Goods in Transit (GIT)

• Goods were sent by the Head Office before the end of the financial
period, but received by the branch after the end of the financial period.
• GIT = Goods Sent to Branch – Goods received from HO
Remittances/Cash in Transit (CIT)
• The remittance or cash was remitted by the branch before the end of the
financial period, but was received by the Head office after the end of the
financial period
• CIT= Remittance to Head Office – Remittance from Branch
Example 2
Information based on Example 1.
Required: Show the current account (record by HO) based on the following
information
1. At the end of the accounting period, RM10,000 of the RM40,000
goods sent from HO had not been received by the branch.
2. RM10,000 of the cash sent by the branch was not received by the HO
until the first week of the new accounting period.
Solution – Head office account
BRANCH CURRENT ACCOUNT
RM RM
Good sent to branch 40,000 Good returned from branch 25,000

Cash 10,000 Cash (34k-10k) 24,000

Good in transit 10,000
HO income statement 54,500 cash in transit 10,000
Bal c/d 35,500
Journal entries
TRANSACTION HEAD OFFICE BOOK BRANCH BOOK
Goods return by branch DR GSTB DB HO ACCOUNT
CR BRANCH ACCOUNT CR GFHO
Branch expenses paid by head DR BRANCH ACCOUNT DR EXPENSES
office CR BANK CR HO ACCOUNT
Branch expenses paid by NO ENTRY DR EXPENSES
branch CR BANK
Remittance from Branch DR BANK DR HO ACCOUNT
CR CURRENT ACCOUNT CR BANK
Branch purchased goods from NO ENTRY DR PURCHASES
outside supplier on credit CR CREDITOR
Item in Transit DR CASH / GOODS IN TRANSIT NO ENTRY
CR BRANCH CURRENT
Allowance for unrealized profit (if DR INCOME STATEMENT NO ENTRY
increase) CR Allowance for unrealized profit
(AFUP)
Allowance for Unrealized Profit
• Allowance Unrealized profit exist when goods sent at a mark-up remain
unsold at the end of the accounting period, the branch stock will include an
element of unrealized profit.
• In practice, it is normal for the head office to send goods to the branch with a
profit mark-up.
• In accounting, unrealized profit cannot be recognized in the income
statement. The unrealized profit will be transferred to the provision for
unrealized account. The entries:
DEBIT HEAD OFFICE INCOME STATEMENT
CREDIT ALLOWANCE FOR UNREALIZED PROFIT
Example 3
• As at 31.12.2008 the closing stock balance at the head office and branch are
as:
Head office RM40,000
` Branch RM12,000 (include markup 10%)

• The closing inventory of the branch represents goods sent by the head office at a mark-up
of 10%.

Required: Record the above information in Income Statement for head office, branch and the
combined operation.
Answer
Income statement extract
HO RM BRANCH RM COMBINED RM
Closing inventory W1 40,000 12,000 50,909
Allowance Unrealized profit W2 1,091 nil nil
W1 W2
HO = 40,000 = 10 / 110 X 12,000
Branch = 10,909 = 1090.9090
50,909
AFTER minus Unrealized:
= 12,000 – 1090.91
= 10,909 is actual cost