Branch accounts

BRANCH ACCOUNTS
OBJECTIVE TYPE QUESTIONS
BRANCH
ACCOUNTIN
G
Branch
: A branch is a
separate segment of
a business. In order

to increase the sales,
business houses
arerequires to market
their products over a
larger territory and
may generally split
their business
intocertain divisions
or parts. These
various parts or

divisions may be
located in different
part of the samecity
or in different cities
of the same country
or in different
countries in the
world. These are
known asbranches.
The head office

controls the
activities of various
branches.
Branch accounting
: Branch accounting
is the process
through which the
accounting system of
a branchis
maintained.

Objectives of
branch accounting
: The main objects of
branch accounts are
dependent on the
nature of the
business and specific
need of a particular
branch. The
objectives of

keeping the branch
accountsacceptable
to all businesses are
as follows.1.
To know the profit
or loss of each
branch separately.2.

To ascertain the
financial position of
each branch
separately on a
particular date.3.
To know the cash &
goods requirements
of the various
branches.4.

To evaluate the
progress and
performances of
each branch5.
To calculate
commission for
payment to the
managers, if based

on profits of
branch.6.
To give concrete
suggestions for the
improvement in the
working of the
various branches.7.

To meet the
requirements of
specific enactments
as all branches of a
company must keep
theaccounts for audit
purpose.
Types of Branches:
i.

F
rom accounting
point of view the
following are the
main types of
branches:
a)
Dependent Branch
(Branch not

keeping full system
of accounting)b)
Independent
Branch (Branch
keeping full system
of accounting)c)
Foreign Brancha)

Dependent Branch
(Branch not
keeping full system
of accounting).
The following are
the main features of
such branches:I.
Such branches sell
only those goods

which are received
from the head office
and are notusually
allowed to make
purchases in the
open market except
with the express
permissionof the
head office.II.

Goods are supplied
by the head office to
such branches either
at cost price or at
invoiceprice.III.
All expenses of the
branch such as rent,
salary of staff,
advertisement etc.,

are paid by thehead
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IV.
Petty expenses such
as cartage,
entertainment,
freights etc. are paid

by the
branchmanager out
of petty cash book
balance. Such book
is maintained at the
branch either
assimple petty cash
book or on imprest
system.V.

The amount received
from cash sales or
cash received from
debtors is either
remitted tothe head
office daily or
deposited in the
account of the head
office in some local
bank.VI.

The branch manager
is normally expected
to sell the goods for
cash only but he may
beauthorized to sell
goods on credit as
well.
Accounting records
for branch:

The branch with the
above features, do
not keep proper set
of books of
accounts. In order
tosupply the
requisite accounting
information to the
head office at
regular interval, each

branch keepsome
memoranda of
records, such as
Stock Register
, the
Cash Book
and the
Petty Cash Book
.
Stock Register :

It is maintained with
a view to keep a
record of all goods
received from the
head office,or
returns made to the
head office during
that period, sales
made at the branch
during the

period,breakages and
losses of goods and
balances of stock
available in hand at
the close of the
accountingperiod.
Cash Book:
It is maintained to
keep records of cash
transactions such as

cash sales, receipts
fromdebtors, & cash
remitted to head
office from time to
time.
Petty Cash Book:
It is maintained to
record small paymen
of expenses such as
carriage,

postage,conveyance
and entertainment
etc.If however the
branch is authorized
to make credit sales,
a Sales Day Book
and a
Debtors Ledger
willalso be required
to be maintained.

Accounting
Records For Head
Office or System
Of Accounting
For Branch:
A dependent
branch does not
keep proper
accounts but

accounts are
maintained in the
headoffice books
only. Thus the
system of
accounting for the
branch to be
adopted by the

headoffice depends
on:
y
The size of the
branch
y

The degree of
control sought to
be exercised
y
The nature and
volume of business
transactions
y

The special
circumstances
under which the
branch is operating
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The following are
the main ways in
which the head

office may keep
the branch
accounts in
its
Debtor System
(Synthetic Method

Final Account
System
Stock & Debtor
System
(Analytical
Method)

W
holesale Branch
System
Debtor System

This system is also
called synthetic
methods, is
adopted generally
in those
brancheswhich are
fairly small in size.
Under this system,
the head office

opens a
separateaccount
for each branch in
order to record all
transactions
relating to the
branch.
Thisaccount is a
nominal account in

nature and is
prepared to
calculate profit and
loss foreach
branch. The goods
supplied by the
head office to the
branch may be
either at costprice

or at cost plus
profit. The
following are the
journal entries
which are passed
in thebooks of the
head office to
record branch
transactions.

Transactions Debit
Credit
1) When goods are
sent to branch
Branch A/c Goods
sent to branch A/c2)
F
or return of goods to
H.O. Goods Sent to

Branch A/c Branch
A/c3)
F
or transferring the
balance of goods
sent to branchA/c
Goods Sent to
Branch A/c
Purchases (in
Trading Concerns)or

Trading A/c (in mfg.
concern)4) When
cheque or draft is
sent for branch
expenses Branch A/c
Bank A/c5) When
cheque or draft is
received for
remittance Bank A/c
Branch A/c6)

F
or closing balances
of Assets Branch
Asset A/c Branch
A/c7)
F
or beginning
balances of assets
next year Branch

A/c Branch Assets
A/c8)
F
or closing balances
of liabilities A/c
Branch A/c Branch
Liabilities A/c9)
F
or opening balances
of liabilities A/c nest

year Branch
Liabilities A/c
Branch A/c10)
F
or branch profit
Branch A/c General
Profit & Loss A/c11)
F

or Branch Loss
General Profit &
Loss A/c Branch A/c
It should be
carefully noted that
sales, discounts,
bad debts,
expenses paid by
branch andreturn

from debtors to the
branch are not
direct transactions
between the branch
and the headoffice,
and therefore they
are not taken care
off while preparing
for the Branch

Account in
thebooks of the
head office
according to this
system.Moreover,
losses due to
pilferages, wastage
and other losses of
stock due to

normal orabnormal
reasons are also
completely ignored
under this method.
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The main defect of
this method is that
it does not provide
full information for
analysis of
branchprofit &
loss. To overcome
this problem, a
separate Branch

Trading & Profit
and Loss
Accounthas to be
prepared, which is,
of course, a
memorandum
account not
forming a part of
the fullsystem of

accounting.In
short, branch
account is debited
with the opening
balance and branch
assets, goods sent
tobranch account
less returns,
cheque received

for remittance and
closing balances of
branchassets. The
difference between
the two sides will
be profit or loss of
the branch.Branch
account (In the
books of the head

office) will appear
as under after
posting of
theentries.
Branch
Accocunt(IN H.O.
BOOKS)

Treatment of of
Certain Branch
Transactions1)
Branch Expenses
paid by the branch
out of Petty Cash.
Such expenses will
be deducted fromthe
branch cash and at

the close reduced
balance of cash will
be shown on the
credit side of
thebranch account.
Such expenses need
not be shown in the
branch account. If
such expenses arere-
imbursed by the

head office to the
branch (if the petty
cash is maintained
on imprestsystem),
then these must be
debited to the branch
account. However,
same opening and
closingbalances of
petty cash will be

shown on the debit
and credit side
respectively of the
branchaccount.
2)
Depreciation of
Fixed assets.
This is not shown in
the branch account.

But the closing
balanceof the fixed
assets will be shown
on the credit side of
the branch account
after deduction of
theamount of
depreciation.

To Branch Cash in
Hand By Branch
Liabilities A/cTo
Branch Stock By
Bank (Remittances
by the branch i.e.
,To Branch Debtors
cash sales + cash
received from
debtorsTo Branch

F
urniture either
through branch
debtors or directTo
Branch Prepaid
from branch debtors
- any amount
spentTo Goods Sent
to Branch A/c Less

by branch
managerGoods
returned to Head
Office By branch
cash in handTo Bank
(Expense paid by
H.O.) By Branch
StockTo Branch
Liabilities By

Branch DebtorsBy
Branch
F
urnitureBy Branch
Prepaid
c*To General Profit
& Loss A/c (Profit)
*By General Profit
& Loss A/c

(Loss)*Balancing
figure is either or
loss
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3
)
Credit sales, bad
debts, sales returns,
allowances, and

discount allowed
pertaining to
branch.
These items are
pertaining to debtors
account and will not
be shown in the
branch
account.However,
these items will be

taken into
consideration while
ascertaining the
amount of openingor
closing balance of
debtors or amount
received from
debtors which are
shown in the
branchaccount.

4)
Goods in transit.
Goods in transit is
the difference
between goods sent
by head office
andreceived by the
branch. Such goods
will be shown either

on the both sides of
the branch accountor
will be ignored
totally while
preparing the branch
account.
5)
Purchase of fixed
asset by the branch.

If the branch has
purchased any fixed
assets, then onone
hand branch account
will be credited by
the head office and
on the other the
remittancefrom the
branch will be
reduced by the

amount. If branch
has purchased the
asset on creditbasis
and liability arising
from such purchase
will be shown on the
debit side of branch
account.
6)

Sale of Fixed Asset.
If the sale is for
cash, cash
remittance will
increase from the
branch butasset will
reduce in value to be
shown on the credit
side of the branch
account as this

isautomatically
adjusted through the
above adjustments.
Invoice Price
Method
When the goods
are sent by the
head office to the
branch at invoice

price i.e. cost plus
somepercentage of
profit, the branch
manager is
required to sell the
goods at invoice
price only.Goods
are marked on
invoice price to

achieve the
following
objectives.I.
In order to keep
secret from the
branch manager
the cost price of
the goods and

profitmade, so that
the branch manger
may not start a
rival and
competitive
business withthe
concern.II.

In order to have
effective control
on stock i.e. stock
at any time must
be equal toopening
stock plus goods
received from the
head office minus

sales made at the
branch.
Accounting
Adjustments
required in Head
Office Books
The branch records
are not in any way
affected due to

invoicing of goods
at cost plus
profit.But, in order
to calculate the
profit or loss made
by branch, some
accounting
adjustments,
asstated below, are

required to be
passed in the
books of the HO
for eliminating the
profitelement
included in (i)
branch opening
stock, (2) goods
sent to branch less

returns made
bybranch to head
office and
(3)branch closing
stock.I.
F
or adjustment of
excess price of the

opening stock at
branchStock
reserve A/c Dr.To
Branch A/c
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II.
F

or adjustment of
excess price of the
closing stock of
unsold goods at
branchBranch
Account Dr.To
Stock Reserve
A/cIII.

F
or adjustment of
excess price of
goods sent to
branch less returns
to head
officeGoods sent
to branch A/c
Dr.To Branch

A/cClosing stock
should always be
valued at cost or
market price
whichever is
lower. This is
basedon the
principle sof
conservatism, i.e.

no profit should be
anticipated and all
losses should
beprovided.
Moreover the
unsold stock lying
in the branch will
not earn any profit
unless

sold.Therefore, it
is necessary to
make provision for
the profit element
included in the
unsold stock.
Calculation of
Mark up or
Load

F
or calculating
excess price, the
following
procedure is
adopted:Suppose
the good are
invoiced at cost

plus 25%. If the
cost is Rs. 100,
profit is Rs. 25,
and thenselling
price would be Rs.
125. The ratio of
profit to selling is
25/125 or 1/5. The
adjustments forthe

difference or the
excess price in
value between the
invoice price and
cost price
thereforewill be
made on the basis
of 1/5 of the
invoice price. If

the percentage is
given on sale price
as25% on sale
price, then suppose
the sale price is Rs.
100, the profit will
be Rs. 25.
Therefore,cost will
be Rs. 75. So the

percentage on cost
will be 33.33%
(1/3 of cost).
Final Account
System

According to this
system, the profit
or loss made by the
branch is
determined by
preparing
Branch Trading
& Profit Loss

Account at cost
price
. It should be
carefully noted that
allexpenses
whether paid by
the head office or
by the branch are
debited to the

Trading andProfit
& Loss Account
prepared for the
branch.The profit
or loss as disclosed
by this account
isexactly same as
that of the branch
account prepared

according to
Debtor/ Synthetic
system. Itshould be
further noted that
the branch trading
and profit loss
account is only a
memorandumacco
unt not forming

part of the full
accounting system.
If the branch
account is also
prepared
inaddition to the
Branch Trading &
Profit and Loss
A/c, then such a

branch account
will be treatedas a
personal account
and not considered
in the nature of a
nominal account
under the
debtorsystem.
Then Branch

account under such
circumstances, will
show a debit
balance which will
beequal to net
worth or net asset
available at branch
at the end of the
accounting period.

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Stock and
Debtors System
There is yet
another method of
calculating profit

and loss of a
branch which is
popularly knownas
or
Analytical
Method.

It is an elaborate
method of keeping
branchaccounts
and is considered
very useful where
the branch
turnover is
sufficiently large
andwhere a greater

degree of control is
sought to be
exercised by the
head office over
the
branch.According
to this system,
instead of opening
one branch

account, as is done
in case of
debtorssystem,
separate accounts
are opened for
various
transactions at
branch. According
to thissystem, a

separate ledger for
each branch will
have to be
maintained at head
office for
keepingaccounts
such as Branch
Stock, Branch
Debtors, and

Goods Sent to
Branch, Branch
Expenses,and
Branch Assets etc.
Branch Cash or
petty Cash
Account may
sometimes be
required to

bemaintained if the
branch is permitted
to use the available
cash for making
certain
payments.Preparati
on of Branch Stock
Account will
however, vary

from branch to
branch depending
uponthe method of
charging goods
sent to branch.
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Pro-forma Invoice Price
Head office may send goods to branch either at "cost" or at "pro-forma invoice price".
In previous section of this chapter we have discussed accounting treatment for a
dependent branch to which the goods are sent to branch at cost price. In the
forthcoming section we will discuss the accounting treatment for the dependent
branch to which goods are sent at pro-forma invoice price. The treatment is slightly
different but before discussing the accounting treatment we must know what pro-
forma invoice price is and why head office prefers to send goods at pro-forma invoice
price.
Pro-forma invoice price is higher than the cost price. Adding a reasonable profit in the
cost makes the price equal to the pro-forma invoice price. Here we must know what is
selling price? Selling price is the price at which goods are sold to the customers. So the
selling price will be higher than the pro-forma invoice price in normal circumstances.
Difference between cost and pro-forma invoice price is known as loading and the
difference between cost and the selling price is the profit in real terms.
Head office usually sends goods to its branches at the pro-forma invoice price to keep
its profit margin secret from the branch managers. Had the cost been known to the
branch manager he would have been in a position to determine the exact profits
enjoyed by the head office, which may induce the branch manager to confront the
business as a competitor. Moreover by sending goods to the branches at pro-forma
invoice price, the head office can dictate pricing policy to its branches, as well as save
work at the branch because prices have already been decided. Sending goods at pro-
forma invoice price is generally done where goods are of standard type, pre-packed
and unlikely to fluctuate in price.
Here it is worth mentioning that "pro-forma invoice" is name of the document which
is sent to branches along with the goods sent; in this document description and
quantity of the goods sent is written along with the price. Therefore the price
appearing on the pro-forma invoice is named as pro-forma invoice price.
The document which is sent to the customers to evident the sales of goods to them is
known as "invoice"; this document discloses the quantity, description and selling
price of the goods sold, along with the settlement terms. Technically speaking "selling
price" may also be termed as "invoice price", but "invoice price" and "pro-forma
invoice price" are different. It is a common error that often people do not care while
using the terminology and confuse "invoice price" with the "pro-forma invoice price".

The method of preparing Branch a/c while goods are sent at pro-forma invoice price is
the same with the exception that the accounting entries relating to the goods sent to
and goods returned from the branch are recorded at pro-forma invoice price and a
reverse adjustment is required with the amount of loading (difference between cost
and pro-forma invoice price).
Remember; the accounting entries for opening and closing stocks are recorded at cost
price. Do not record stocks at pro-forma invoice price.
Rationale; an accountant is supposed to record accounting entries evidenced by a
source document. Goods sent to branch are evidenced through "pro-forma invoice"
therefore price mentioned on the document cannot me ignored while recording this
56

Advance Financial Accounting (FIN-611)
VU
transaction. Whereas, valuation of opening and closing stocks is not reported through
pro-forma invoice therefore to make it simple stocks are accounted for at cost.
Accounting Entries in the Books of Head Office
11. For opening balances of assets at the branch
Branch a/c
Branch assets a/c (individual accounts)
12. For opening balances of liabilities at the branch
Branch liabilities a/c (individual accounts)
Branch a/c
13. For goods sent to the branch (at pro-forma invoice price)
Branch a/c
Goods sent to branch a/c
14. For return of goods by the branch (at pro-forma invoice price)
Branch a/c
15. For reversal of loading on (net) goods set to branch (with the amount of loading)
Branch a/c
16. For remittance of cash or cheque to the branch
Branch a/c
Cash/Bank a/c
17. For cash or cheque received from the branch
Cash/Bank a/c
Branch a/c
18. For closing balances of assets at the branch
Branch asset a/c (individual accounts)
Branch a/c
19. For closing balances of liabilities at the branch
Branch a/c
Branch liabilities a/c (individual accounts)
20. For closing goods sent to branch account.
Purchases a/c

VU
21. For closing branch account into the profit and loss account
Incase of profit
Branch a/c
Profit & loss a/c
Incase of loss
Profit & loss a/c
Branch a/c
22. For abnormal loss (should always be accounted for at cost)
Abnormal loss a/c
(at cost)
Branch a/c
Insurance claim a/c (claim admitted)
Profit & loss a/c
(balance if not admitted by the insurance company)
Abnormal loss a/c (cost of the abnormal loss)
Note: No accounting entry is required for normal losses.
Solved Problem # 1
Excellent Garments of Multan has a branch at Lahore. Goods are supplied to the
branch at cost. The expenses of the branch are paid from Multan and the branch keeps
a sales journal and the debtors' ledger only. From the following information supplied
by the branch, prepare a Branch Account in the books of the head office. Goods are
sent to branch at pro-forma invoice price which is cost plus 20%. (All figures in
rupees)
Opening Stock (at Pro-forma invoice) 28,800 Closing Debtors
9,150
Closing Stock (at Pro-forma invoice)
21,600 Opening Debtors
?
Goods received from HO (at Pro-forma invoice)
40,320
Bad Debt
140
Credit Sales

41,000
Expenses paid by Head office
10,400
Cash Sales
17,500
Cash received from Debtors
37,900
Pilferage of goods by the employees (Normal Loss) 2,000
Solution: (Debtors System)
In the books of Head Office (Multan)
Lahore Branch Account
Particulars
Rs.
Particulars
Rs.
Opening Stock
24,000
Cash Received from Branch
17,500
Opening Debtors
6,200
Cash Received from Debtors
37,900
Cash sent to Branch
10,400
Goods sent to Branch
6,720
Goods sent to Branch a/c 40,320
(loading)
18,000
General Profit & Loss a/c 8,360
Closing Stock
9,160
(Profit)
Closing Debtors

VU
Working:
Debtors Account
Particulars
Rs.
Particulars
Rs.
Op. Debtors (Balancing 6,200
Cash Received from Debtors
37,900
fig)
41,000
Bad Debts
140
Sales (credit)
Cl. Debtors c/f
9,160
47,200
47,200
Opening stock at cost
28,800 x 100/120 = 24,000 (pro-forma invoice x % of cost by % of pro-forma invoice)
Closing stock at cost
21,600 x 100/120 = 18,000 (pro-forma invoice x % of cost by % of pro-forma invoice)
Loading on goods sent to branch (net)
Rupees
Goods sent to branch (at pro-forma invoice)
40,320
Less Goods returned by branch (at pro-forma invoice)
0
Net goods sent
(at pro-forma invoice)
40,320
40,320 x 20/120 = 6,720 (pro-forma invoice x % of loading by % of pro-forma invoice)
Income Statement System

The head office may also prepare an Income Statement to find out the profits of
branch. Such Income Statement is merely a memorandum; the only reason for
preparing the statement is to have full information of all transactions which are
ignored in Debtor System (already discussed in the previous section). While preparing
the Income Statement of the branch we shall be using all those skills which we have
learned in the single entry system of accounting during conversion of single entry into
double entry.
We know very well that in Income Statement incomes and expenses are measured on
the basis of accrual concept and the profits are measured according to the matching
concept. So the cost of goods sold will be determined keeping in view that the goods
sent to branch are equivalent to purchases of the branch and should be included at
cost. Obviously the opening and closing stocks can not be measured at a value that is
above its cost.
Above problem can be solved through Income Statement System as well. Following

Fill in the Blanks:
1. The system of operating at several places through one’s own
establishments is called .
2. The main establishment located at the main place of activity is
called the and the subsidiary establishment located at various
places are called .
3. Branches may be divided into 3 categories, branches, branches
and foreign branches.
4. Goods supplied to Dependent Branches by the Head Office may
be either at or at price.
5. The One Account System or Debtors System is generally adopted
when the branch is fairly in size.
6. Branch Account is a in nature and is prepared in the Head Office
Books.
7. Under Debtors System, bad debts and discounts allowed in the
Branch Account.
8. Under the Debtors System the debtors (at close) are shown on
the of the Branch Account after adjusting bad debts, discount
allowed etc.
9. Under Debtors System fixed assets is shown on the credit side
only after the amount of depreciation, if any.
10. Under the Debtors System, the Head Office will record all
the transactions relating to the branch in the Branch Account
through and relationship between the Branch and the Head Office.
11. Under the Debtors System, the Reserve for Doubtful Debts
/Reserve for Discount on Debtors, should be from closing Debtors
and only the good closing debtors will be recorded in the Branch
Account.
12. Actual petty expenses incurred by the branch will in the
Branch Account under the Debtors System.
(Answers: 1 - Branch Organization; 2 - Head Office, Branches; 3 -

Dependent, Independent; 4 - Cost, Invoice; 5 - Small; 6 - Nominal
Account; 7 - Do not figure or not taken, shown; 8 - Credit side; 9 -
Deducting; 10 - Debtors, Creditors;
11 - Deducted; 12 - Not be recorded)
State whether the following Statements are ‘True’ or ‘False’:
1. Under Debtors System, bad debts and discount allowed figure in the
Branch Account.
2. Under Debtors System, Debtors at close are shown on the Debit Side
of the Branch Account after adjusting for Bad Debts, discount allowed
etc.
3. Under Debtors System, Depreciation is not shown in the Branch
Account.
4. Reserve for Bad Debts and Reserve for Discount on Debtors will be
recorded separately in the Branch account under the Debtors system.
5. Actual petty expenses incurred by the Branch Account under the
Debtors system will not be recorded in the Branch Account.
6. Sales Returns will not appear directly in the Branch Account under the
Debtors System.
7. Branch Account under Debtors System is a Real Account.
8. Under Debtors System Branch Account is debited with losses like bad
debts, discounts allowed and depreciation.
9. When the Branch Manager is allowed petty cash on Imprest System,
the amount remitted by Head Office to reimburse the actual expenses
will be debited to the Branch Account.
10. Branch Account is a nominal account in nature and is prepared in
the Branch Books.
(Answers:
False – 1, 2, 4, 7, 8, 10
True – 3, 5, 6, 9)

Indicate the correct answers:
1. Under Debtors System, the Debtors at close are shown
(i) On the credit side of the Head Office Account
(ii) On the debit side of the Branch account
(iii) On the credit side of the Branch account after adjusting for bad
debts, discount allowed etc.
(iv) Are not shown in the Branch account
2. Under Debtors System treatment of Reserve for Bad debts is
(i) Shown it on the credit side of Branch a/c
(ii) It is not shown in Branch a/c
(iii) It is deducted from the Branch Debtors and the good Branch
debtors are shown in the Branch account
(iv) It is shown on the debit side of the general Profit and Loss account
3. The treatment of petty expenses made by the Debtors System is as
follows
(i) It is not recorded in the Branch account
(ii) It is shown on the debit side of the Branch account
(iii) It is shown on the general Profit and Loss account of Head Office
(iv) Only the closing balance of Petty Cash (Opening balance plus
amount reduced from Head Office less petty expenses) will appear
in the credit side of the Branch account
4. The Head Office sends goods at cost and instructs the branch to sell
the goods at a profit of 20% on selling price. What is the total sales, if:
Opening stock at Rs.36,000, Goods sent to branch Rs.6,00,000,
Closing stock Rs.60,000
(i) Rs.6,00,000
(ii) Rs.7,20,000
(iii) Rs. 6,72,000
(iv) None of the above
5. Furniture on 1/04/2005 – Rs.20,000; Furniture sold on 1/10/2005 –
Rs.9,000 (book value on 1/10/2005 – Rs.9,500); Furniture purchased
on 1/10/2005 – Rs.17,000; Depreciation on Furniture – 10% p.a.
From the above information, the value of Furniture shown on the
Credit side of Branch Account under Debtors System will be
(i) Rs.27,000
(ii) Rs.24,200
(iii) Rs.23,850

6. Under Debtors System, the Branch Account is
(i) Real Account
(ii) Nominal Account
(iii) Personal Account
7. Stock Reserve in relation on opening Stock appears (under the Debtors
System)
(i) On the debit side of the Branch Account
(ii) On the credit side of the Branch Account
(iii) On the Credit side of Head Office Account
8. Stock reserve in relation to closing stock appears (under the Debtors
System)
(i) On the debit side of the Branch Account
(ii) On the credit side of the Branch Account
(iii) On the debit side of Head Office Account
9. The cash and credit sales of the branch are Rs.5,000 and Rs.15,000
respectively. The amount collected from debtors is Rs.10,000. The
amount to be credited to Branch Account under the Debtors System
will be
(i) Rs.20,000 (ii) Rs.15,000 (iii) Rs.10,000 (iv) Rs.25,000
10. The opening balance of Petty Cash at the Branch is Rs.2,000,
amount received from the Head Office for Petty Expenses is Rs.10,000,
the closing balance of Petty Cash is Rs. 3,000;
Which of the following is the right answer under the Debtors System?
(i) Rs.9,000 on the Debit side of the Branch Account as Petty
Expenses
(ii) Rs.3,000 on the Credit side of the Branch Account as Petty
Cash
(iii) Rs.7,000 on the Credit side of the Branch Account as Petty
Cash Expenses.
(iv) None of the above.
(Answers: 1-(iii); 2-(iii); 3-(iv); 4-(ii); 5-(ii); 6-(ii); 7-(ii); 8-(i); 9-(ii); 10-
(ii) )

Followings are the main differences between branch and department:
1. Branches are separated from the main organization. Departments are
attached with the main organization under a single roof.
2. Branches are the outcome of tough competition and expansion of business.
Departments are the result of fast human life.
3. Branches are geographically separated. Departments are not separated rather
existed under a same roof.
4. Branches are of different types like dependent, independent and foreign.
There is no such classification in department because all are common under the

same roof.
5. Allocation of branch common expenses does not arise. Allocation of
departmental common expenses is a tough job.
6. To find out the net result of the organization, the reconciliation of different
branch account is a main job.In departmental accounting, no reconciliation is
necessary because there is a central account division.

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