Reconciliation of

Reciprocal Accounts
Turato, Ella Mae B. BSA 3-1
 RECIPROCAL ACCOUNTS
Investment in Branch Home Office
(a) Assets xx xx (a) Assets
transferred to received from
the Branch Home Office
(c) Liabilities xx xx (b) Assets (b) Assets xx xx (c) Liabilities
&expenses received from received from &expenses
incurred/paid Branch Branch incurred/paid
by HO on by HO on
behalf of behalf of
Branch Branch
(d) Profit of xx xx (e)Loss of (e)Loss of xx xx (d) Profit of
Branch Branch Branch Branch
MUST CONSIDER
 TIMING DIFFERENCE (Transfers in-transit)
Date
Home Office Books
Dec 31 Investment in Branch XX (Inv in Branch)
Shipments to branch XX increases

Date Branch Books

Dec 31 *** There’s no entry made (Home Office)
remains the same
 UNRECORDED DEBIT and CREDIT MEMOS
Date HOME OFFICE BOOK
Dec 31 Cash XX
Investment in branch XX

Date BRANCH BOOKS

Dec 31 Home Office XX
Accounts Receivable XX
 ERRORS

So, reconcile!
Illustration 1: Reconciliation – Adjusted Balance Solution:
DJ Co. is preparing its 2020 FS. The balances of reciprocal accounts HO Books Br Books
Investment in Home Office
on Dec 30 2020 are as follows: Branch
Inv in Br Account…156,000
HO Account………....70,200 Unadjusted Bal 156,000 70,200
The following info has been gathered: a. Shipment in-
20,000
transit
a. A 20,000 inventory shipment from the HO in Dec 2020 was
recorded by the branch only in Jan 2021 b. Collection of
receivable (10,000)
b. The HO collected 10,000 AR on behalf of the branch but the
branch is not yet notified c. Return of
damaged merch (30,000)
c. The branch returned damaged merchandise worth 30,000 but
the HO has not yet received the shipment d. Unrecorded
remittance (40,000)
d. The HO failed to record a 40,000 cash remittance from the
branch e. Alloc. of cost
recorded twice (5,000)
e. The branch recorded twice a 5,000 allocation of Overhead cost
from the HO f. Error
10,800
f. A 12,000 freight paid by the HO for inventory shipment to the Adjusted Balances
86,000 86,000
branch was recorded by the branch as 1,200

Requirement: Compute for the adjusted balances of the

reciprocal accounts
The compounding adjusting entries are as follows:
Home office books Branch books
Shipments to Branch 30,000 Shipments from HO 30,000
Cash 40,000 Freight-in 10,800
Investment in Branch 70,000 Accounts Receivable 10,000
Overhead Expense 5,000
Home office 15,800
Illustration 2: Solution:
HO Books Br Books
The unadjusted balance of the Investment in Branch Investment Home Office
account of a Home Office is 182,000. Relevant in Branch
information follows:
Unadjusted Bal 182,000 145,000
a. The branch did not record a 12,000 credit
a. Unrecorded Cr
memo from the HO memo from HO (12,000)
b. The branch did not record a 9,000 debit memo
b. Unrecorded Dr

squeeze
from the HO memo from HO 9,000
c. The HO erroneously recorded twice a 20,000 c. Cr memo from
credit memo from the branch. Branch recorded twice (20,000)
by HO
d. The HO recorded a 30,000 debit memo from the
branch as 3,000 d. Error in recording Dr
(27,000)
memo from Branch
e. The branch sent by mistake a 7,000 credit
memo to the HO. The HO did not record it. e. Cr memo mistakenly
sent by Branch (7,000)

Adjusted Balances 135,000 135,000

Requirement: Compute for the unadjusted balances
of the Home Office account.