Chapter 2329

Advanced Financial
Accounting
[As per Revised Syllabus of 2017-18 for M.Com., Semester III, University of Mumbai]
Rajiv S. Mishra
M.Com., MBA, M.Phil., UGC-NET, Ph.D. (Pursuing),
Recognised UG Professor by University of Mumbai.
Assistant Professor in BBI & Co-ordinator, M.Com.,
N.E.S. Ratnam College of Arts, Science and Commerce,
Bhandup (W), Mumbai-400 078.
Visiting Faculty at N.G. Acharya, D.K Marathe, V.K. Menon College, Pragati College,
Chandrabham Sharma College, Dnyansadhana College and Vikas College
for M.Com., BBI, BMS, BFM and BAF.
Winner of “Best Commerce Author – 2013-14” by Maharashtra Commerce Association

“State Level Mahatma Jyotiba Phule Excellent Teacher Award 2016”
Lion Dr. Nishikant Jha

ICWA, PGDM (MBA), M.Com., Ph.D., D.Litt. [USA],
CIMA Advocate [CIMA U.K.], BEC [Cambridge University],
International Executive MBA [UBI Brussels, Belgium, Europe],
Recognised UG & PG Professor by University of Mumbai.
Recognised M.Phil. & Ph.D. Guide by University of Mumbai.
Assistant Professor in Accounts & HOD, BAF, Thakur College of Science & Commerce.
Visiting Faculty in K.P.B. Hinduja College for M.Phil. & M.Com., University of Mumbai.
CFA & CPF (USA), CIMA (UK), Indian & International MBA, CA & CS Professional Course.
Virendra Singh
M.Com., NET, M.Com., Co-ordinator,
Assistant Professor,
S.M. Shetty College, Pawai.
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PREFACE
It is a matter of great pleasure to present revised edition of the book on Advanced Financial
Accounting to the students and teachers of Masters of Commerce (M.Com.) for University of
Mumbai. This book is written on lines of syllabus instituted by the University. The book presents
the subject matter in a simple and convincing language.
We owe a great many thanks to a great many people who helped and supported us during the
writing of this book which includes Principal, HOD, Co-coordinator, and Students of K.M.
College, DAV, Ratnam College, K.J. Somaiya, Vivekananda Education Society, Vikas College,
R.J. College, N.G. Archarya College, Menon College, Nitin Godiwala College of the B.Com.,
M.Com., BBI, BMS, BAF and BFM Section.
Our deepest thanks to Mr. Manoj Sharma of the Kamladevi Jain College, Four Bungalows,
Andheri who has always given strength to us.
We would also thank all of them who have been a part of this and helped us knowingly or
unknowingly. We also extend our heartfelt thanks to our family and well-wishers without whom it
would have been a distant reality.
Authors
SYLLABUS
ADVANCED FINANCIAL ACCOUNTING
Modules at a Glance
No. of
S. No. Modules
Lectures
1 Foreign Currency Conversion (As per Accounting Standard/s Applicable) 15
2 Final Accounts and Statutory Requirements for Banking Companies 15
3 Accounting and Statutory Requirements of Insurance Companies 15
4 Accounting and Statutory Requirements of Co-operative Societies 15
Total 60
S. No. Modules/ Units

1 Foreign Currency Conversion (As per Accounting Standard/s Applicable)
Requirements as per Accounting standard/s
Foreign Branches
2 Final Accounts and Statutory Requirements for Banking Companies
Final Accounts of Banking Companies
Provisioning of Non-performing Assets
Form and Requirements of Final Accounts
3 Accounting and Statutory Requirements of Insurance Companies
• Accounting Provision for Insurance Act and Insurance Regulation and Development
Authorities for
1. Life Insurance Business
2. General Insurance Business
• Forms and Requirements of Final Accounts for
1. Life Insurance Business
2. General Insurance Business
4 Accounting and Statutory Requirements of Co-operative Societies
Accounting Provision of Maharashtra State Co-operative Societies Act and Rules
Forms and Requirements of Final Accounts
PAPER PATTERN
Question Paper Pattern
Maximum Marks: 60
Questions to be Set: 04
Duration: 2 Hours.
All questions are compulsory carrying 15 Marks each.
Question Particular Marks

No
Q. 1 Practical Question 15 Marks

OR

OR

OR
Q. 4 Objective Question 15 Marks

(Multiple Choice/True or False/Fill in the Blanks/Match the Columns/Short
Questions)
OR
Q. 4 Short Notes (Any three out of five) 15 Marks
Note: Full length question of 15 Marks may be divided into two sub-questions of 08 and 07
Marks.
CONTENTS
1 Foreign Currency Conversion (As per Accounting Standards Applicable) 1 - 26
2 Final Accounts and Statutory Requirements for Banking Companies 27 - 85
3 Accounting and Statutory Requirements of Insurance Companies 86 - 134
4 Accounting and Statutory Requirements of Co-operative Societies 135 - 188

FOREIGN CURRENCY
1 CONVERSION
(As per Accounting
Standards Applicable)
1.1 Introduction
1.2 Foreign Branches
1.3 Accounting for Foreign Branches
1.4 Change in Classification
1.5 Techniques for Foreign Currency Translation
1.6 Summary
1.1 INTRODUCTION
As per Section 29 of the Companies Act, 1956, a branch can be described as any establishment
carrying on either the same or substantially the same activity as that carried on by head office of the
company. It must also be noted that the concept of a branch means existence of a head office for there can
be no branch without a head office – the principal place of business. From the accounting point of view,
branches may be classified as follows:
Classification of Branches
Inland Branches Foreign Branches
Independent Branches which Dependent Branches for which

maintain independent whole accounting records are
accounting records kept at Head Office
1.2 FOREIGN BRANCHES

Foreign branches generally maintain independent and complete record of businesses transacted by
them in currency of the country in which they operate. Thus problems of incorporating balances of foreign
branches relate mainly to translation of foreign currency into Indian rupees. This is because exchange rate
of Indian rupee is not stable in relation to foreign currencies due to international demand and supply effects
2 Foreign Currency Conversion (As per Accounting Standards Applicable)
on various currencies. The accounting principles which apply to inland branches also apply to a foreign
branch after converting the trial balance of the foreign branch in the Indian currency.
1.3 ACCOUNTING FOR FOREIGN BRANCHES

For the purpose of accounting, AS 11 (revised 2003) classifies the foreign branches may be classified
into two types:
Integral Foreign Operation;
Non- Integral Foreign Operation.
Let us discuss these two types of foreign branches in detail.
Integral Foreign Operation (IFO)
It is a foreign operation, the activities of which are an integral part of those of the reporting enterprise.
The business of IFO is carried on as if it was an extension of the reporting enterprise’s operations.
Generally, IFO carries on business in a single foreign currency, ie. of the country where it is located. For
example, sale of goods imported from the reporting enterprise and remittance of proceeds to the reporting
enterprise.
Non-Integral Foreign Operation (NFO)
It is a foreign operation that is not an Integral Foreign Operation. The business of a NFO is carried on
in a substantially independent way by accumulating cash and other monetary items, incurring expenses,
generating income and arranging borrowings in its local currency. An NFO may also enter into transactions
in foreign currencies, including transactions in the reporting currency. An example of NFO may be
production in a foreign currency out of the resources available in such country independent of the reporting
enterprise.
The following are the indicators of Non- Integral Foreign Operation-.
 Control by reporting enterprises - While the reporting enterprise may control the foreign
operation, the activities of foreign operation are carried independently without much dependence
on reporting enterprise.
 Transactions with the reporting enterprises are not a high proportion of the foreign operation’s
activities.
 Activities of foreign operation are mainly financed by its operations or from local borrowings. In
other words it raises finance independently and is in no way dependent on reporting enterprises.
Foreign operation sales are mainly in currencies other than reporting currency.
 All the expenses by foreign operations are primarily paid in local currency, not in the reporting
currency.
 Day-to-day cash flow of the reporting enterprises is independent of the foreign enterprises cash
flows.
 Sales prices of the foreign enterprises are not affected by the day-to-day changes in exchange
rate of the reporting currency of the foreign operation.
There is an active sales market for the foreign operation product.
The above are only indicators and not decisive/conclusive factors to classify the foreign operations as
non-integral, much will depend on factual information, situations of the particular case and, therefore,
judgment is necessary to determine the appropriate classification.
Foreign Currency Conversion (As per Accounting Standards Applicable) 3
Controversies may arise in deciding the foreign branches of the enterprises into integral or non-
integral. However, there may not be any controversy that subsidiary associates and joint ventures are non-
integral foreign operation.
In case of branches classified as independent for the purpose of accounting are generally classified as
non-integral foreign operations.
3.4 CHANGE IN CLASSIFICATION

When there is a change in classification, accounting treatment is as under-
Integral to Non-Integral
(i) Translation procedure applicable to non-integral shall be followed from the date of change.
(ii) Exchange difference arising from the translation of non-monetary assets at the date of re-
classification is accumulated in foreign currency translation reserve.
Non-Integral to Integral
(i) Translation procedure as applicable to integral should be applied from the date of change.
(ii) Translated amount of non-monetary items at the date of change is treated as historical cost.
(iii) Exchange difference lying in foreign currency translation reserve is not to be recognized as
income or expense till the disposal of the operation even if the foreign operation becomes
integral.
3.5 TECHNIQUES FOR FOREIGN CURRENCY TRANSLATION
Integral Foreign Operation (IFO)

Following are the standard recommendations for foreign currency translation:
(1) All transactions of IFO be translated at the rate prevailing on the date of transaction. This will
require datewise details of the transaction entered by that operation together with the rates.
Weekly or monthly average rate is permitted if there are no significant variations in the rate.
(2) Translation at the balance sheet date-
(i) Monetary items1 at closing rate;
(ii) Non-monetary items2: The cost and depreciation of the tangible fixed assets is translated
using the exchange rate at the date of purchase of the asset if asset is carried at cost. If
tangible fixed asset is carried at fair value, translation should be done using the rate existed
on the date of the valuation.
(iii) The cost of inventories is translated at the exchange rates that existed when the cost of
inventory was incurred and realizable value is translated applying exchange rate when
realizable value is determined which is generally closing rate.
(iv) Exchange difference arising on the translation of the financial statement of integral foreign
operation should be charged to profit and loss account.
1 Monetary items are money held and assets and liabilities to be received or paid in fixed or determinable amounts of
money. Cash, receivables and payables are examples of monetary items.
2 Non-monetary items are assets and liabilities other than monetary items. Fixed assets, investments in equity shares,
inventories are examples of non-monetary assets.
Non-Integral Foreign Operation

Accounts of non-integral foreign operation are translated using the following principles:
 Balance sheet items i.e. Assets and Liabilities both monetary and non-monetary – apply closing
exchange rate.
 Items of income and expenses – At actual exchange rates on the date of transactions. However,
accounting standard allows average rate subject to materiality.
 Resulting exchange rate difference should be accumulated in a “foreign currency translation
reserve” until the disposal of “net investment in non-integral foreign operation”.
Sr. No. Particular Concession Rate to be Used
1. Opening Stock Beginning Rate
2. Closing Stock Closing Rate
3. Fixed Asset Date of Purchase Rate
4. Depreciation Date of Purchase Rate
5. Current Asset & Liab. Closing Rate
6. Revenue Expenditure Average Rate
Illustration 1: On 31st December, 2012 the following balances appeared in the books of Chennai
Branch of an English firm having its HO office in New York:
Amount in ` Amount in `
Stock on 1st Jan., 2012 2,34,000
Purchases and Sales 15,62,500 23,43,750
Debtors and Creditors 7,65,000 5,10,000
Bills Receivable and Payable 2,04,000 1,78,500
Salaries and Wages 1,00,000 -
Rent, Rates and Taxes 1,06,250 -
Furniture 91,000 -
Bank A/c 5,68,650
New York Account - 5,99,150
36,31,400 36,31,400
Stock on 31st December, 2012 was ` 6,37,500.
Branch account in New York books showed a debit balance of $ 13,400 on 31st December, 2012 and
Furniture appeared in the Head Office books at $ 1,750.
The rate of exchange for 1 $ on 31st December, 2011 was ` 52 and on 31st December, 2012 was
` 51. The average rate for the year was ` 50.
Prepare in the Head Office books the Profit and Loss a/c and the Balance Sheet of the Branch.
Solution:
In the books of English Firm (Head Office in New York)
Chennai Branch Profit and Loss Account
for the year ended 31st December, 2012
$ $
To Opening stock 4,500 By Sales 46,875
To Purchases 31,250 By Closing stock 12,500
To Gross profit c/d 23,625 (6,37,500 / 51)

59,375 59,375
To Salaries 2,000 By Gross profit b/d 23,625
To Rent, rates and taxes 2,125
To Exchange translation loss 2,000
To Net Profit c/d 17,500
23,625 23,625
Balance Sheet of Chennai Branch

as on 31st December, 2012
Liabilities $ $ Assets $
Head Office A/c 13,400 Furniture 1,750
Add : Net profit 17,500 30,900 Closing Stock 12,500
Trade creditors 10,000 Trade Debtors 15,000
Bills Payable 3,500 Bills Receivable 4,000
Cash at bank 11,150

44,400 44,400
Working Note:
Calculation of Exchange Translation Loss
Chennai Branch Trial Balance (converted in $)
as on 31st December, 2012
Dr. Cr. Conversion Dr. Cr.
` ` Rate ($) ($)
Stock on 1st Jan., 2012 2,34,000 52 4,500
Purchases & Sales 15,62,500 23,43,750 50 31,250 46,875
Debtors & creditors 7,65,000 5,10,000 51 15,000 10,000
Bills Receivable and Bills Payable 2,04,000 1,78,500 51 4,000 3,500
Salaries and wages 1,00,000 50 2,000
Rent, Rates and Taxes 1,06,250 50 2,125
Furniture 91,000 1,750
Bank A/c 5,68,650 51 11,150
New York Account 5,99,150 13,400
Exchange translation loss (bal. fig.) 2,000
36,31,400 36,31,400 73,775 73,775
Illustration 2: S & M Ltd., Bombay, have a branch in Sydney, Australia. Sydney branch is an integral
foreign operation of S & M Ltd.
At the end of 31st March, 2013, the following ledger balances have been extracted from the books of
the Bombay Office and the Sydney Office:
Bombay (` thousands) Sydney (Austr dollars thousands)
Debit Credit Debit Credit
Share Capital – 2,000 – –
Reserves & Surplus – 1,000 – –
Land 500 – – –
Buildings (Cost) 1,000 – – –
Buildings Dep. Reserve – 200 – –
Plant & Machinery (Cost) 2,500 – 200 –
Plant & Machinery Dep. Reserve – 600 – 130
Debtors / Creditors 280 200 60 30
Stock (1.4.2012) 100 – 20 –
Branch Stock Reserve – 4 – –
Cash & Bank Balances 10 – 10 –
Purchases / Sales 240 520 20 123
Goods sent to Branch – 100 5 –
Managing Director’s salary 30 – – –
Wages & Salaries 75 – 45 –
Rent – – 12 –
Office Expenses 25 – 18 –
Commission Receipts – 256 – 100
Branch / H.O. Current A/c 120 – – 7
4,880 4,880 390 390
The following information is also available:
(1) Stock as at 31.3.2013:
Bombay ` 1,50,000
Sydney A $ 3,125
You are required to convert the Sydney Branch Trial Balance into rupees;
(use the following rates of exchange :
Opening rate A $ = ` 20
Closing rate A $ = ` 24
Average rate A $ = ` 22
For Fixed Assets A $ = ` 18).
Solution:
Sydney Branch Trial Balance (in Rupees)
As on 31st March, 2013
(` ‘000)
Conversion rate per A$ Dr. Cr.
Plant & Machinery (cost) ` 18 36,00
Plant & Machinery Dep. Reserve ` 18 23,40
Debtors / Creditors ` 24 14,40 7,20
Stock (1.4.2012) ` 20 4,00
Cash & Bank Balances ` 24 2,40
Purchase / Sales ` 22 4,40 27,06
Goods received from H.O. – 1,00
Wages & Salaries ` 22 9,90
Rent ` 22 2,64
Office expenses ` 22 3,96
Commission Receipts ` 22 22,00
H.O. Current A/c 1,20
78,70 80,86
Exchange loss (balancing figure) 2,16
80,86 80,86
Illustration 3: M/s Carlin has head office at New York (U.S.A.) and branch at Mumbai (India).
Mumbai branch is an integral foreign operation of Carlin & Co.
Mumbai branch furnishes you with its trial balance as on 31st March, 2013 and the additional
information given thereafter:
Dr. Cr.
Rupees in thousands
Stock on 1st April, 2012 300 –
Purchases and sales 800 1,200
Sundry Debtors and creditors 400 300
Bills of exchange 120 240
Wages and salaries 560 –
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 suppliers. Depreciate computers at 60% for the year.
(b) Unsold stock of Mumbai branch was worth ` 4,20,000 on 31st March, 2013.
(c) The rates of exchange may be taken as follows: on 1.4.2012 @ ` 40 per US $
on 31.3.2013 @ ` 42 per US $
average exchange rate for the year @ ` 41 per US $
conversion in $ shall be made upto two decimal accuracy.
You are asked to prepare in US dollars the revenue statement for the year ended 31st March, 2013 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 that Mumbai branch account showed a debit balance of US $ 39609.18
on 31.3.2013 in New York books and there were no items pending reconciliation.
Solution:
M/s Carlin
Mumbai Branch Trial Balance in (US $) as on 31st March, 2013
Conversion Dr. Cr.
rate per US $ US $ US $
(`)
Stock on 1.4.12 40 7,500.00 –
Purchases and sales 41 19,512.20 29,268.29
Sundry debtors and creditors 42 9,523.81 7,142.86
Bills of exchange 42 2,857.14 5,714.29
Wages and salaries 41 13,658.54 –
Rent, rates and taxes 41 8,780.49 –
Sundry charges 41 3,902.44 –
Computers – 6,000.00 –
Bank balance 42 10,000.00 –
New York office A/c – – 39,609.18
81,734.62 81,734.62
Trading and Profit & Loss Account

for the year ended 31st March, 2013
US $ US $
To Opening Stock 7,500.00 By Sales 29,268.29
To Purchases 19,512.20 By Closing stock 10,000.00
To Wages and salaries 13,658.54 By Gross Loss c/d 1,402.45
40,670.74 40,670.74
To Gross Loss b/d 1,402.45 By Net Loss 17,685.38
To Rent, rates and taxes 8,780.49
To Sundry charges 3,902.44
To Depreciation on computers 3,600.00
(US $ 6,000 × 0.6)
17,685.38 17,685.38
Balance Sheet of Mumbai Branch

as on 31st March, 2013
Liabilities US $ Assets US $ US $
New York Office A/c 39,609.18 Computers 6,000.00
Less : Net Loss (17,685.38) 21,923.80 Less: (3,600.00) 2,400.00
Depreciation
Sundry creditors 7,142.86 Closing stock 10,000.00
Bills payable 5,714.29 Sundry debtors 9,523.81
Bank balance 10,000.00
Bills receivable 2,857.14
34,780.95 34,780.95
Illustration 4: “OURS” is a Head Office in Mumbai, having Branch “Theirs” in New York, America.
The Trial Balance of the Branch as on 31st March 2009 was as below:
Particulars Dr ($) Cr ($)
Head Office Account 17,000
Sales 1,22,000
Goods from Head Office 88,000
Stock on 1st April, 2008 17,000
Furniture 18,000
Cash on hand 500
Bank Balance 2,500
Salaries 5,600
Rent 2,400
Insurance 300
Outstanding Expenses 1,600
Sundry Debtors 6,300
1,40,600 1,40,600
Additional Information
(a) The branch account in the books of head office shows debit balance ` 6,43,500 and goods sent to
branch account shows credit balance ` 39,37,500.
(b) Provide depreciation on furniture @ 10%.
(c) Closing Stock was $ 7,500.
(d) The exchange rates were on 31st March, 2009 $ 1 = ` 45.
On 1st April, 2008 $ 1 = ` 42.
Average rate was $ 1 = ` 43.5 and for furniture it was $ 1 = 30.
You are required to prepare:
(i) Branch Trial Balance in Indian Rupees.
(ii) Profit and Loss Account for the year ending 31st March, 2009.
(iii) Balance Sheet as on that date.
Solution:
Trial Balance of “OURS” as on 31st March 2009
Particulars Dr. $ Cr. $ Rate Dr. (`) Cr. (`)
Head Office A/c 1,7000 Given 6,43,500
Sales 1,22,000 43.5 53,07,000
Goods sent to Branch 88,000 - Given 39,37,500 -
Opening stock 17,000 - 42 7,14,000
Furniture 18,000 - 30 5,40,000
Cash 500 - 45 22,500
Bank 2,500 - 45 1,12,500
Salaries 5,600 - 43.5 2,43,600
Rent 2,400 - 43.5 1,04,400
Insurance 300 - 43.5 13,050
O/s Expenses - 1,600 45 72,000

Debtors 6,300 45 2,83,500
Exchange Difference 54,450 -
1,40,600 1,40,600 60,22,500 60,22,500
Trading & Profit and Loss A/c for the year ending 31st March, 2009
Particulars ` Particulars `
To Opening Stock 7,14,000 By Sales 53,07,000
” Purchases 39,37,500 ” Closing stock 3,37,500
” Salaries 2,43,600
” Rent 1,04,400
” Insurance 13,050
” Depreciation 54,000
” Ex-difference 51,400
” Net Profit 5,26,500
56,44,500 56,44,500
Balance Sheet as at 31st March, 2009

Liabilities ` Assets `
Head Office Furniture 5,40,000
A/c 6,43,500 (–) Dep. 54,000 4,86,000
Net Profit 5,26,500 11,70,000 Closing stock 3,37,500
O/S Expenses 72,000 Debtors 2,83,500
Bank Balance 1,12,500
12,42,000 12,42,000
Illustration 5: Black and White Limited have a branch in London and Head Office in Mumbai. The
Trial balance prepared as on 31st March 2009 was as below:
Particulars Dr (£) Cr (£)
Head Office Account 1,800
Sales 16,200
Goods from Head Office 9,000
Stock on (1st April, 2008) 1,500
Furniture and Fixtures 2,000
Cash on hand 210
Cash at Bank 190
Outstanding Expenses 200
Salaries 2,600
Taxes Insurance 50
Rent 200
18,200 18,200
The Branch account in the books of Head Office showed a debit balance of ` 90,000 and Goods sent
to branch showed a credit balance of ` 6,46,000. The closing stock at branch was valued at £ 9,000.
The exchange rates on different dates were as below:

On 1st April, 2008 £ 1 = ` 70, on 31st March, 2009 £ 1 = ` 74 and Average rate £ 1 = ` 72.
For Furniture it was £ 1 = ` 60.
You are required to prepare (i) Trial Balance of Branch in Indian Rupees (ii) Trading and Profit &
Loss account for the year ending 31st March, 2009 (iii) Balance Sheet as on that date.
Solution:
In the Books at Black & White Ltd. Converted Trial Balance as on 31-3-2009
Particulars Dr. $ Cr. $ Rate Dr. (`) Cr. (`)
H.O. A/c 1,800 Given 90,000
Sales 16,200 72 11,66,400
Goods from H.O. 9,000 Given 6,46,000
Opening stock 1,500 70 1,05,000
Furniture 2,000 60 1,20,000
Cash balance 210 74 15,540
Bank balance 190 74 14,060
Outstanding Expenses 200 74 14,800
Salaries 2,600 72 1,87,200
Taxes Insurance 50 72 3,600
Rent 200 72 14,400
Debtors 2,450 74 1,81,300
Exchange Difference 15,900
18,200 18,200 12,87,100 12,87,100
Trading and Profit & Loss A/c for the year ended 31-3- 2009
To Goods from H.O. 6,46,000 By Closing stock 66,600
To Gross Profit 4,82,000
12,33,000 12,33,000
To Salaries 1,87,200 By Gross profit 4,82,000
To Taxes 3,600 By Exchange difference 15,900
To Rent 14,400
To Depreciation 12,000
To Net Profit 2,80,700
4,97,900 4,97,900
Balance Sheet as at 31st March, 2009

Outstanding Expenses 14,800 Furniture 1,20,000
H.O. A/c 90,000 (–) Dep. 12,000 1,08,000
Net Profit 2,80,700 3,70,700 Stock 66,600
Debtor 1,81,300
Cash 14,060
Bank 15,540
3,85,500 3,85,500
Illustration 6: Hindustani (India) Limited has a Branch in New Jercy, America. Its Trial Balance as
on 31st March, 2010 is as below:
Particulars Debit US $ Credit US $
Machinery 2,40,000
Furniture 16,000
Stock (Opening) 1,12,000
Purchases 4,80,000
Sales 8,32,000
Goods received from India 1,60,000
Wages 4,000
Carriage Inwards 2,000
Salaries 12,000
Rent and Taxes 4,000
Insurance 2,000
General Expenses 2,000
Head Office Account 2,28,000
Sundry Creditors 40,000
Bank Balance 10,000
Cash Balance 2,000
Printing and Stationery 1,500
Telephone Expenses 4,500
11,00,000 11,00,000
The additional information available is as below:
(a) Wages outstanding are $ 2000.
(b) Provide depreciation @ 10% on Machinery and Furniture.
(c) The goods sent to branch were ` 7840000.
(d) Branch account in the books of Head office shows debit balance of ` 86 lac.
(e) Closing stock in the branch was $ 104000.
(f) The rates of exchange were:
On 1st April 2009 $ 1 = ` 39.
On 31st March 2010 $ 1 = ` 41.
Average rate was $ 1 = ` 40.
The Fixed assets were purchased when the rate was $ 1 = ` 38.
(g) There were no items in transit at the end of the year.
You are required to prepare the Trial Balance as on 31st March, 2010 in Indian Rupees. Prepare
Trading and Profit and Loss Account for the year ending 31st March, 2010 and the Balance Sheet as on the
same date, taking into account requirement of AS 11.
Solution:
In the Books of Hindustani (India) Ltd.
Trial Balance as on 31st March, 2010
Particulars Dr. US $ Cr. US $ Rate Dr. (`) Cr. (`)
Machinery 2,40,000 38 91,20,000
Furniture 16,000 38 6,08,000
Stock 1,12,000 39 43,68,000
Purchases 4,80,000 40 1,92,00,000
Sales 8,32,000 40 3,32,80,000
Goods received from India 1,60,000 Given 78,40,000
Wages 4,000 40 1,60,000
Carriage Inwards 2,000 40 80,000
Salaries 12,000 40 4,80,000
Rent and Taxes 4,000 40 1,60,000
Insurance 2,000 40 80,000
General Expenses 2,000 40 80,000
Head Office Account 2,28,000 Given 86,00,000
Sundry Debtors 48,000 41 19,68,000
Sundry Creditors 40,000 41 16,40,000
Bank Balance 10,000 41 4,10,000
Cash Balance 2,000 41 82,000
Printing and Stationery 1,500 40 60,000
Telephone Expenses 4,500 40 1,80,000
Difference in Exchange
11,00,000 11,00,000 4,48,76,000 4,48,76,000
Trading & Profit & Loss A/c. for the year ended 31-3-2010
Dr. Cr.
To Opening Stock 43,68,000 By Sales 3,32,80,000
To Purchases 1,92,00,000 By Closing Stock 42,64,000
To Carriage Inwards 80,000 ($ 1,04,000 × ` 11)
To Goods received from India 78,40,000
To Wages 1,60,000
Add: O/s 82,000 2,42,000
3,75,44,000 3,75,44,000
[O/s Wages $ 2,000 × 41 = 82,000]

To Salaries 4,80,000 By G.P.B/f 58,14,000
To Rent and Taxes 1,60,000 By Differences in Exchange 3,56,000
To Insurance 80,000
To General Expenses 80,000
To Printing and Stationery 60,000

To Telephone Expenses 1,80,000
To Depreciation:
Machinery 9,12,000
Furniture 60,800 9,72,800
71,70,000 71,70,000
Balance Sheet as on 31st March, 2010

Particulars ` Assets `
Head Office 86,00,000 Machinery 91,20,000
Add: NP 51,57,200 1,37,57,200 Less: Dep. 9,12,000 82,08,000
S. Creditors 16,40,000 funiture 6,08,000
O/s Wages 82,000 (–) Dep. 60,800 5,47,200
Closing Stock 42,64,000
Sundry Debtors 19,68,000
Bank 4,10,000
Cash 82,000
1,54,79,200 1,54,79,200
st
Illustration 7: TY Ltd. has a branch in US. Trial Balance of the Branch as on 31 March, 2010 was as
below:
Particulars Debit $ Credit $
Head Office Account - 17,000
Sales - 1,22,000
Goods from Head Office 88,000 -
Stock on 1st April, 2009 17,000 -
Furniture 18,000 -
Cash in Hand 500 -
Bank Balance 2,500 -
Salaries 5,600 -
Rent 2,400 -
Insurance 300 -
Outstanding Expenses - 1,600
Sundry Debtors 6,300 -
1,40,600 1,40,600
The branch account in head office shows debit balance ` 4,29,000 and goods sent to branch credit
balance of ` 26,24,000.
Depreciate furniture @ 10% p.a.
Stock at Branch 31st March, 2010 was $ 15,000.
Furniture was purchased in 2002 when on e$ = ` 40.
Exchange rates were:
On 1-4-2009 1 $ = ` 44
On 31-3-2010 1 $ = ` 46
Average Rate 1 $ = ` 45
You are required to prepare Branch Trials Balance by converting in Rupees and Prepare Branch
Trading and Profit and Loss A/c for the year ended 31-3-2010 and Balance Sheet as on that date.
Solution:
Particulars Dr. US $ Cr. US $ Rate Dr. (`) Cr. (`)
H.O. A/c 17,000 - 4,29,000
Sales 1,22,000 45 54,90,000
Goods from HO (given) 88,000 26,24,000
Stock (1-4-09) 17,000 44 7,48,000
Furniture 18,000 40 7,20,000
Cash 500 46 23,000
Bank 2,500 46 1,15,000
Salaries 5,600 45 2,52,000
Rent 2,400 45 1,08,000
Insurance 300 45 13,500
O/s Expenses 1,600 46 73,600
Debtors 6,300 46 2,89,800
Difference in Exchange 10,99,300
Total 1,40,600 1,40,600 59,92,600 59,92,600
New York Branch

Trading & Profit & Loss A/c. for the year ended 31-3-2010
Dr. Cr.
To Goods from H.O. 26,24,000 By Closing Stock 6,90,000
To Gross Profit C/D 28,08,000
61,80,000 61,80,000
To Salaries 2,52,000 By Gross Profit B/D 28,08,000
To Rent 1,08,000
To Insurance 13,500
To Diff. In Exchange 10,99,300
28,08,000 28,08,000
Balance Sheet as on 31-3-2010

Particulars ` Assets `
Head Office A/c 4,29,000 Furniture 7,20,000
(+) Net Profit 12,63,200 16,92,200 (–) Dep. P.A. (10%) 7,200 6,48,000
O/s Expenses 73,600 Debtors 2,89,800
Closing Stock 6,90,000
Cash at Bank 1,15,000
Cash in Hand 23,000
17,65,800 17,65,800
Illustration 8: The firm Rajini & Co. with its H.O. At Vijayawada as a branch in Sydney. At the end
of each year (December 31) a Trial Balance sent by the branch in Australian Dollar currency is converted
into Rupee Currency at the Head Office.
The following Trial Balance for the year has been compiled at the branch as on 31-12-2011
Particulars Dr. $ Cr. $
Bills Receivable 5,000 -
Sundry Debtors 7,600 -
Sundry Creditors - 2,200
Purchases 27,000 -
Sales - 45,600
Furnitures and Fixtures 2,680 -
Stock (1-1-2011) 4,000 -
Establishment expenses 4,000 -
Salaries 2,800 -
Rent, rates and taxes 800 -
Sundry expenses 2,900 -
Depreciation on furniture & fixtures 256 -
Remittance to H.O. 3,004 -
Cash on hand and at bank 1,600 -
Total 61,640 61,640
The stock in hand on December 31, 2011 was $ 5,000. The rates of exchange were:
From December 31, 2010 to June 30, 2011 1 $ = ` 44.
From 1st July, 2011 to December 31, 2011 1 $ = ` 46
In Vijayawada books the balance of the Sydney Branch Account and of the remittances from Sydney
Branch Account appear as ` 3,57,694 and ` 74,136 respectively. The original furnitures were bought when
the rate of exchange was 1 $ = ` 40.
Convert the above trial balance into Rupees currency and prepares final accounts of the branch for the
year ended 31st December, 2011.
Solution:
In the books of Rajni & Co.
Trial Balance of Sydney Branch Converted into Indian `
Particulars Dr. $ Cr.$ Rate Dr. ` Cr. `
Bills Receivable 5,000 46 2,30,000
Sundry Debtors 7,600 46 3,49,600
Sundry Creditors 2,200 46 1,01.200
Purchases 27,000 45 12,15,000
Sales 45,600 45 20,52.000
Furnitures & Fixtures 2,680 40 1,07,200
Opening Stock 4,000 44 1,76,000
Establishment Expenses 4,000 45 1,80,000
Salaries 2,800 45 1,26,000
Rent, Rates & Taxes 800 45 36,000

Sundry Expenses 2,900 45 1,30,500
Depreciation on Furniture 256 40 10,240
Remittance to H.O. 3,004 74,136
Head Office Account 13,840 3,57,694
Cash on Hand and at Bank 1,600 46 73,600
Deference due to exchange rates 1,97,382
61,640 61,640 27,08,276 27,08,276
Closing Stock 5,000 46 2,30,000
Trading Profit and Loss Account for the year ended 31st March 2011
To Opening Stock 1,76,000 By sales 20,52,000
To Purchases 12,15,000 By Closing stock 2,30,000
22,82,000 22,82,000
To Establishment Expenses 1,80,000 By Gross Profits b/d 8,91,000
To Rent, Rates Taxes 36,000 By Deference due to exchange rates 1,97,382
To Salaries Expenses 1,30,500
To Depreciation on Furniture 10,240
10,88,382 10,88,382
Balance Sheet as on 31st March 2011

Head Office Account 3,57,694 Furniture and Fixtures 1,07,200
Add: Net Profit 6,05,642 Bills Receivable 2,30,000
9,63,336
Less: Remittances 74,136 8,89,200 Sundry Debtors 3,49,600
Sundry Creditors 1,01,200 Closing Stock 2,30,000
Cash 73,600
9,90,400 9,90,400
Illustration 9: Patamata Coast Ltd. has a branch in Canada. On 31st December, 2011 the Trial
Balance of the branch was as given below:
Particulars Dr. £ Cr. £
Sales - 1,62,000
Goods from Head Office A/c 90,000
st
Stock 1 January, 2011 15,000
Furniture & Fixtures 20,000
Cash in Hand 2,100
Cash in Bank 1,900
Owing for Expenses - 2,000
Salaries 26,000
Taxes, Insurance, etc. 500

Rent 2,000
Total 1,82,000 1,82,000
The Branch account in Head Office showed a debit balance of ` 2,25,000 and Goods sent to branch
account a Credit balance of ` 16,15,000.
Furniture and Fixtures are acquired in 1-1-2010@ 1 £ = ` 80 and depreciation @ 5% p.a. is to be
provided for the current year.
The exchange rates were:
January 1, 2011 £ 1 = ` 78.50
December 31, 2011 £ 1 = ` 81.00
Average £ 1 = ` 79.75
The stock at branch on 31-12-2011 was valued at £ 9,000.
Prepare Trading and Profit & Loss Account and Balance Sheet of Canada Branch for the year ended
31-12-2011.
Solution:
Converted Trial Balance as on 31st December, 2011 in the Books of Branch
Sr. No. Particulars Dr. ($) Cr. ($) Rate Dr. (`) Cr. (`)
1 Head Office Account - 18,000 Given 2,25,000
2 Sales - 1,62,000 79.75 1,29,19,500
3 Goods from Head Office A/c 90,000 Given 16,15,000
st
4 Stock 1 January, 2011 15,000 78.50 11,77,500
5 Furniture & Fixtures 20,000 80.00 16,00,000
6 Cash in Hand 2,100 81.00 1,70,100
7 Cash in Bank 1,900 81.00 1,53,900
8 Owing for Expenses - 2,000 81.00 1,62,000
9 Salaries 26,000 79.75 20,73,500
10 Taxes, Insurance, etc. 500 79.75 39,875
11 Rent 2,000 79.75 1,59,500
12 Sundry Debtors 24,500 81.00 19,84,500
89,73,875 1,33,06,500
Difference in Exchange 43,32,625
1,82,000 1,82,000 1,33,06,500 1,33,06,500
In the Books of Branch,

Trading, Profit & Loss A/c for the Year Ended 31st December, 2011
Particulars Dr. Amt Particulars Cr. Amt
To Opening stock a/c 11,77,500 By Sales 1,29,19,500
To Goods from H.O 16,15,000 By Closing stock 7,29,000
To Gross profit c/d 1,08,56,000
1,36,48,500 1,36,48,500
To Rent 1,59,500 By Gross profit b/c 1,08,56,000
To Salaries 20,73,500
To Taxes & Insurance 39,875
To Difference in exchange 43,32,625
To Net profit c/d 41,70,500
Total 1,08,56,000 Total 1,08,56,000
Balance Sheet as on 31st December, 2011

Liabilities Dr. Amt Assets Cr. Amt
Add: Net Profit 41,70,500 43,95,500 Less: Dep 80,000 15,20,000
Owing for expenses 1,62,000 Sundry Debtors 19,84,500
Closing stock 7,29,000
Cash in hand 1,70,100
Cash in bank 1,53,900
Total 45,57,500 Total 45,57,500
Illustration 10: Black Coast Ltd. have a branch in London. On 31st December, 2012 the Trial Balance
of the branch was as given below:
Particulars Dr. £ Cr. £
Sales - 81,000
Goods from Head Office A/c 45,000
st
Stock 1 January, 2012 7,500
Furniture & Fixtures 10,000
Cash in Hand 1,050
Cash in Bank 950
Owing for Expenses - 1,000
Salaries 13,000
Taxes, Insurance, etc. 250
Rent 1,000
Total 91,000 91,000
The Branch account in Head Office showed a debit balance of ` 7,00,000 and Goods sent to branch
account a Credit balance of ` 36,00,000.
Furniture and Fixtures are acquired in 1-1-2010@ 1 £ = ` 75.00 provide depreciation @ 10% p.a.
The exchange rates were:
January 1 £ 1 = ` 78.00
December £ 1 = ` 80.00
Average £ 1 = ` 79.00
The stock at branch on 31-12-2012 was valued at £ 4,500.
Convert the above trial balance in Indian ` And then.
Prepare Trading, Profit and Loss A/c and Balance Sheet of London Branch for the year ended 31-12-
2012.
Solution:
Black Coats Ltd. Converted Trial Balance as on 31st December, 2012
Particulars Dr. (£) Cr. (£) Rate Dr. (`) Cr. (`)
Head Office Account 9,000 Given 7,00,000
Sales 81,000 79 63,99,000
Goods from Head Office A/c 45,000 Given 36,00,000
Stock (Opening) 7,500 78 5,85,000
Furniture 10,000 75 7,50,000
Cash 1,050 80 84,000
Bank 950 80 76,000
O/S Expenses 1,000 80 80,000
Salaries 13,000 79 10,27,000
Taxes and Insurance 250 79 19,750
Rent 1,000 79 79,000
Debtors 12,250 80 9,80,000
Difference in Exchange 21,750
Total 91,000 91,000 72,00,750 72,00,750
Trading and Profit & Loss A/c for the Year Ending 31-12-2012
Particulars Dr. Amt Particulars Cr. Amt
Opening stock 2,85,000 Sales 63,99,000
Goods from H.O 36,00,000 Closing stock 3,60,000
Gross profit c/d 25,74,000
67,59,000 67,59,000
Salaries 10,27,000 Gross Profit b/d 25,74,000
Taxes & Insurance 19,750 Difference in Exchange 21,750
Rent 79,000 Depreciation 75,000
Net Profit Tfd. To H.O. 13,95,000
Total 25,83,500 Total 25,83,500
Balance Sheet as on 31-12-2012

Add: Net Profit 13,95,000 20,95,000 Less: Dep 75,000 6,75,000
Debtors 9,80,000
Owing for expenses 80,000 Closing stock 3,60,000
Bank 76,000
Cash 84,000
Total 21,75,000 Total 21,75,000
Illustration 11: The following balances appeared in the books of Nanded Branch of a firm in UK on
31-12-2012.
Particulars Dr. ` Cr. `
Stock as on 1-1-2012 37,800 -
Purchases 2,25,000 -
Sales - 3,37,500
Debtors 1,17,000
Creditors - 78,000
Bills Receivable 31,200
Bills Payable - 27,300
Wages and Salaries 14,400
Rent, Rates and Taxes 10,800
Miscellaneous Expenses 4,500
Furniture 14,730
Cash in Bank 90,870
Head Office Account - 1,03,500
5,46,300 5,46,300
Stock on 31-12-2012 was ` 65,000, Nanded Branch Account in the books of Head Office showed a
debit balance of £ 1,080 on 31-12-2012.
Furniture and Fitting were purchased from a remittance of £ 125 received from Head Office.
The rates of exchange were:
31-12-2011 ` 67.50 per £
31-12-2012 ` 68.50 per £
The average rate of 2012, may be taken at ` 68 per £.
Prepare Trading and Profit and Loss Account and Balance Sheet of Nanded Branch in the books of
Head Office.
Round of the amount to the nearest £.
Solution:
In the Books of Nanded Branch of a Firm in UK
Trial Balance as on 31-12-2012
Particulars Rate Dr. (`) Cr. (`) Dr. (£) Cr. (£)
Stock as on 1-1-2012 67.50 37,800 - 560
Purchases 68 2,25,000 - 3,309
Sales 68 - 3,37,500 - 4,963
Debtors 68 1,17,000 - 1,708
Creditors 68.5 - 78,000 - 1,139
Bills Receivable 68.5 31,200 - 456
Bills Payable 68.5 - 27,300 - 398
Wages and Salaries 68 14,400 - 212
Rent, Rates and Taxes 68 10,800 - 158
Miscellaneous Expenses 68 4,500 - 66

Furniture - 14,730 - 125
Cash in Bank 68.5 90,870 - 1,326
Head Office Account - - 1,03,500 - 1,080
Difference in Foreign Exchange A/c - - - 340
5,46,300 5,46,300 7,920 7,920
Trading and Profit & Loss A/c for the Year Ended 31-12-2012.
Dr. Cr.
To Opening Stock 560 By Sales 4,963
To Purchases 3,309 By Closing Stock (65,000/68.5) 949
To Wages and Salaries 212
To Gross Profit c/d 1,831
5,642 5,642
To Rent, Rates & Taxes 158 By Gross Profit b/d 1,831
To Misc. Expenses 66 By F.E. Difference 340
To Net Profit 1,947
2,171 2,171
Balance Sheet of Nanded Branch on 31-12-2012

Creditors 1,139 Furniture 125
Bills Payable 398 Closing Stock 949
H.O. A/c 1,080 Debtors 1,708
Add: Net Profit c/d 1,947 3,027 Bills Receivable 456
Cash at Bank 1,326
4,564 4,564
Illustration 12: Arihant & company has head office at Washington D.C. (USA) and Branch at Pune
(India). Pune branch furnishes you with its trial balance on 31st March, 2013 and the additional information
given thereafter.
Particulars Debit ` Credit `
Stock on 1-4-2012 6,00,000 -
Purchases 16,00,000 -
Sales - 24,00,000
Sundry Creditors - 6,00,000
Sundry Debtors 8,00,000 -
Bills of Exchange 2,40,000 4,80,000
Wages and Salaries 11,20,000 -
Rent, Rates and Taxes 7,20,000 -

Sundry Changes 3,20,000 -
Computers 4,80,000 -
Bank Balance 8,40,000 -
Washington D.C. Office A/c - 32,40,000
Total 67,20,000 67,20,000
Additional information:
(1) Computers were acquired from a remittance of US $ 12,000 received from Washington D.C.
Head office and paid to the suppliers. Depreciate at 60% for the year.
(2) Unsold stock of Pune branch was worth ` 8,40,000 on 31st March, 2013.
(3) The rates of exchange may be taken as follows:
(i) on 1-4-2012 @ ` 40 per US $
(ii) on 31-3-2013 @ ` 42 per US $
(iii) Average exchange rate for the year @ ` 41 per US $
(iv) Conversion in $ shall be made upto two decimal accuracy
You are asked to prepare in US dollars the revenue statement for the year ended 31st March, 2013 and
the Balance Sheet as on that date of Pune branch as would appear in the books of Washington D.C. Head
office Arihant & Company. You are informed that Pune branch account showed a debit balance of US $
79218.36 on 31-3-2013 in Washington D.C. books and there were no items pending reconciliation. The
operations is in the nature of an integral operation.
Solution:
Arihant & Company Conversion of Pune Branch
Trial Balance as at 31-03-2013 into US Dollars
Particulars Debit ` 000’s Credit ` Conversion Dr. US $ Cr. US $
000’s Rate per US
$ (`)
Stock on 1-4-2012 600 - 40 15,000.00 -
Purchases & Sales 1,600 2,400 41 39,024.00 58536.58
Debtors & Creditors 800 600 42 19,047.62 14285.72
Bills of Exchange 240 480 42 5,714.28 11428.58
Wages and Salaries 1,120 - 41 27,317.08 -
Rent, Rates and Taxes 720 - 41 17,560.98 -
Sundry Changes 320 - 41 7,804.88 -
Computers 480 - Original 24,000.00 -
Bank Balance 840 - 42 20,000.00 -
Washington D.C. Office A/c - - Actual - 79,218.36
Total 6,720 6,720 1,63,469.24 1,63,469.24
Trading and Profit & loss Account for the year ended 31.3.2013
Particular Amount in ` Particular Amount in `
To Opening Stock 15,000.00 By Sales 58,536.58
To Purchases 39,024.40 By Closing Stock 20,000.00
To Wages & Salaries 27,317.08 By Gross Loss c/d 2,804.90
Total 81,341.48 Total 81,341.48
To Gross Loss b/d 2,804.90 By Net Loss c/d to Balance Sheet 35,370.76
To Rent, Rates & b/d 17,560.98
To Sundry Charges 7,804.88
To Depn. on Computers
(12,000 × 60%) 7,200.00
Total 35,370.76 Total 35,370.76
Balance Sheet of Pune Branch as on 31.3.2013 (Amount in US $)

Liabilities Amount in ` Assets Amount in `
Washington DC USA 79,218.36 Computers 12,000.00
Less: Net loss for the year (35,370.76) Less: Depreciation (7,200.00)
Net Balance in HO A/c 43,847.60 4,800.00
Sundry Creditors 14,285.72 20,000.00
Bills Payable 11,428.58 19,047.62
20,000.00
5,714.28
Total 69,561.90 Total 69,561.90
1.6 SUMMARY
 Types of branches
(a) Dependent branches
(b) Independent branches
 Classification of Branches from accounting point of view
(a) Branches in respect of which the whole of the accounting records are kept at the head office
(Dependent Branches)
(b) Branches which maintain independent accounting records (Independent Branches), and
Foreign Branches.
 Systems of accounting followed by Dependent Branches
(a) Debtors System: Under this system head office makes a branch account. Anything given to
branch is debited and anything received from branch would be credited.
(b) Branch trading and profit and loss account (Final accounts) method /branch account method:
Under this system head office prepares (a) profit and loss account (b) branch account taking
each branch as a separate entity.
Stock and debtors system: Under this system head office opens:
(a) Branch Stock Account
(b) Branch Profit and Loss Account
(c) Branch Debtors Account
(d) Branch Expenses Account

(e) Goods sent to Branch Account
(f) Branch Asset Account
 Maintenance of comprehensive account books by Independent Branches
Preparation of separate trial balance of each branch in H.O.books.
 Types of Foreign branches
(a) Integral Foreign Operation (IFO): It is a foreign operation the activities of which are an
integral part of those of the reporting enterprise.
(b) Non-Integral Foreign Operation (NFO): It is a foreign operation that is not an Integral
Foreign Operation. The business of a NFO is carried on in a substantially independent way
by accumulating cash and other monetary items, incurring expenses, generating income and
arranging borrowing in its local currency.
 Non-Integral Foreign Operation -translation
(a) Balance sheet items i.e. Assets and Liabilities both monetary and non-monetary – apply
closing exchange rate.
(b) Items of income and expenses – At actual exchange rates on the date of transactions
(c) Resulting exchange rate difference should be accumulated in a “foreign currency translation
reserve” until the disposal of “net investment in non-integral foreign operation”.
 Integral Foreign Operation (IFO) - translation
At the rate prevailing on the date of transaction
 Translation at the balance sheet date-
Monetary items at closing rate;
(a) Non-monetary items: The cost and depreciation of the tangible fixed assets is translated
using the exchange rate at the date of purchase of the asset if asset is carried at cost. If
tangible fixed asset is carried at fair value, translation should be done using the rate existed
on the date of the valuation.
(b) The cost of inventories is translated at the exchange rates that existed when the cost of
inventory was incurred and realizable value is translated applying exchange rate when
realizable value is determined which is generally closing rate.
(c) Exchange difference arising from the translation of the financial statement of integral
foreign operation should be charged to profit and loss account.
Multiple Choice Questions
1. AS 11 classifies foreign operation into _____________ types
(a) Two (b) Three
2. AS _____________ provides conversion of currency
(a) 11 (b) 21
3. Depreciation is converted as per _____________ rate
(a) Opening (b) Average
4. Outstanding interest is converted as per _____________ rate
(a) Closing (b) Opening
5. _____________ is non monetary item
(a) Cash (b) Inventory
6. Closing rate is _____________ rate

(a) Balance Sheet Date (b) P/L Date
7. Foreign currency is other than _____________ currency
(a) Reporting (b) Non-reporting
Ans.: 1. (a), 2. (a), 3. (b), 4. (a), 5. (b), 6. (a), 7. (a)
Match the Columns
Group ‘A’ Group ‘B’

1. Opening Stock (a) Closing Rate
2. Closing Stock (b) Opening Rate
3. Advertising (c) Date of Purchase Rate
4. Depreciation (d) Average Rate
5. Exchange Difference (e) Balance Sheet Rate
6. Debtors (f) P/L A/c
(g) No Rate
Ans.: 1. – (b), 2. – (a), 3. – (d), 4. – (c), 5. – (f), 6. – (e)
  

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Winner of “Best Commerce Author – 2013-14” by Maharashtra Commerce Association

Lion Dr. Nishikant Jha

ISO 9001:2008 CERTIFIED

First Edition : 2017

S. No. Modules/ Units

Question Particular Marks

Q. 1 Practical Question 15 Marks

Q. 2 Practical Question 15 Marks

Q. 3 Practical Question 15 Marks

Q. 4 Objective Question 15 Marks

1 Foreign Currency Conversion (As per Accounting Standards Applicable) 1 - 26

2 Final Accounts and Statutory Requirements for Banking Companies 27 - 85

3 Accounting and Statutory Requirements of Insurance Companies 86 - 134

4 Accounting and Statutory Requirements of Co-operative Societies 135 - 188

Inland Branches Foreign Branches

Independent Branches which Dependent Branches for which

1.2 FOREIGN BRANCHES

1.3 ACCOUNTING FOR FOREIGN BRANCHES

3.4 CHANGE IN CLASSIFICATION

3.5 TECHNIQUES FOR FOREIGN CURRENCY TRANSLATION

Integral Foreign Operation (IFO)

Non-Integral Foreign Operation

To Gross profit c/d 23,625 (6,37,500 / 51)

Balance Sheet of Chennai Branch

Cash at bank 11,150

Trading and Profit & Loss Account

Balance Sheet of Mumbai Branch

O/s Expenses - 1,600 45 72,000

Balance Sheet as at 31st March, 2009

The exchange rates on different dates were as below:

Balance Sheet as at 31st March, 2009

[O/s Wages $ 2,000 × 41 = 82,000]

To Printing and Stationery 60,000

Balance Sheet as on 31st March, 2010

New York Branch

Balance Sheet as on 31-3-2010

Rent, Rates & Taxes 800 45 36,000

Balance Sheet as on 31st March 2011

Taxes, Insurance, etc. 500

In the Books of Branch,

Balance Sheet as on 31st December, 2011

Balance Sheet as on 31-12-2012

Miscellaneous Expenses 68 4,500 - 66

Balance Sheet of Nanded Branch on 31-12-2012

Rent, Rates and Taxes 7,20,000 -

Balance Sheet of Pune Branch as on 31.3.2013 (Amount in US $)

(d) Branch Expenses Account

6. Closing rate is _____________ rate

Group ‘A’ Group ‘B’

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