch will record
the equipment

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 HOME OFFICE, AGENCY & BRANCH ACCGT

k. Accounts receivable of branch Cash[ Home office

collected by the home office Investment in branch Accounts receivable
i. Accounts receivable of home Investment in branch Cash
office collected by the branch Accounts Receivable Home office
m. Accounts payable of branch Investment in branch Accounts Payable
paid by the home office Cash Home office
n. Accounts Payable of Home Accounts Payable Home office
office paid by the branch Investment in branch Cash
o. Expenses of home office paid Expenses Home office
by the branch Investment in branch Cash
p. Expenses of branch paid by Investment in branch Expenses
the home office Cash Home office

CONSOLIDATION WORKING PAPER ELIMINATION ENTRIES

BILLED AT COST BILLED AT BILLED PRICE
a. Home office a. Home office
Investment in branch Investment in branch
b. Shipment to branch b. Shipment to branch
Shipment from home office Allowance for overvaluation of branch
Shipment from HO
c. Accounts Payable c. Accounts Payable
Accounts Receivable Accounts receivable
d. Allowance for overvaluation of branch
Beg. Invtry – branch
e. End. Invtry – branch (IS)
End. Invtry – branch (BS)

Journal Entries: Example

Date Home Office Branch Working Paper Reciprocal

Accounts
Jan. 1 Investment Investment in Branch xx Cash xx Home Office xx
Cash xx Shipment from HO xx Investment in branch xx
Ship. to Branch xx Equipment xx
Equipment xx Home Office xx AFO xx
Allowance for overvalued xx Shipment to branch xx
Shipment from HO xx

Note: In the combined financial

statement the reciprocal
accounts should not be
accounted.
Jan-Dec. 31 Daily Cash xx
transaction Sales xx

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 HOME OFFICE, AGENCY & BRANCH ACCGT

COGS xx
Inventory xx

Operating Expense xx
Cash xx
Dec. 31 Closing Investment in Branch xx Sales xx
entries Income from branch xx COGS xx
Operating Exp. xx
Income Summary xx

Income Summary xx
Home Office xx

Branch Formula
Cost- 100% Billed Price AFO
Beg. Inventory Xx xx xx
Add: Shipment from Xx xx xx AFO/Cost=rate
HO
Goods available for Xx xx xx AFO nga gintutukoy
sale ha probs basta given
Less: Ending Inventory (xx) (xx) (xx)
Cost of sales Xx xx xx Realized GP/
Unrealized intra
company profit

Branch:
Outside xx
Beg. Inventory Home Office xx same to ending inventory

Outsider:
Beg. Inventory xx
Purchases xx
GAS xx
Ending Inventory xx
COS xx

Branch separate books Net Income: Branch correct books Net Income:
Sales xx Sales xx
COS: Home office @BP (xx) COS: Home office @cost (xx)
Outsider (xx) Outsider (xx)
GP xx GP xx
Expenses (xx) Expenses (xx)
Net Income xx Net Income xx
Add: RGP xx
Correct NY xx

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 HOME OFFICE, AGENCY & BRANCH ACCGT

Home Office:

Home office Net Income:

Sales xx
Cos: BI xx
Purchases xx
Less: Ship. to branch (xx) to avoid double counting
COS xx xx
GP xx
Expenses (xx)
Net Income xx

Combined Net Income: Combined Ending Inventory

Net Income- Home office xx End. Inventory branch: Home office@cost xx
Net Income- Branch- @cost xx Outsider xx
Combined Net Income xx End. Inventory Home Office xx
Combined ending inventory xx

Notes: Prior year- use the prior year rate

Current year- use the current year rate
If both rate is given: prior year rate – use for Beg. Inventory
Current year rate – use for shipment

Shipment from Home office xx

Shipment to Branch @BP xx
Inventory in transit xx – added to ending inventory to branch

RECONCILIATION:

EFFEC Home Office- IIB Branch- HO

T
1. Transfer of Asset  Investment in Branch xx Asset xx
Asset xx Home Office xx
2. Allocate Expenses: a. Expense xx a. Expenses xx
a. Home office – a. Cash xx Home Office xx
Branch Allocation:
b. Branch – Home Investment in Branch xx
office Expenses xx

b. b. Expenses xx b. Expenses xx

Investment in xx Cash xx
Allocation:
Home office xx
Expenses xx

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 HOME OFFICE, AGENCY & BRANCH ACCGT

3. Remittance or Return  Cash xx Home Office xx

Investment in Branch xx Cash/AR xx
4. Net Income of Branch 
5. Net Loss of Branch 
6. Error 

Note:
Home Office  Branch if Debit memo
IIB  & HO 
Branch  Home office
HO  & IIB 
Kitaa kun ano iya normal balance if debit memo from home office to branch normal balance
hiton IIB is debit tas nakadebit memo increase
No rate given: Shipment from HO / Shipment to branch

Shipments to branch (@billed price) xx

Shipment from home office (xx)
Cost of goods still in transit xx  included in the computation of TGAS

Beg. Invtry xx
Purchases xx
Cost of goods still in transit xx
COGAS xx