BRANCH ACCOUNTING INTRODUCTION WITH PRACTICAL PROBLEM

BRANCH ACCOUNTING

1. BRANCH ACCOUNTING D.JEBASELVI ANITHA

2. INTRODUCTION Branch accounting is a bookkeeping system in which separate accounts are kept for each branch or operating location of an organization. Technically, the branch account is a temporary or nominal ledger account, lasting for a designated accounting period. Branch accounting provides better accountability and control since profitability and efficiency can be closely tracked for each location.

3. Branch Accounting Methods Debtor system Income statement system Stock and debtor system Final accounts system

4. Objectives of branch accounts ( i ) To know the profit or loss of each branch separately. (ii) To ascertain the financial position of each branch on a particular date. (ii) To know the cash and goods requirements of the various branches (iv) To evaluate the progress and performance of each branch. (v) To know the profitability of each branch.

5. PROBLEM A Mumbai head office has a branch at Chennai to which goods are invoiced at cost plus 20%. From the following particulars, prepare Branch A/c in the head office books: Particulars ₹ Goods sent to Branch 2,11,872 Total Sales 2,06,400 Cash Sales 1,10,400 Cash received from Branch Debtors 88,000 Branch Debtorson 1 st January 2020 24,000 Branch Stock on 1 st January 2020 7,680 Branch Stock on31 st December 2020 13,440

6. WORKINGS Opening Debtor + sales – Cash = Branch Debtors 24,000 + 96,000 – 88,000 = 32,000

7. Chennai Branch Account Date Particulars ₹ Date Particulars ₹ Jan 1 To Balance b/d: 10,000 Dec 31 By Bank: Stock 7,680 Cash Sales 1,10,400 Debtors 24,000 Cash received from Debtors 88,000 To Goods sent to Branch 2,11,872 By Stock Reserve 7,680 x 20/120 35,312 To Stock Reserve 13,440 x 20/120 2,240 By Balance c/d To Profit transferred to P&L a/c(BF) 34,640 Stock 13,440 Debtors 32,000 2,80,432 2,80,432