Chapter-Two

Accounting for
Branches and
Head office
 Objectives of this Chapter

After studying this chapter, you should be able to:

Describe segments of a business enterprise, primarily
branches and divisions
Prepare working paper for combined financial state-
ments
Prepare combined financial statements for home office
and branches
Understand the basic procedures for reconciliation of
reciprocal accounts
Record transaction between branches

20-2
 Branches & Divisions
Definition
As a business enterprise grows, it may establish one or
more branches to market its products over a large territory.

Branches and divisions are separate economic entities

from their home office.
However, they are not separate legal entities from their
home office.
Branch is a business unit located at some distance from
Home Office which carries merchandise obtained from the
home office, makes sales, approves customers’ credit, and
makes collections from it’s customers.
20-3
 Branches & Divisions
 Division is a segment of a business entity which
generally has more autonomy than a branch.
 Accounting for a division not operated as a separate
corporation (i.e., subsidiary company) is similar to
that of branches.
 Accounting for a division operated as a separate
corporation is different from that of branches and
will be discussed in latter chapters (3).
 Consolidated financial statements are required for
these business organizations.

20-4
 Cont.…
Difference between Branches and Divisions
Characteristics Branch Division

Degree of auton-
Moderate Very high
omy

Set of accounting Required by HO Required by the

records and branches division

Transactions ap-
Branch Division
proved by
Accounting entity Yes Yes
Legal entity No May or may not
20-5
 Accounting System for a Branch
Accounting methods used by branches and home
office includes;
Reciprocal ledger accounts/(home office/investment
in branch)
Expenses incurred by home office and allocated to
branches
Alternative method of billing merchandise shipments
to branches
Separate financial statements for branch and for
home office

20-6
 Accounting System for a Branch

 Combined financial statements for home office and

branch
 Journal entries for operations of a branch
 Working paper for combined financial statements
 Treatment of beginning inventories priced above cost
 Reconciliation of reciprocal ledger accounts
 Transaction between branches

20-7
 Reciprocal Ledger Accounts
Investment in Branch in Branch Account
A non-current asset account used by the home office to
record any transactions with the branches.
Investment in Branch in Branch Account
Dr Cr
Assets provided to the branch Assets received from the
by the home office branch

NI reported by the branch NL reported by the branch

20-8
 Reciprocal Ledger Accounts
Home Office ledger account
A quasi-ownership equity account used by the branch
to record any transactions with the home office.

Home Office Ledger Account

Dr Cr
Assets sent by the branch to the Assets provided by the HO to
HO or to other branches the branch
NL reported by the branch NI reported by the branch

 At the end of an accounting period when the branch closes

its accounting records, the Income Summary account is
closed to the Home Office account.
20-9
 Other Accounts
On the branch ac- On the HO account-
Item counting records ing records
Dr Cr Dr Cr
Plant assets ac- Plant asset Cash or
quired by the HO for No entry account: liability
a branch’s usage branch account
Plant asset is ac- HO Cash or lia- Plant asset Inv’t in
quired by a branch bility ac- account: branch
for its usage count branch
Expense incurred by Expense HO account Inv’t in Expense
HO and allocated to account Branch ac- account
Branches count

20-10
 Alternative Methods of Billing Merchandise
Shipments to Branches
 Three alternative methods are available to the home
office in billing the merchandise shipped to the
branches:
a) Billed at home office cost,
b) Billed at a percentage above home office cost (cost +
mark-up), and
c) Billed at the branch’s retail selling price.
 Shipment of merchandise to a branch does not con-
stitute a sale because ownership title has not
changed.

20-11
 Advantages and Disadvantage

Advantages Disadvantage
Billed at the home Widely used because of Attributes all gross prof-
office cost its simplicity its of the business to the
branches
Billed at a per- Able to allocate a rea- Branch NI understated
centage above sonable gross profit to and the ending invento-
ries overstated
home office cost the home office
Billed at the Increase internal con- No gross profit assigned
branch’s retail trol over inventories at to the branches
selling price branches

20-12
 Separate Financial Statements for Branch and
for Home Office (for internal use only)
 To review the operating results and financial position
of the branch, management of the enterprise may
prepare a separate income statement and balance
sheet.

20-13
 Combined financial Statements for Home Office
and Branch (for external use)
 Combined financial statements should be prepared
for external users.
 A starting point in preparation of a combined bal-
ance sheet would be the adjusted trial balances of
the home office and of the branch.
 The reciprocal ledger accounts are eliminated because
they have no significance when the branch and
home office report as a single entity.

20-14
 Cont.…

 In preparing the combined financial statements, the

following accounts should be eliminated:
a) Reciprocal ledger accounts
b) Any intra-company profits or losses
c) Any receivables and payables between the home office
and the branch (or between two branches).
 The rest of accounts are just summed together for
the combined financial statements.

20-15
 Cont.…

Example I
Journal entries for operations of a branch when
merchandise is billed at the cost of the home office
with a perpetual inventory system.

20-16
 Cont.….
Example
Assume that Garad PLC bills merchandise to Hawassa
Branch at home office cost and that Hawassa Branch
maintains complete accounting records and prepares fi-
nancial statements. Both the home office and the branch
use the perpetual inventory system. Equipment used at
the branch is carried in the home office records. Ex-
penses, such as advertising and insurance, incurred by
the home office on behalf of the branch, are billed to the
branch.
Transactions and events during the first year (2013) of
operations of Hawassa Branch are summarized below:

20-17
 Cont.….
1. Cash of Br.1,000 was forwarded by the home office
to Hawassa Branch.
2. Merchandise with a home office cost of Br.60,000
was shipped by the home office to Hawassa
Branch.
3. Equipment was acquired by Hawassa Branch for
Br.500, to be carried in the home office accounting
records. (Other plant assets for Hawassa Branch
generally are acquired by the home office.)
4. Credit sales by Hawassa Branch amounted to
Br.80,000; the branch’s cost of the merchandise
sold was Br.45,000.
5. Collections of trade accounts receivable by
Hawassa Branch amounted to Br.62,000.
20-18
 Cont.…
6. Payments for operating expenses by Hawassa
Branch totaled Br.20,000.
7. Cash of Br.37,500 was remitted by Hawassa Branch
to the home office.
8. Operating expenses incurred by the home office
and charged to Hawassa Branch totaled Br.3,000.

20-19
 Example

Home Office Accounting Hawassa Branch Accounting

Records Journal Entries: Records Journal Entries:
1.Inv’t in HB……… 1,000 Cash…………. 1,000
Cash……………….............. 1,000 Home Office………. 1,000

2. Investment in HB…. 60,000 Inventories……. 60,000

Inventories…............... 60,000 Home Office……… 60,000
3. Equipment-HB……..500 Home Office…… 500
Investment in HB…..……... 500 Cash………………..… 500
4. No entry A/R…… 80,000
CGS……. 45,000
Sales………………... 80,000
Inventories……….. 45,000
20-20
 Example
Home Office Accounting
Records Journal Entries:
5. No entry
6. No entry
7. Cash……….. 37,500
Investment in HB... 37,500
8. Investment in HB…. 3,000
Op/Expenses…..…….. 3,000
Hawassa Branch Accounting
Records Journal Entries:
Cash…………...... 62,000
A/Receivable…………… 62,000
Op/Expenses…….. 20,000
Cash…………….. 20,000
Home Office…… 37,500
Cash……………… 37,500
Op/Expenses…… 3,000
Home Office………. 3,000
20-21
 Example
 Two Reciprocal Ledger Accounts (prior to adjust-
ing and closing entries):
Investment in Hawassa Branch
Date Explanation Debit Credit Balance
2013  Cash sent to branch 1,000 1,000 Dr
 Merchandise billed to
branch at HO cost 60,000 61,000 Dr
 Equipment acquired by
branch, carried in home
office accounting records
 Cash received from 500 60,500 Dr
branch
 Operating expenses 37,500 23,000 Dr
billed to branch 3,000 26,000 Dr

20-22
 Example
Home Office
Date Explanation Debit Credit Balance
2013  Cash received from HO 1,000 1,000 Cr
 Merchandise received
from HO 60,000 61,000 Cr
 Equipment acquired 500 60,500 Cr
 Cash sent to HO 37,500 23,000 Cr
 Operating expenses
billed by HO 3,000 26,000 Cr

20-23
Working Paper for Combined financial Statements
 A working paper for combined financial statements
has three distinct purposes:
1) To eliminate any intra-company profits or losses,
2) To eliminate the reciprocal accounts, &
3) To combine ledger accounts balances for like revenues,
expenses, assets, and liabilities.

20-24
 Cont.…

 Assume that the Hawassa Branch’s ending invento-

ries of Br.15,000 at the end of 2013 had been verified
by a physical count
 All the year-end adjusting entries had been made.
 The working paper begins with the adjusted trial
balance of the home office and Hawassa Branch.
 Income taxes are ignored in this illustration.
 The following working paper is based on the transactions
illustrated earlier and additional assumed data for the
home office trial balance.

20-25
 Garad PLC
Working paper for combined Financial Statements of Home office and Hawassa Branch.
For Year Ended December 31, 2013
(Perpetual Inventory System: Billing at Cost)
Adjusted Trial Balances
Home Of- Hawassa
fice Branch Eliminations Combined
Dr (Cr) Dr(Cr) Dr (Cr) Dr (Cr)
Income Statement

Sales (400,000) (80,000) (480,000)

Cost of goods sold 235,000 45,000 280,000
Operating expenses 90,000 23,000 113,000
Net Income (to
statement of RE be- 75,000 12,000 87,000
low)
Totals -0- -0- -0-
20-26
 Cont.…
Adjusted Trial Balances
Statement of Retained Home Of- Hawassa Eliminations Combined
Earnings fice Branch
Dr (Cr) Dr(Cr) Dr (Cr) Dr (Cr)
Retained earnings, Jan.
1, 2013 (70,000) (70,000)

Net income(from in-

comes statement (75,000) (12,000) (87,000)
above)

Dividends declared 40,000 40,000

Retained earnings,
Dec.31,2013 (to balance
(117,000)
sheet below)

Totals -0-
20-27
 Cont.…
Adjusted Trial Balances
Home Of- Hawassa Eliminations Combined
Balance Sheet fice Branch
Dr (Cr) Dr(Cr) Dr (Cr) Dr (Cr)
Cash 25,000 5,000 30,000
Trade accounts receiv-
able (net) 39,000 18,000 57,000

Inventories 45,000 15,000 60,000

Inv’t in Hawassa
Branch 26,000 a) (26,000)

Equipment 150,000 150,000

Accumulated deprecia-
tion of equipment (10,000) (10,000)

20-28
 Cont.…
Adjusted Trial Balances
Home Of- Hawassa Eliminations Combined
Balance Sheet fice Branch
(contd.)
Dr (Cr) Dr(Cr) Dr (Cr) Dr (Cr)
Trade accounts payable (20,000) (20,000)
Home Office (26,000) a) 26,000
Common stock, Br.10 par (150,000) (150,000)
Retained earnings
(from statement of re-
tained earnings above)
(117,000)

Totals -0- -0- -0- -0-

 (a) To eliminate reciprocal ledger account balances
 * the elimination appears in the working paper only20-29
Combined Financial Statements -Example I
Garad PLC
Income Statement
For Year Ended December 31, 2013

20-30
 Cont.…
Garad PLC
Statement of Retained Earnings
For Year Ended December 31, 2013

20-31
 Cont….
Garad PLC
Balance Sheet
December 31, 2013

20-32
 Garad PLC
Balance Sheet

20-33
 Cont.…
Home Office Adjusting and Closing Entries and
Branch Closing Entries Performed on 12/31/2013
(perpetual inventory system):
HO: Adjusting and Closing Hawassa Branch : Closing
Entries: Entries:

Sales……………….. 80,000
CGS…….............................. 45,000
None Op/Expenses……………. 23,000
Income Summery……… 12,000
Investment- HB….. 12,000 Income Summery….. 12,000
Income-HB…..….............. 12,000 Home Office…………….. 12,000
Income: HB…………. 12,000
None
Income Summery……… 12,000
20-34
 Example II: Billing of Merchandise to Branches at Prices
above Home Office Cost

 Similar information as in the previous example, ex-

cept that the home office bills merchandise shipped to
Hawassa branch at 50% markup of the cost, or 331/3%
of billed price.
 Thus, the shipment of merchandise costing $60,000
will be recorded at the home office and branch as fol-
lows:

20-35
 Cont.…
Journal entries for shipments to branch at prices
above home office cost
(Perpetual inventory system):
HO: Adjusting and Closing Hawassa Branch : Closing
Entries: Entries:
Investment- HB….. 90,000 Inventory……….. 90,000
Inventories…..…............. 60,000 Home Office…………….. 90,000
AFOVI……………….……... 30,000
 Thus, the balances of both the Investment in Hawassa
Branch account and Home Office account will be
$56,000, instead of $26,000 due to the inventory mark
up of $30,000.

20-36
 Working paper when billings to branches are at
cost plus mark-up
 When the home office bills merchandise shipments to
branches at prices above home office cost, preparation
of working paper for combined financial statement is
facilitated by an analysis of the flow of merchandise to
a branch, such as the following the following for
Hawassa Branch of Garad PLC.

20-37
 Cont.…
Garad PLC
Flow of Merchandise for Hawassa Branch
During 2013
Billed Home Markup
Price Cost
Beginning 0 0 0
inventories
Add: Shipments
from home office 90,000 60,000 30,000
CGAS 90,000 60,000 30,000
Less: Ending
inventories 22,500 15,000 7,500
Cost of goods
sold 67,500 45,000 22,500
20-38
 Adjusted Trial Bal-
ances
Eliminations Combined
Home Of- Hawassa
fice Branch
Dr (Cr) Dr(Cr) Dr (Cr) Dr (Cr)

Income Statement

Sales (400,000) (80,000) (480,000)

Cost of goods sold 235,000 67,500 (a) (22,500) 280,000

Operating expenses 90,000 23,000 113,000
Net Income(loss) (to
statement of re- 75,000 (10,500) (b) 22,500 87,000
tained earnings be-
low)
Totals -0- -0- -0-
20-39
 Adjusted T/Balance
Statement of Re- Home Of- Hawassa Elimina- Com-
tained Earnings fice Branch tions bined

Dr (Cr) Dr(Cr) Dr (Cr) Dr (Cr)

Retained earnings,
Jan.1, 2013 (70,000) (70,000)

Net(income) loss
(from incomes state- (75,000) 10,500 (b) (22,500) (87,000)
ment above)

Dividends declared 40,000 40,000

Retained earnings,
Dec.31,2013 (to bal- 117,000
ance sheet below)

Totals -0-
20-40
 Adjusted T/Balances
Home Of- Hawassa Elimina- Com-
Balance Sheet fice Branch tions bined
Dr (Cr) Dr(Cr) Dr (Cr) Dr (Cr)
Cash 25,000 5,000 30,000
Trade accounts re-
ceivable (net) 39,000 18,000 57,000
Inventories 45,000 22,500 (a) (7,500) 60,000
Investment in
Hawassa Branch 56,000 (c) (56,000)
Allowance for over-
valuation of invento- (30,000) (a) 30,000
ries: Hawassa
Branch
Equipment 150,000 150,000
20-41
 Adjusted T/Balances
Home Of- Hawassa Eliminations Combined
Balance Sheet fice Branch
(contd.)
Dr (Cr) Dr(Cr) Dr (Cr) Dr (Cr)

Accumulated deprecia-
tion of inventories:
Hawassa Branch
(10,000) (10,000)

Accounts payable (20,000) (20,000)

Home Office (56,000) (c) 56,000
Common stock,Br.10 par (150,000) (150,00)
Retained earnings
(from statement of re- (117,000)
tained earnings above)

Totals -0- -0- -0- -0-

20-42
 HO and Branch adjusting and closing entries

 Branch Closing Entries-The closing entries for

the branch at the end of 2013 are as follows:
Sales…………………………………....80,000
Income Summary……………………...10,500
Cost of Goods Sold…………………………..67,500
Operating Expenses………………………….23,000
To close revenue and expense ledger accounts
Home Office……………….................10,500
Income Summary……………………………10,500
To close the net loss in the Income Summary account to the Home
Office account

20-43
 Cont.…
 After the closing entries, the Home Office ledger ac-
count should have a balance of Br.45,500.
 Note: Home Office balance prior to the closing en-
tries equals Br.56,000. Br.56,000-net loss of
Br.10,500 = Br.45,500 (net loss decreases Home Of-
fice credit balance).

20-44
 Cont.…
Home Office Adjusting and Closing Entries
Income- HB………........................ 10,500
Investment in HB………………………… 10,500
To record net loss reported by branch

AFOVI- HB………………………….. 22,500

Realized Gross Profit- HB…................... 22,500
To reduce allowance to amount by which ending inventories of branch
exceed cost.

Realize Gross Profit: HB…………… 22,500

Income: HB…………................................ 10,500
Income Summary……….......................... 12,000
To close branch net loss and RGP to Income Summary ledger account
(Income tax effects are disregarded.)
20-45
 Cont.….
After posting the above entries, the account balance
for the following accounts is:
Investment in HB =45,500(debit)*
AFOVI- HB =7,500(credit)**
Realized Gross Profit: HB =0
Income: HB =0
* Balance prior to the above entries equals Br.56,000. Br.56,000- 10,500
(net loss of the branch reduces the debit balance of the Investment
account) = Br.45,500.
** Br.30,000-22,500 = Br.7,500.

20-46
 Periodic Inventory System

 When a periodic inventory system is adopted, inven-

tory account cannot be used for the shipments of
merchandise between the home office and the
branch.
 Accounts such as “Shipments to Branch” (used by
the home office) and “Shipments from Home Office”
(used by the branch) are used.

20-47
 Cont.…

Example:
Continue with the Garad PLC for a second year of opera-
tions (2014) but using the periodic inventory system for
both the home office and Hawassa Branch. The beginning
inventories for 2014 were carried by Hawassa Branch at
Br.22,500 (home office cost is Br.15,000 due to a 50%
markup by the home office). Assume that during 2014, the
home office shipped merchandise to Hawassa Branch that
cost Br.80,000 and Hawassa was billed at Br.120,000. Dur-
ing 2014, Hawassa Branch sold Br.150,000 merchandise
that was billed at Br.112,500.
The journal entries to record the shipments and sales at a price above
home office cost under the periodic inventory system are as follows:
20-48
 Cont.…
Home Office Accounting Records Hawassa Branch Accounting
Journal Entries: Records Journal Entries:
Investment- HB….. 120,000 Shipment from HO.. 120,000
Shipment to HB…………..80,000 Home Office…………… 120,000
AFOVI: HB…………………..40,000
A/Receivables……… 150,000
None
Sales……………………. 150,000
 The branch inventories at the end of 2014 amounted to
Br.30,000.
 The flow of merchandise for Hawassa Branch of year
2015 summarized below:

20-49
 Garad PLC
Flow of Merchandise for Hawassa Branch During 2014
Billed Home Markup (50% of
Price Office Cost;331/3 % of
Cost Billed Price)

Beginning
inventories 22,500 15,000 7,500
Add: Shipments
from home office 120,000 80,000 40,000
Available for sale 142,500 47,500
95,000
Less: Ending
inventories (30,000) (20,000) (10,000)
Cost of goods
sold 112,500 75,000 37,500

20-50
 Cont.…
The activities for the branch for 2014 are reflected in
the following two home office ledger accounts and the re-
ciprocal Home Office ledger account of the branch:
Investment in Hawassa Branch
Date Explanation Debit Credit Balance
2014  Balance, Dec. 31, 2013 45,500 dr
 Merchandise billed to
branch at markup of 50% 120,000 165,500dr
above home office cost, or
33 1/3 % of billed price
 Cash received from branch
 Operating expenses billed 113,000 52,500 dr
to branch 4,500 57,000 dr
 Net Income for 2014
reported by branch 10,000 67,500 dr

20-51
 Cont.…
Allowance for Overvaluation of Inventories:
Hawassa Branch
Date Explanation Debit Credit Balance
2014  Balance, Dec. 31, 7,500 cr
2013
 Mark-up on
merchandise shipped
to branch during 2000
(50% of cost)
 Realization of 50% 40,000 47,500 cr
mark-up on
merchandise sold by
branch during 2014 37,500 10,000 cr

20-52
 Cont.….
Home Office
Date Explanation Debit Credit Balance
2014  Balance, Dec. 31, 2013 45,500 cr
 Merchandise receivable from
home office 120,000 165,500 cr
 Cash sent to home office 113,000 52,500 cr
 Operating expenses billed by
Home office 4,500 57,000 cr
 Net income for 2014 10,000 67,000 cr

20-53
 Cont….
 The working paper for combined financial statements
under the periodic inventory system is as follows:
Adjusted Trial
Balances Eliminatio Combine
Income Statement Home Hawassa ns d
Office Branch

Dr (Cr) Dr (Cr) Dr (Cr) Dr (Cr)

Sales (500,00) (150,00) (650,000)

Inventories, Dec.
31, 2013 45,000 22,500 (b) (7,500) 60,000
Purchases 400,000 400,000
Shipments to
Hawassa Branch (80,000) (a) 80,000
20-54
 Cont….
Adjusted Trial Balances
Eliminations Combined
Income Statement Home Hawassa
(contd.) Office Branch
Dr (Cr) Dr (Cr) Dr (Cr) Dr (Cr)

Shipments from home 120,000 (a)(120,000)

office
Inventories, Dec. (70,000) (30,000) (c)10,000 (90,000)
31,2014
Operating expenses 120,000 27,500 147,500
Net Income( to
statement of retained 85,000 10,000 (d) 37,500 132,500
earnings below)
Totals -0- -0- -0-

20-55
 Cont.…
Adjusted Trial
Statement of Balances Elimination Combine
Retained Earnings Home Hawassa s d
Office Branch

Dr (Cr) Dr (Cr) Dr (Cr) Dr (Cr)

Retained earnings,
Dec. 31, 2013 (117,000) (117,000)
Net Income (from
income statement (85,000) (10,000) (d)(37,500) (132,500)
above)
Dividends declared 60,000 60,000
Retained earnings,
Dec. 31, 2014 (to 189,500
balance sheet
below)
20-56
 Cont….
Adjusted Trial Balances
Home Hawassa Eliminations Combined
Balance Sheet Office Branch
Dr (Cr) Dr (Cr) Dr (Cr) Dr (Cr)

Cash 30,000 9,000 39,000

Trade accounts
receivable (net) 64,000 28,000 92,000
Inventories, Dec. 31,
2014 70,000 30,000 (c) (10,000) 90,000
Allowance for
overvaluation of (a) 40,000
(47,500) (b) 7,500
inventories: HB
Investment in
Hawassa Branch 67,000 (e) (67,000)

20-57
 Cont…
Adjusted Trial Balances
Home Hawassa Elimination Combined
Balance Sheet Office Branch s
(contd.)
Dr (Cr) Dr (Cr) Dr (Cr) Dr (Cr)

Equipment 158,000 158,000

Accumulated
depreciation of (15,000) (15,000)
equipment
Trade Account payable (24,500) (24,500)
Home office (67,000) (e) 67,000
Common stock, Br.10 (150,000) (150,000)
par
Retained earnings
(from statement of
retained earnings (189,500)
above) 20-58
 Cont.…
a) To eliminate reciprocal ledger accounts for mer-
chandise shipments.
b) To reduce beginning inventories of branch to cost
c) To reduce ending inventories of branch to cost.
d) To increase income of home office by portion of mer-
chandise markup that was realized by branch sales.
e) To eliminate reciprocal ledger account balances.

20-59
 Branch Closing Entries and Home Office Adjusting and
Closing entries for the home office (with billing at above
the cost and using a periodic inventory system)

Branch Closing Entries:

(1)Inventory (ending)……………….30,000
Cost of Goods Sold………………..112,500*
Inventory (beg.)…………………………………….22,500
Shipments from Home Office………………….120,000
CGS=22,500+120,000-30,000 

20-60
 Cont.….

(2) Sales……………………..150,000
CGS…………………………………….112,500
Operating expenses……………. 27,500
Income Summary……………….. 10,000
(3) Income Summary…….10,000
Home Office…………………………10,000

20-61
 Cont….

Home Office Adjusting (1 and 2) and Closing En-

tries (3) :
(1) Investment in Branch……………… 10,000
Income: HB………………………………………. 10,000
(2) AFOVI…………………………………….. 37,500
Realized Gross Profit: HB……………….…. 37,500
(3) Realized Gross Profit……………….. 37,500
Income: HB…………………………...… 10,000
Income Summary………………………….......47,500

20-62
 Cont.….

 Balances of Investment in Hawassa Branch, Allowance

for Overvaluation of Inventories, Realized Gross Profit,
Income: Hawassa Branch and Home Office accounts after
the above adjusting and closing entries are:
Investment in Hawassa Branch
=Br.67,000(dr.) (57,000+10,000)
Allowance for Overvaluation of Inventories
=Br.10,000(cr.) (47,500 -37,500)

20-63
 Cont….

Realized Gross Profit = Br.0

(37,500- 37,500)
Income: Mason Branch = Br.0
(10,000-10,000)
Home Office (a reciprocal account of
Investment)=Br.67,000(cr.) (57,000+10,000) 

20-64
 Reconciliation of Reciprocal Ledger Accounts

 Reading Assignment (Larsen. Ad-

vanced Accounting)

20-65
 Transactions between Branches

 Reading Assignment (Larsen. Ad-

vanced Accounting)

20-66
END OF
CHAP-
TER ,2 20-67