2.

BRANCH ACCOUNTS

MODEL – 1 - DEPENDENT BRANCH (DEBTORS SYSTEM)

FORMAT OF BRANCH ACCOUNT

IN THE BOOKS OF HEAD OFFICE

BRANCH ACCOUNT
Dr. Cr.
Particulars Amount Particulars Amount
in ₹ in ₹
To Balance b/d (Op XXX BY Balance b/d (Op balance XXX
balance of Assets) of Liabilities)
1) To Goods sent to XXX 2) By Cash Remittances
Branch
3) To Cash/Bank XXX - Cash Sales XXX
(Expenses paid by
H.O.)
To Balance c/d (Cl. XXX - Cash from Debtors XXX
Balance of Liabilities)
To Profit XXX By Balance c/d (Cl. Balance XXX
of Assets)
Total XXX Total XXX
It is important to note that under this system of preparing the branch account,
items like credit sales, bad debts, discounts, depreciation, loss or gain on sale
of assets do not figure at all.
 PROBLEMS FOR PRACTICE
Cost Price Method

1. From the following information relating to a Bangalore Branch for the year
ending 31-3-2016, prepare Branch Account in the books of Head Office Books
Opening Balances on 1-4-2015 ₹
Stock 37,500
Debtors 75,000
Petty Cash 750
Goods sent to Branch 6,30,000
Cash Sales 1,50,000
Cash received from Debtors 5,25,000
Goods returned by Branch 5,000
Credit Sales 5,70,000
Cheques sent to Branch
Salaries 22,500
Rent and Taxes 3,750
Petty Cash 2,750
Closing Balances on 31-3-2016
Stock 62,500
Debtors 1,20,000
Petty Cash 500

Solution:
Debtors System
In the Books of Head office
Bangalore Branch A/c. for the year ending 31stMarch 2016
Dr Cr
Particulars Amt. In Particulars Amt. In
Rs. Rs.
To Balance B/d By Cash
(Op. Assets) Remittances
- Stock 37,500 - Cash Sales 1,50,000
- Debtors 75,000 - Cash 5,25,000 6,75,000
received
from Drs.
- Petty Cash 750 1,13,250 By Goods 5,000
Returned
To Goods Sent to 6,30,000 By Balance C/d
Branch (CL. Assets)
To Bank A/c. - Stock 62,500
- Salaries 22,500 - Debtors 1,20,000
- Rent 3,750 - Petty Cash 500 1,83,000
- Petty Cash 2,750 29,000

To Profit 90,750
Total 8,63,000 Total 8,63,000

Verification:
Final Accounts System
Bangalore Branch Trading A/c. for the year ending 31stMarch 2016
Dr Cr
Particulars Amt. In Particulars Amt. In
Rs. Rs.
To Op. Stock 37,500 By Sales
To Good Sent 6,30,000 - Cash 1,50,000
Less: Returns 5,000 6,25,000 - Credit 5,70,000 7,20,000
By Cl. Stock 62,500
To GP 1,20,000
Total 7,82,500 Total 7,82,500

Bangalore Branch Profit & Loss A/c. for the year ending 31stMarch 2016
Dr Cr
Particulars Amt. In Particulars Amt. In
Rs. Rs.
To Salaries 22,500 By GP 1,20,000
To Rent & Taxes 3,750 -
To Petty Expenses -
Op. 750
+Received 2,750
3,500
-Cl 500 3,000
To Profit 90,750
Total 1,20,000 Total 1,20,000
 Invoice Price Method
Profit on Cost Loading = % / 100+%
2. Tip Top Co. New Delhi, has a branch at Kolkatta. It invoices goods to the
branch at selling price which is cost plus 33 ⅓%. From the following
particulars prepare Branch Account at (i) Cost Price and (ii) at Invoice Price.
Show also Branch Debtors Account ant Goods sent to Branch account in the
Books of Tip Top Co. New Delhi.
₹
st
Stock on 1 January 2015 (Invoice Price) 15,000
st
Debtors on 1 January 2015 11,400
Goods invoiced to Branch during the year at Invoice Price
67,000
Sales at Branch
Cash Sales 31,000
Credit Sales 37,400 68,400
Cash received from debtors 40,000
Discount allowed to customers 300
Bad debts written off 250
Cheques sent to branch – Salaries 5,000
-sundry Expenses 1,700 6,700
st
Stock on 31 December 2015 (Invoice Price) 13,400

Solution:
Required
In the Books of Head office
1. Branch A/c at Cost Price
2. Branch A/c. at Invoice Price
3. Branch Debtors A/c.
4. Good Sent to Branch A/c.
1. Preparation of Branch A/c. at Cost Price
In the Books of Tip Top Co. New Delhi - Head office
Kolkata Branch A/c. for the year ending 31 st December 2015
Dr Cr
Particulars Amt. In Particulars Amt. In
Rs. Rs.
To Balance B/d By Cash
(Op. Assets) Remittances
- Stock 15,000 - Cash Sales 31,000
Less: Stock 3,750 11,250 - Cash from 40,000 71,000
Reserve A/c. Debtors
33.33/133.33
(1/4)
- Debtors 11,400 By Balance C/d
(Cl. Assets)
To Goods sent 67,000 - Stock 13,400
Less: Loading 16,750 50,250 Less: Stock 3,350 10,050
(1/4) Reserve (1/4)
To Bank A/c. - Debtors WN – 1 8,250
- Salaries 5,000
- Sundry 1,700 6,700
Exp.
To Profit 9,700
Total 89,300 Total 89,300

2. Branch Debtors
Kolkata Branch Debtors A/c.
Dr Cr
Particulars Amt. In Particulars Amt. In
Rs. Rs.
To Balance B/d 11,400 By Cash 40,000
To Credit Sales 37,400 By Discount 300
By Bad Debts 250
By Balance C/d 8,250

Total 48,800 Total 48,800

3. Goods Sent to Branch

Goods Sent to Branch A/c.

Dr Cr
Particulars Amt. In Particulars Amt. In
Rs. Rs.
To Branch A/c. 16,750 By Branch A/c. 67,000
To Purchases 50,250
(Bal. Fig.)
Total 67,000 Total 67,000
 4. Preparation of Branch Account at Invoice Price

Kolkata Branch A/c. for the year ending 31 st December 2015

Dr Cr
Particulars Amt. In Particulars Amt. In
Rs. Rs.
To Balance B/d By Stock 3,750
Reserve on Op.
Stock
- Stock 15,000 By Goods Sent 16,750
(Loading)
- Debtors 11,400 By Cash
remittance
To Goods sent 67,000 - Cash sales 31,000
To Bank - Cash from 40,000 71,000
Debtors
- Salaries 5,000 By Balance C/d
- Sun. Exp. 1,700 6,700 - Stock 13,400
To Stock Reserve 3,350 - Debtors WN 8,250
A/c. (Cl. Stock)
-
To Profit 9,700
Total 1,13,150 Total 1,13,150

Verification:
Final Accounts Method

Kolkata Branch Trading A/c. for the year ending 31st December 2015
Dr Cr
Particulars Amt. In Particulars Amt. In
Rs. Rs.
To Op. Stock 11,250 By Sales
To Goods sent 50,250 - Cash 31,000
- - Credit 37,400 68,400

To GP 16,950 By Cl. Stock 10,050

Total 78,450 Total 78,450
st
Kolkata Branch Profit & Loss A/c. for the year ending 31 December 2015
Dr Cr
Particulars Amt. In Particulars Amt. In
Rs. Rs.
To Discount 300 By GP 16,950
To Bad Debts 250
To Salaries 5,000

To Sun. Exp. 1,700 -

To Net Profit 9,700 -
Total 16,950 Total 16,950

Kolkata Branch Debtors A/c.

Dr Cr
Particulars Amt. In Particulars Amt. In
Rs. Rs.
*To Balance B/d 11,400 *By Cash 40,000
#To Credit Sales 37,400 #By Discount 300
#By Bad Debts 250
*By Balance 8,250
C/d

Total 48,800 Total 48,800

* Debtors System
Op Bal. of Drs 11,400 Dr
Cash Received 40,000 Cr
Cl Bal. of Drs 8,250 Cr 36,850 Cr (Net
Amount)

# Final Accounts System

Credit Sales 37,400 Cr

Discount 300 Dr
Bad Debts 250 Dr 36,850 Cr (Net
Amount)
3. The following information and particulars relate to New Delhi Branch for the
year 2015-16
31-3-2015 31-3-2016
Stock 50,000 75,000
Debtors 70,000 95,000
Petty Cash 250 120

Goods costing ₹ 5,50,000 were sold by the branch @25% on cost. Cash sales
amount to ₹ 1,50,000 and the rest credit sales.

Branch spent ₹ 30,000 for salaries, ₹ 12,000 for rent and ₹ 8,000 for petty
expenses (all expenses were remitted by the Head office).
Branch receives all goods from H.O.

You are required to show the New Delhi branch account in the books of H.O.
for the year 2015-16 and verify your answer by preparing Branch Trading and
Profit and Loss Account.
Solution:
Working Note -1 Calculation of Credit Sales
Working Note – 2 Calculation of Goods sent to Branch
Working Note - 3 Calculation of Petty cash sent
Working Note – 4 Calculation of Cash received from Debtors
1. Branch Account under Debtors System
2. Branch Trading & Profit & Loss A/c. under Final Accounts system
for Verification

Working Note – 1 Calculation of Credit Sales

Cost Value of Goods Sold (COGS) Rs. 5,50,000
Add: Profit 25% on Cost Rs. 1,37,500
Total Sales Rs. 6,87,500
Less: Cash Sales Rs. 1,50,000
Credit Sales Rs .5,37,500

Working Note – 2 Goods Sent to Branch = Purchases

COGS = Op. stock +Goods Sent ( purchases ) – cl. stock
5,50,000 = 50,000 + Goods Sent – 75,000
Goods sent = 5,50,000 +75,000 – 50,000
 Goods Sent = Rs.5,75,000

Working Note – 3 Petty Cash sent

Spent = Op. Cash + sent – Cl. Cash
Rs.8,000 = 250 + Sent – 120
Sent = Rs.8,000-250+120
Sent = Rs.7,870

Working Note – 4 Cash received from Debtors

Branch Debtors A/c.
Dr Cr
Particulars Amt. In Particulars Amt. In
Rs. Rs.
To Balance B/d 70,000 By Cash 5,12,500
received from
Debtors (Bal.
Fig.)
To Credit Sales WN – 1 5,37,500 By Balance C/d 95,000
6,07,500 6,07,500

Debtors System
Preparation of Branch Account in the books of Head office
New Delhi Branch A/c. for the year ending 31st March 2016
Dr Cr
Particulars Amt. In Particulars Amt. In
Rs. Rs.
To Balance B/d By Cash
Remittances
- Stock 50,000 - Cash Sales 1,50,000
- Debtors 70,000 - Cash from 5,12,500 6,62,500
Debtors
(WN – 4)
- Petty Cash 250 By Balance C/d
To Goods sent to WN -2 5,75,000 - Stock 75,000
Branch
To Bank - Debtors 95,000
- Salaries 30,000 - Petty Cash 120
- Rent 12,000 -
 - Petty Cash WN – 3 7,870
To Profit 87,500
Total 8,32,620 Total 8,32,620

Verification:
Final Accounts System
New Delhi Branch Trading A/c. for the year ending 31st March 2016
Dr Cr
Particulars Amt. In Particulars Amt. In
Rs. Rs.
To Op. Stock 50,000 By Sales
To Goods Sent 5,75,000 - Cash 1,50,000
To GP 1,37,500 - Credit 5,37,500 6,87,500

By Cl. Stock 75,000

Total 7,62,500 Total 7,62,500

New Delhi Branch Profit & Loss A/c. for the year ending 31st March 2016
Dr Cr
Particulars Amt. In Particulars Amt. In
Rs. Rs.
To Salaries 30,000 By GP 1,37,500
To Rent 12,000 -
To Petty Exp. Spent 8,000 -

To Profit 87,500
Total 1,37,500 Total 1,37,500

4. India Sales Ltd. have a head office and many retail branches which are
supplied goods from the head office @20% profit on sales price. Accounts are
kept at head office from where all expenses (except petty expenses) are paid.

Such petty expenses are paid by the branches which are allowed to maintain
petty cash balance of ₹ 300 on imprest system. From the following balances,
as shown by the books, prepare branch account.

Balances on 1st January 2015 Petty Expenses made by the 180

Branch
Petty cash in hand at 300 Cash received from 40,000
branch customers
Stock in hand at branch at 20,000 Bad debts written off 200
sales price
Sundry debtors at branches 4,000 Cash purchases by the 10,500
branch (on permission from
head office)
Sundry creditors at 1,200 Cash paid to creditors 8,000
branches
Furniture and Fixtures at 8,000 Creditors at the end 3,000
branch
Rent prepaid (upto 31st 300 Payments made by the head office
March 2015)
Transactions for the year ended 31st Rent for one year (paid on 1st 1,800
December 2015 were as follows April 2015)
Goods sent to branch 1,04,000 Insurance paid for the year 360
(Less: Returns) ending 31st March 2016
Cash sales at branch 80,000 Salaries 2,000
Credit sales at branch 45,000 Balance on 31st December 2015
Allowances to debtors 500 Stock at cost 30,000
Write off 10% depreciation on furniture.

Solution:
Debtors System
Preparation of Branch Account in the books of India Sales Ltd.
Head office
Branch Account for the year ending 31st December 2015
Dr Cr
Particulars Amt. In Particulars Amt. In
Rs. Rs.
To Balance B/d By Balance B/d
- Petty Cash 300 - Creditors 1,200
- Stock 20,000 -

- Debtors 4,000 By Stock Reserve 20% * 4,000

20,000
- Furniture 8,000 By Goods Sent 20% * 20,800
A/c. (Load) 1,04,000
- Rent Prepaid 300 By Cash WN - 1 1,01,320
Remittances
To Goods Sent 1,04,000 By Balance C/d
To Bank - Rent 1,800/12*3 450
Prepaid
(CY)
- Rent 1,800 - Insurance 360/12*3 90
Prepaid
- Insurance 360 - Stock 30,000
- Salaries 2,000 - Furniture 7,200
- Petty Cash 300
To Balance C/d - Debtors WN - 2 8,300
- Creditors 3,000
To Profit 29,900
Total 1,73,660 Total 1,73,660

Working Note – 1 Cash Remittances

Particulars Amt. In Rs.
Cash Sales 80,000
Cash From Debtors 40,000
Total Collections 1,20,000
Less:
1. Petty Expenses 180
made by the
Branch
2. Cash Purchases 10,500
3. Cash paid to 8,000 18,680
Creditors
Cash Remittances 1,01,320

Working Note – 2 Calculation of Closing Debtors

Branch Debtors A/c.
Dr Cr
Particulars Amt. In Particulars Amt. In
Rs. Rs.
To Balance B/d 4,000 By Allowances 500
To Sales Credit 45,000 By Cash 40,000
By Bad Debts 200
By Balance C/d 8,300
Total 49,000 Total 49,000
5. From the following information, prepare Mumbai Branch Account in the books
of head office for the year ending on 31st March 2013:

Particulars ₹
Opening Stock (at cost) 3,56,000
Opening Debtors 28,000
Opening Petty Cash 500
Furniture (in the beginning) 12,000
Opening Creditors 12,000
Goods sent to Branch (at cost) 10,45,000
Goods returned by Branch to H.O. (at Cost) 17,200
Goods returned by Customers to Branch 13,800
Closing Stock (at cost) 3,76,800
Closing Debtors 1,93,000
Closing Petty Cash 240
Furniture at the end ?
Closing Creditors 12,000
Cheques sent to Branch for Expenses 99,740
Cash received from Debtors 12,78,000
Cash Sales 64,000
Depreciate the furniture @ 10% p.a.

Debtors System
Preparation of Mumbai Branch Account in the books of Head office
Mumbai Branch Account for the year ending 31st March 2013
Dr Cr
Particulars Amt. In Particulars Amt. In
Rs. Rs.
To Balance B/d By Balance B/d
- Stock 3,56,000 - Creditors 12,000
- Debtors 28,000 By Goods 17,200
returned
- Petty Cash 500 By Cash
Remittances
- Furniture 12,000 - Cash from 12,78,000
Debtors
To Goods sent 10,45,000 - Cash Sales 64,000 13,42,000
To Bank 99,740 By Balance C/d
To Balance C/d - Stock 3,76,800
- Creditors 12,000 - Debtors 1,93,000
- - Petty cash 240
To Profit 3,98,800 - Furniture 10,800

Total 19,52,040 Total 19,52,040

Verification:
Opening Stock 3,56,000
Add: Goods sent 10,45,000
(-) Returns 17,200 10,27,800
Available Goods 13,83,800
Less: Closing Stock 3,76,800
COGS 10,07,000

Sales:
Cash Sales 64,000
Credit Sales 14,56,800
Total Sales 15,20,800
Less: Returns (13,800)
Net Sales 15,07,000

COGS = Sales – GP
GP = Sales – COGS
= 15,07,000 -10,07,000
= Rs.5,00,000

GP 5,00,000
Less: Expenses 1,00,000
Depreciation ,1,200 1,01,200
NP 3,98,800
Branch Debtors A/c.
Dr Cr
Particulars Amt. In Particulars Amt. In
Rs. Rs.
To Balance B/d 28,000 By Sales 13,800
Returns
To Credit Sales 14,56,800 By Cash 12,78,000
 By Balance C/d 1,93,000
Total 14,84,800 Total 14,84,800

Calculation of Expenses Spent

Opening Petty Cash 500
Add; Cash sent 99,740
1,00,240
Less: Petty Cash 240
Petty Expenses Spent 1,00,000

6. From the following information, prepare a Memorandum trading and profit and
loss account of branches and also show the branch account as it would appear
in the head office books at the end of the year.
Dr. Cr.
Branch Cash Account
Particulars Amount Particulars Amount
in ₹ in ₹
*To Balance 7,500 *By Petty cash 3,000
*To Receipts from debtors 37,500 *By Bank 62,000
*To Cash Sales 25,000 *By Balance 5,000
Total 70,000 Total 70,000

Dr. Cr.
Branch Debtors Account
Particulars Amount Particulars Amount
in ₹ in ₹
*To Balance 3,000 *By Cash 37,500
*To Sales 45,000 *By Discount Allowed 1,000
*By Bad debts 1,500
*By Balance 8,000
Total 48,000 Total 48,000
Dr. Cr.
Branch Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Balance By Balance B/d
- *Cash 7,500 - *Expenses 1,000
Outstanding
 - *Debtors 3,000 *By Bank 62,000
- *Furniture 7,500 *By Balance 20,500
- *Stock 10,000
*To Goods transferred 45,000
*To Furniture Purchased 2,500
*To Sundry Expenses 8,000
Total 83,500 Total 83,500
Closing stock at branches was ₹4,000 and expenses outstanding were ₹900.
Depreciation at 10% of the book value has to be provided on furniture.

Solution:
Required
1. Memorandum Branch Trading A/c.
2. Memorandum Branch Profit & Loss A/c.
3. Branch A/c. (Corrected)

Dr. Cr.
Memorandum Branch Trading Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Opening Stock 10,000 By Sales
To Goods Transferred 45,000 - Cash 25,000
To GP 19,000 - Credit 45,000
By Cl. Stock 4,000
Total 74,000 Total 74,000

Dr. Cr.
Memorandum Branch Profit & Loss Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Petty Cash (Expenses) 3,000 By GP 19,000
To Discount 1,000
To Bad Debts 1,500
To Sundry Exp – Rs.8,000
Less: O/s (Op)- Rs. (1,000)
Add: O/s(Cl) – Rs. 900 7,900
To Depreciation 1,000
To Profit 4,600
Total 19,000 Total 19,000
Dr. Cr.
Corrected Reconciled Branch Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Balance B/d (Wrong) 20,500 By Balance C/d (Cl. Assets)
- Branch Cash 5,000
To Balance C/d (Cl. Lia.) - Debtors 8,000
- Exp. O/S 900 - Stock 4,000
To Profit 4,600 - Furniture 9,000
Total 26,000 - 26,000

Branch Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Balance By Balance B/d
- *Cash 7,500 - *Expenses 1,000
Outstanding
- *Debtors 3,000 *By Bank 62,000
- *Furniture 7,500 By Balance
- *Stock 10,000 - Branch Cash 5,000
*To Goods transferred 45,000 - Debtors 8,000
*To Furniture Purchased 2,500 - Stock 4,000
*To Sundry Expenses 8,000 - Furniture 9,000
To Balance C/d
- Exp O/s 900
To Profit 4,600
Total 89,000 Total 89,000

Working Note – 1
Dr. Cr.
Branch Furniture Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Balance B/d 7,500 By Depreciation 1,000
To Bank 2,500 By Balance C/d 9,000
-
Total 10,000 Total 10,000
7. X Ltd. having its principal place of business at Chennai has branches at
Lucknow, Delhi and Chandigarh. The principal office purchase goods and
transfers them to the branches at selling prices. the following details available
for the calendar year 2018 are furnished to you, to enable you to prepare a
combined trading account in columnar form:
Balances at the end of the business of 2018
Principal Lucknow Delhi Chandigarh
Office
Stock on 1s January 2018 15,000 6,000 5,000 5,000
Purchases 1,40,200 - - -
Sales - 64,000 60,000 36,000
Remittances received from 1,48,000 60,000 52,000 36,000
branches
Lucknow Branch (Dr) 10,000
Delhi Branch (Dr.) 13,000
Chandigarh Branch (Dr.) 3,600
st
Stock on 31 December 2018 24,000 8,000 6,000 6,000
The principal office invoices goods to the branches at fixed sales price but
maintain branch account in its own books at cost price. show branch accounts
in Chennai Office Books.

Solution:
Required
1. Combined Trading Account – To Know Goods sent
2. Branch Account
In the Books of Head Office
Combined Trading Account for the year ending 31st December 2018
Dr Cr
Particulars Lucknow Delhi Chandi Total Particulars Lucknow Delhi Chandi Total
garh garh
To Op. 4,800 4,000 4,000 12,800 By Sales 64,000 60,000 36,000 1,60,000
Stcok
To Goods 52,800 48,800 29,600 1,31,200 By Cl. 6,400 4,800 4,800 16,000
sent (Bal. Stock
Fig.)
To GP 12,800 12,000 7,200 32,000
Total 70,400 64,800 40,800 1,76,000 Total 70,400 64,800 40,800 1,76,000
 Combined Profit & Loss Account for the year ending 31st December 2018
Dr Cr
Particulars Lucknow Delhi Chandi Total Particulars Lucknow Delhi Chandi Total
garh garh
To Nil Nil Nil Nil By GP 12,800 12,000 7,200 32,000
Expenses
To NP 12,800 12,000 7,200 32,000
Total 12,800 12,000 7,200 32,000 Total 12,800 12,000 7,200 32,000

Combined Branch Account for the year ending 31st December 2018
Dr Cr
Particulars Lucknow Delhi Chandi Total Particulars Lucknow Delhi Chandi Total
garh garh
To 10,000 13,000 3,600 26,600 By Cash 60,000 52,000 36,000 1,48,000
Balance Remiitanc
B/d (Net e
Assets)
To Goods 52,800 48,800 29,600 1,31,200 By 15,600 21,800 4,400 41,800
Sent Balance
C/d (Net
Assets)
(Bal. Fig.)
To Bank Nil Nil Nil Nil

To Profit 12,800 12,000 7,200 32,000

Total 75,600 73,800 40,400 1,89,800 Total 75,600 73,800 40,400 1,89,800

Working Note – 1
Calculation of Profit on Cost/Sales

Calculation of Goods sent to Branch (Cost Price)

In the Books of Head Office - Chennai
Dr. Cr.
Stock Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Balance B/d 15,000 By Goods Sent (Bal. Fig.) 1,31,200
To Purchases 1,40,200 By Balance C/d 24,000
-
Total 1,55,200 Total 1,55,200

Cost Value of Goods Sent by HO - Rs.1,31,200

 Working Note – 2 Calculation of Goods sent at Invoice Price
Dr. Cr.
Combined Branch Stock Account (Selling Price/ Invoice Price)
Particulars Amount Particulars Amount
in ₹ in ₹
To Balance B/d 16,000 By Sales 1,60,000
(6,000+5,000+5,000) (64,000+60,000+36,000)
To Goods received from 1,64,000 By Balance C/d 20,000
HO (IP) (8,000+6,000+,6,000)
-
Total 1,80,000 Total 1,80,000

Invoice Value of Goods sent by HO = Rs. 1,64,000

Working Note – 3 Calculation of Profit on Cost/ IP

Invoice Value of Goods sent by HO = Rs. 1,64,000
Less: Cost Value of Goods Sent by HO - Rs.1,31,200
Profit 32,800
Profit on Cost = Rs.32,800/1,31,200 *100 25%
Profit on IP = Rs.32,800/1,64,000 *100 20%

MODEL – 2-WHOLESALE BRANCH

8. Y Ltd. with its H.O. in Delhi invoiced goods to its branch at Patna at 20%
less than the catalogue price which is cost plus 50%, with instruction that
cash sales were to be made at invoice price and credit sales at catalogue
price less discount at 15% on prompt payment.

From the following particulars, prepare the Branch Trading and Profit and
Loss Account for the year ended 31st March 2013 in H.O. books so as to
show the actual profit and loss for the branch for the year.
Particulars Amount ₹
Stock on 1.4.2012 (Invoice Price) 12,000
Debtors ( ,, ) 10,000
Goods received from H.O. (I.P.) 1,32,000
Cash sales 46,000
Credit Sales 1,00,000
Cash received from Debtors 85,635
Discount allowed to Debtors 13,365
 Expense 6,000
Remittance to H.O. 1,20,000
Debtors (31.03.2013) 11,000
Cash in hand (31.03.2013) 5,635
Stock on 31.03.2013 (Invoice Price) 15,000
It was further reported that a part of stock at the branch was lost by fire (not
covered by insurance)during the year whose value is to be ascertained and
provisions should be made for discount to be allowed to Debtors as on
31.03.2013 on the basis of years trend of prompt payment.

Working Note – 1 Price Structure Mechanism

Particulars Pricing Price to Be Profit
Policy Charged Margin
Cost Price 100 CP
Invoice Price 20% Less 150- 20% 120 IP 20
Less (30)
Cata. Price / cost + 50% 100+50 150 SP 50
SP
Let us Assume Cost be Rs.100

Working Note – 2 Calculation of Goods lost by fire

Dr. Cr.
Branch Stock Account (Invoice Price)
Particulars Amount Particulars Amount
in ₹ in ₹
To Balance B/d 12,000 By Cash Sales 46,000
To Goods Received from 1,32,000 By Credit Sales 80,000
Ho 1,00,000/150 * 120
By Goods lost by Fire 3,000
By Balance C/d 15,000
Total 1,44,000 Total 1,44,000

Cost Value of Goods lost by Fire 3,000 / 120 *100 = Rs.2,500

Working Note 3 – Calculation of Provision for Discount
Discount allowed to Debtors = Rs. 13,365
Discount = 15% on Prompt Debtors
15% on Prompt Debtors = Rs.13,365
15% * Prompt Debtors = Rs.13,365
Prompt Debtors = Rs.13,365 / 15%
= Rs.13,365 / 15 * 100
= Rs.89,100
Total Debtors (op. Drs + Credit sales) = 10,000 + 1,00,000 = 1,10,000
% of Prompt Debtors = 89,100/1,10,000 * 100 = 81%

Provision
Closing Debtors as on 31-3-2013 Rs.11,000
Prompt Closing Debtors Rs.11,000 * 81% =
Rs.8,910
Provision for Discount on Prompt Closing Debtors Rs.8,910 *15% =
Rs.1,337

In the Books of Y Ltd. Head Office

Dr. Cr.
Patna Branch Trading Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Op. Stock 10,000 By Sales
12,000/120*100
To Goods Sent 1,10,000 - Cash 46,000
1,32,000/120*100
To GP 41,000 - Credit 1,00,000
By Cl. Stock
(15,000/120*100) Rs.12,500
Add: Goods by Fire 15,000
Rs.2,500
Total 1,61,000 Total 1,61,000

Dr. Cr.
Patna Branch Profit & Loss Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Discount 13,365 By GP 41,000
To Expenses 6,000 -
To Goods lost by fire (WN 2,500 -
– 2)
To Provision for discount 1,337
(WN – 3)
To NP 17,798
Total 41,000 Total 41,000

9. M/s. Nathai & Co. with their head office at Bangalore have a branch at
Shrinagar. They supply goods to its branch at selling price less 20%. The
company as well as branch sell goods to consumers at a profit of 100% on
cost. Nathai & Co, also sells goods to their approved stockists at the same
price at which they are selling to their branch at Shrinagar.

From the following particulars prepare Trading account of the Head office and
of the branch for the year of their business and show the provision for
unrealized profits on stock at the branch supplied by the head office.

Head Office (₹) Branch (₹)

Stock in the beginning 30,000 1,600
Purchases during the year 2,56,000
Goods sent to the branch 40,000
Goods received from the head office 40,000
Goods sold to approved stockist 60,000
Goods sold to customers 1,20,000 36,000
Solution:
Working Note – 1 Price Structure Mechanism
Particulars Pricing Price to Be Profit
Policy Charged Margin
Cost Price 100 CP
Branch SP – 20% 200-(20% 160 IP 60
of Rs.200)
Consumers Cost + 100+100 200 SP 100
100%
Stockists SP – 20% 200-(20% 160 IP 60
of Rs.200)
Let us Assume Cost be Rs.100
Working Note – 2 Calculation of Closing stock of Head office (CP)
COGS = Sales - GP
COGS = Op + Pur – Cl

Missing Data = Cl Stock

Cl Stock = OP + Pur - COGS
Particulars Cost Value Amount In Rs.
Opening Stock 30,000
+ Purchases 2,56,000
2,86,000
- COGS
(A) Goods Sent 40,000 * 100/160 25,000
to Branch
(B) Stockists 60,000 * 100/160 37,500
(C) Consumers 1,20,000 * 100/200 60,000 1,22,500
CLOSING STOCK 1,63,500

HO Profit = 15,000 + 22,500 + 60,000 = Rs.97,500 GP

Working Note – 3 Calcualtion of Closing Stock of Branch (IP)

Particulars Invoice Value Amount In Rs.
Opening Stock 1,600
+ Purchases Goods Sent 40,000
41,600
- Invoice of 36,000 * 160/200 28,800
Value of
Goods Sold
CLOSING STOCK 12,800
Branch Profit = 7,200 GP

Trading Account for the year ending ?

Dr Cr
Particulars HO Branch Total Particulars HO Branch Total
(CP) (IP)
To Op. 30,000 1,600 31,600 By Goods 40,000 40,000
Stock Sent
To 2,56,000 - 2,56,000 By Goods 60,000 60,000
Purchases sold to
Stockists
To Goods 40,000 40,000 By Sales 1,20,000 36,000 1,56,000
sent
To GP 97,500 7,200 1,04,700 By Cl. 1,63,500 12,800 1,76,300
Stock WN
Total 3,83,500 48,800 4,32,300 3,83,500 48,800 4,32,300

Profit & Loss Account for the year ending ?

Dr Cr
Particulars HO Branch Total Particulars HO Branch Total
To Unrealized 4,800 - 4,800 By GP 97,500 7,200 1,04,700
Profit (Cl
Stock)
12,800*60/160
To Net Profit 93,300 7,200 1,00,500 By 600 - 600
Unrealized
Profit
60/160 *
1,600
Total 98,100 7,200 1,05,300 Total 98,100 7,200 1,05,300

MODEL – 3- STOCK AND DEBTOR SYSTEM

Principles to be followed:
1. All the items in Branch Stock Account should be at Invoice Price Only.
2. Branch Stock Account is Matched (Tallied) when all the items are at
Invoice Price.
3. If Branch Stock Account is not Tallied, then the difference will be
Normal Loss, Abnormal Loss, and Abnormal Gain.
4. The Profit Portion of Branch Stock Account should be removed and
shown in Branch Adjustment Account.
5. Do Not remove Profit portion of three items in Branch Stock Account
a. Cash Sales
b. Credit Sales
c. Sales Returns.
6. Two items in Branch Stock Account are peculiar
a. Normal Loss
b. Abnormal Gain
 The above two items are entirely (100%) transferred to Branch
Adjustment Account.
7. The Result of Branch Adjustment Account is Gross Profit.
8. Five Ledger Account are Common
a. Branch Stock Account (IP)
b. Branch Debtors Account
c. Branch Petty Cash Account
d. Branch Adjustment Account (To calculate GP)
e. Branch Profit and Loss Account (To Calculate NP)

10. ESSKAY Ltd. of Kolkata invoices goods to its Branch at Mumbai at cost
plus 33 1/3 %. From the following particulars prepare the Branch Stock
Account and the Branch Stock Adjustment Account as they would appear
in the books of H.O.

Particulars Amount
₹
Stock at commencement at Branch (at invoice price) 75,000
Stock at close at branch (at invoice price) 60,000
Goods sent to Branch during the year at invoice price (include goods
invoiced at ₹ 10,000 to Branch on 31.03.2013 but not received by the
branch before close of the year) 5,00,000
Return of goods to H.O. (invoice price) 25,000
Cash sales at Branch 4,50,000
Credit sales at Branch 25,000
Invoice value of goods pilfered 5,000
Normal loss at branch due to wastage and deterioration of Stock
(invoice value) 7,500
ESSKAY Ltd. closes its books on 31.03.2013

Solution:
Required:
1. Branch Stock Account
2. Branch Adjustment Account
 In the Books of Head office - Esskay Ltd.
Dr. Cr.
Mumbai Branch Stock Account (IP)
Particulars Amount Particulars Amount
in ₹ in ₹
To Balance B/d 75,000 By Goods Returned 25,000
To Goods Sent 5,00,000 By Cash Sales 4,50,000
To Abnormal Gain 7,500 By Credit Sales 25,000
(Bal. Fig.)
By Goods in Transit A/c. 10,000
By Normal Loss A/c. 7,500
By Goods Pilfered 5,000
(Abnormal Loss) A/c.
By Balance C/d 60,000
Total 5,82,500 Total 5,82,500

Dr. Cr.
Mumbai Branch Adjustment Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Goods In Transit A/c. 2,500 By Stock Reserve A/c. (On 18,750
(1/4 of Rs.10,000) Op. Stock) ¼ of Rs.75,000
To Goods Returned A/c. 6,250 By Goods Sent A/c. (1/4 of 1,25,000
(1/4 of Rs.25,000) Rs.5,00,000)
To Goods Pilfered A/c. 1,250 By Abnormal Gain A/c. 7,500
(1/4 of Rs.5,000)
To Normal Loss (100%) 7,500
To Stock Reserve A/c. (On 15,000
Cl. Stock) 60,000 * ¼
To GP 1,18,750
Total 1,51,250 Total 1,51,250
1,18,750
Profit Portion = Cost Plus 1/3
Formula = % / 100 + %
= 33.33/133.33
= 1/3 / 4/3
= 1/3 * ¾
= ¼ = 25%
Extra Problem by Stock and Debtors System = Profit 9,700
Tip Top Co. New Delhi, has a branch at Kolkatta. It invoices goods to the
branch at selling price which is cost plus 33 ⅓%. From the following
particulars prepare Branch Accounts under Stock and Debtors System in the
Books of Tip Top Co. New Delhi.
₹
st
Stock on 1 January 2015 (Invoice Price) 15,000
st
Debtors on 1 January 2015 11,400
Goods invoiced to Branch during the year at Invoice Price
67,000
Sales at Branch
Cash Sales 31,000
Credit Sales 37,400 68,400
Cash received from debtors 40,000
Discount allowed to customers 300
Bad debts written off 250
Cheques sent to branch – Salaries 5,000
-sundry Expenses 1,700 6,700
st
Stock on 31 December 2015 (Invoice Price) 13,400
Solution:
In the Books of Head Office – Tip Top Co. New Delhi

Dr. Cr.
Kolkata Branch Stock Account (IP)
Particulars Amount Particulars Amount
in ₹ in ₹
To Balance b/d 15,000 By Cash Sales 31,000
To Goods Sent 67,000 By Credit Sales 37,400
By Normal Loss (Bal. Fig.) 200
By Balance C/d 13,400
Total 82,000 Total 82,000

Dr. Cr.
Kolkata Branch Adjustment Account (IP)
Particulars Amount Particulars Amount
in ₹ in ₹
To Normal Loss 200 By Stock Reserve (on Op. 3,750
Stock) ¼ of Rs.15,000
To Stock Reserve (On Cl. 3,350 By Goods Sent (1/4 of 16,750
Stock) ¼ of Rs.13,400 67,000)
To GP 16,950
Total 20,500 Total 20,500

Dr. Cr.
Kolkata Branch Debtors Account (IP)
Particulars Amount Particulars Amount
in ₹ in ₹
To Balance B/d 11,400 By Cash 40,000
To Credit Sales 37,400 By Discount 300
By Bad Debts 250
By Balance C/d 8,250
Total 48,800 Total 48,800

Dr. Cr.
Kolkata Branch Profit & Loss Account (IP)
Particulars Amount Particulars Amount
in ₹ in ₹
To Discount 300 By GP 16,950
To Bad debts 250
To Salaries 5,000
To Sundry Expenses 1,700
To NP 9,700
Total 16,950 Total 16,950

11. Prepare a Branch Account in the books of Head office from the following
particulars for the year ended 31st March 2017 assuming HO supplied goods
at cost plus 25%.

Particulars Amount Particulars Amount

In Rs. In Rs.
Stock on 1-4-2016 (I.P.) 12,500 Bad debts 2,000
Debtors on 1-4-2016 5,000 Allowances to Customers 1,000
Petty Cash on 1-4-2016 1,000 Returns Inwards 1,000
Goods sent to Branch (I.P.) 40,000 Cheques sent to Branch for
Expenses:
Goods return to H.O. (I.P.) 5,000 Rates & Taxes 3,000
Cash Sales 12,000 Salaries 8,000
Cash received from debtors 30,000 Misc. Exps. 1,000
Stock on 31-3-2017 (I.P.) 15,000
Debtors on 31-3-2017 4,000
Petty Cash on 31-3-2017 1,000
(9Marks)
Cost Plus 25%
Cost Be Rs.100
Profit Rs. 25
IP Rs.125
Profit on IP = 25/125 = 1/5
(Or)
Profit = % / 100+% = 25/100+25 = 25/125
In the Books of Head Office

Dr. Cr.
Branch Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Balance B/d By Stock Reserve (On Op. 2,500
Stock) 1/5 of Rs.12,500
- Stock 12,500 By Goods Sent (1/5 of 8,000
Rs40,000)
- Debtors 5,000 By Goods Returned 5,000
- Petty Cash 1,000 By Cash Remittance
To Goods Sent 40,000 - Cash Sales 12,000
To Goods Returned (1/5 of 1,000 - Cash From Debtors 30,000
Rs.5,000)
To Bank A/c. By Balance C/d
- Rates & Taxes 3,000 - Stock 15,000
- Salaries 8,000 - Debtors 4,000
- Misc. Exps. 1,000 - Petty Cash 1,000
To Stock Reserve (1/5 of 3,000
Rs.15,000)
To Profit 3,000
Total 77,500 Total 77,500
Alternative Method

Stock and Debtors System

Required Ledgers
1. Branch Stock A/c.
2. Branch Adjustment A/c.
3. Branch Debtors A/c.
4. Branch Petty Cash A/c.
5. Branch Profit & Loss A/c.

In the Books of HO

Dr. Cr.
1. Branch Stock Account (IP)
Particulars Amount Particulars Amount
in ₹ in ₹
To Balance B/d 12,500 By Goods Returned A/c. 5,000
To Goods Sent A/c. 40,000 By Cash Sales 12,000
To Returns Inwards 1,000 By Credit Sales 33,000
To Abnormal Gain 11,500 By Balance C/d 15,000
(Bal. Fig.)
Total 65,000 Total 65,000

Dr. Cr.
2. Branch Adjustment Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Goods Returned A/c. 1,000 By Stock Reserve A/c. 2,500
To Stock Reserve A/c. 3,000 By Goods Sent A/c. 8,000
To Gross Profit 18,000 By Abnormal Gain 11,500
Total 22,000 Total 22,000
Dr. Cr.
3. Branch Petty Cash Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Balance B/d 1,000 By Balance C/d 1,000
Total 1,000 Total 1,000

Dr. Cr.
4. Branch Debtors Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Balance B/d 5,000 By Cash A/c. (HO) 30,000
To Credit Sales (Bal.Fig.) 33,000 By Bad Debts A/c. 2,000
By Allowances A/c. 1,000
By Returns Inwards A/c. 1,000
By Balance C/d 4,000
Total 38,000 Total 38,000

Dr. Cr.
5. Branch Profit & Loss Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Bad Debts A/c. 2,000 By GP 18,000
To Allowances A/c. 1,000
To Rates & Taxes 3,000
To Salaries 8,000
To Misc. Exps. 1,000
To Net Profit 3,000
Total 18,000 Total 18,000

12. Multichained Stores Ltd. Delhi, has its branches at Lucknow and Chennai.
It charges goods to its Branches at cost plus 25%. Following information is
available of the transactions of the Lucknow Branch for the year ended on
31st March 2013:

Particulars Amount ₹
Balances on 01.04.2012
 Stock (at invoice price)
30,000
Debtors 10,000
Petty Cash 50
Transactions during 2012-13 (Lucknow Branch):
Goods send to Lucknow Branch (at invoice price)
3,25,000
Goods returned to Head Office (at invoice price) 10,000
Cash Sales 1,00,000
Credit Sales 1,75,000
Goods pilfered (at invoice price) 2,000
Goods lost by fire (at invoice price) 5,000
Insurance Co. paid to H.O. for loss by fire at Lucknow 3,000
Cash sent for petty expenses 34,000
Bad debts at Branch 500
Goods transferred to Chennai Branch under H.O. advice 15,000
Insurance charges paid by H.O. 500
Goods returned by Debtors 500
Balance on 31.03.2013
Petty Cash 230
Debtors 14,000

Goods worth ₹15,000 (including above) sent by Lucknow Branch to

Chennai Branch was in-transit on 31.03.2013.

Show the following accounts in the books of Multichained Stores Ltd.:

(a) Lucknow Branch Stock Account; (b) Lucknow Branch Debtors
Account; (c) Lucknow Branch Adjustment Account; (d) Lucknow
Branch Profit & Loss Account, and (e) Stock Reserve Account.
Solution:
1. Lucknow Branch Stock A/c.
2. Lucknow Branch Debtors A/c.
3. Lucknow Branch Adjustment A/c.
4. Lucknow Branch Profit & Loss A/c.
5. Stock Reserve A/c.
Dr. Cr.
Head Office Balance Sheet Extract as on 31-3-2012 (OP)
Liabilities Assets
Fixed Assets
HO Own Fixed Assets XXX
 Add: Lucknow Br FA XXX
Add: Chennai Br FA XXX XXX
Current Assets:
(a) Stock in Trade
- HO Own Stock XXX XXX
- Lucknow Branch (IP) 30,000
Less: Stock Reserve 6,000 24,000
- Chennai Branch XXX
Less: Stock Reserve XXX
- Goods in Transit XXX

Dr. Cr.
Head Office Balance Sheet Extract as on 31-3-2013
Liabilities Assets
Fixed Assets
HO Own Fixed Assets XXX
Add: Lucknow Br FA XXX
Add: Chennai Br FA XXX XXX
Current Assets:
(a) Stock in Trade
HO Own Stock XXX XXX
Add: Lucknow Branch (IP) 48,500
Less: Stock Reserve 9,700 38,800
Add: Chennai Branch XXX
Less: Stock Reserve XXX

1. Lucknow Branch Stock Account (IP)

Particulars Amount Particulars Amount
in ₹ in ₹
To Balance B/d 30,000 By Goods Returned A/c. 10,000
To Goods sent 3,25,000 By Cash Sales 1,00,000
To Sales Returns 500 By Credit Sales 1,75,000
By Goods Pilfered A/c. 2,000
By Goods Lost by fire A/c. 5,000
By Goods Transferred to 15,000
Chennai Br.
By Balance C/d (Bal. Fig.) 48,500
Total 3,55,500 Total 3,55,500
 2. Lucknow Branch Debtors Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Balance B/d 10,000 By Bad Debts 500
To Credit Sales 1,75,000 By Sales Returns 500
By Cash (Bal. Fig.) 1,70,000
By Balance C/d 14,000
Total 1,85,000 Total 1,85,000

Dr. Cr.
3. Lucknow Branch Adjustment Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Goods returned A/c. 2,000 By Stock Reserve A/c. 6,000
To Goods Pilfered A/c. 400 By Goods Sent A/c. 65,000
To Goods Lost By Fire 1,000
A/c.
To Goods Transferred A/c. 3,000
To Stock Reserve A/c. 9,700
To GP 54,900
Total 71,000 Total 71,000

Dr. Cr.
4. Lucknow Branch Profit & Loss Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Goods Pilfered (CV) 1,600 By GP 54,900
To Goods Lost By fire A/c. 1,000
To Bad debts 500
To Insurance Charges 500
To Petty Expenses 33,820
To NP 17,480
Total 54,900 Total 54,900
Dr. Cr.
5. Stock Reserve Account
Particulars Amount Particulars Amount
in ₹ in ₹
2012
To Branch Adj. A/c. 6,000 By Balance B/d (OP B/s) 6,000
To Balance C/d (Cl B/s) 9,700 By Branch Adj. A/c. 9,700
Total
2013
To Branch Adj. A/c. By Balance B/d 9,700

Working Note -1

Dr. Cr.
Lucknow Branch Petty Cash Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Balance B/d 50 By Petty Expenses (Bal. 33,820
Fig.)
To Cash (HO) 34,000 By Balance c/d 230
Total 34,050 Total 34,050

Dr. Cr.
Goods lost by Fire Account
Particulars Amount Particulars Amount
in ₹ in ₹
To Branch Stock A/c. 5,000 By Branch Adj. A/c. 1,000
By Cash (HO) by Ins. 3,000
By Branch P& L A/c. 1,000
Total 5,000 Total 5,000

13. X Ltd. has two Branches in Cochin and Bangalore. During the year ended
31.03.2013, goods have been invoiced to the Cochin Branch at 20% above
cost and to the Bangalore Branch at 25% above cost. The Branches do not
maintain complete books of account but the following figures are available
for the year ended on 31.03.2013.

Particulars Cochin
Bangalore
 Opening Stock at invoice price 10,000 10,000
Goods Sent to Branch at cost 50,000 40,000
Amount remitted by Branch 80,000 80,000
Amount remitted by H.O. 15,000 15,000
Goods returned by Branch at invoice price 3,000 ------
Cash as on 1.4.2012 2,000 1,000
Cash on 31.3.2013 1,000 500
Goods returned by customers at Branch at selling price 5,000 4,000
Expenses at Branch in cash 5,000 3,000

All sales at the Branches are for Cash. During the year Cochin Branch
purchased Fixed Assets worth ₹4,000 and this amount is included in the
figure of Branch expenses. Cochin Branch transferred to the Bangalore
Branch Stock costing ₹5,000 during the year. The Bangalore Branch
remitted ₹2,000 to Cochin Branch also during the year. There was a
Closing Stock of ₹24,000 valued at invoice price at the Cochin Branch.
There was no Closing Stock at the Bangalore Branch.
Prepare Branch Stock Account, Branch Stock Adjustment Account, Branch
Cash Account and Branch Profit and Loss Account in the Head Office
books ignoring depreciation.

Solution:
Required
1. Branch Stock A/c.
2. Branch Adjustment A/c.
3. Branch Cash A/c.
4. Branch Profit & Loss A/c.

In the Books of Head office of X Ltd

Branch Stock A/c.
Dr Cr
Particulars Cochin Bangalore Particulars Cochin Bangalore
(1/6) (1/5)
To Balance B/d 10,000 10,000 By Goods Returned 3,000
To Goods sent 60,000 50,000 By Goods 6,000
Transferred
To Sales returns 5,000 4,000 By Cash Sales 76,000 73,500
To Goods 6,250
Transferred
To Abnormal Gain 34,000 3,250 By Balance C/d 24,000 -
(Bal. Fig.)
Total 1,09,000 73,500 Total 1,09,000 73,500
 Branch Adjustment A/c.
Dr Cr
Particulars Cochin Bangalore Particulars Cochin Bangalore
To Goods Returned 500 By Stock Reserve 2,500 2,000
(Given)
To Goods Transferred 1,000 By Goods Sent 10,000 10,000
To Stock Reserve (Cl. 4,000 By Goods Transferred 1,250
Stock)
To GP 41,000 16,500 By Abnormal Gain 34,000 3,250
Total 46,500 16,500 Total 46,500 16,500

Branch Cash A/c.

Dr Cr
Particulars Cochin Bangalore Particulars Cochin Bangalore
To Balance B/d 2,000 1,000 By Cash 80,000 80,000
To Cash 15,000 15,000 By Sales returns 5,000 4,000
To Cash Transferred 2,000 By Branch Expenses 5,000 3,000
To Cash Sales (Bal. 76,000 73,500 By Branch 4,000
Fig.) Expenses(WE)
By Cash Transferred 2,000
By Balance C/d 1,000 500
Total 95,000 89,500 Total 95,000 89,500

Branch Profit & Loss A/c.

Dr Cr
Particulars Cochin Bangalore Particulars Cochin Bangalore
To Branch Expenses 5,000 3,000 By GP 41,000 16,500
To Branch Expenses Nil
(WE) 4,000
Less: Branch FA 4,000
To Net Profit 36,000 13,500
Total 41,000 16,500 Total 41,000 16,500
Working Note – 1
Rectification
(a) Correct Entry
Cochin Branch Fixed Assets A/c. Dr 4,000
To Cochin Branch Cash A/c. 4,000
(b) Wrong Entry
Cochin Branch Expenses A/c. Dr 4,000
To Cochin Branch Cash A/c. 4,000
(c) Rectification Entry
Cochin Branch Fixed Assets A/c. Dr 4,000
To Cochin Branch Expenses A/c. 4,000
MODEL - 4-INDEPENDENT BRANCH

Model Entries
S.No. Transactions Head Office Branch
Dr Cr Dr Cr
1 Goods Sent Branch A/c. Dr Goods from HO A/c.
To Goods Sent Dr
To HO A/c.
2 Goods returned by Goods A/c. Dr HO A/c. Dr
Branch to HO To Branch A/c. To Goods from HO
A/c.
3 Cash sent by Branch to HO Cash A/c. Dr HO A/c. Dr
To Branch A/c. To Cash A/c.
4 Goods sold by Branch No Entry Cash A/c or Debtors
to their Customers A/c. Dr
To Sales A/c.
5 Goods sold by HO to their Cash / Debtors A/c. No Entry
Customers Dr
To Sales
6 Branch Expenses Paid by Branch A/c. Dr Expenses A/c. Dr
HO To Cash A/c. To HO A/c.
7 Branch Expenses Paid by No Entry Expenses A/c. Dr
Branch To Cash A/c.
8 Goods transferred from one Receiving Branch Receiving Branch:
Branch to Another Branch A/c. Dr Goods A/c. Dr
To Giving Branch To HO A/c.
A/c. Giver Branch
HO A/c. Dr
To Goods A/c.
9 Branch Purchases No Entry Purchases A/c. Dr
from Supplier To Creditors A/c.
10 HO received cash from Branch Cash A/c. Dr HO A/c. Dr
Debtors To Branch a/c. To Debtors A/c.
11 Branch received cash from No Entry Cash A/c. Dr
Debtors To Debtors A/c.
12 FA Purchased by HO in Cash FA A/c. Dr No Entry
To Cash A/c.
13 FA purchased by HO but paid by FA A/c Dr HO A/c. Dr
Branch To Branch A/c. To Cash A/c.
14 FA Purchased by Branch in Cash No Entry FA A/c. Dr
To Cash A/c.
15 FA Purchased by Branch and Branch A/c. Dr FA A/c. Dr
Paid by HO To Cash A/c. To HO A/c.
16 Cash paid by HO to settle Branch A/c. Dr Creditors A/c. Dr
Branch Creditors To Cash A/c. To HO A/c.

14. Journalize the following transactions in the books of Head Office. Delhi
Branch and Agra Branch :
(a) Goods worth ₹ 50,000 are supplied by Delhi Branch to Agra Branch
under the instructions of Head Office.
 (b) Delhi Branch draws a bill receivable for ₹ 40,000 on Agra Branch
which sends its acceptance.
(c) Delhi Branch received ₹ 10,000 from Agra Branch.
(d) Goods worth ₹ 20,000 were returned by a customer of Agra Branch
to Delhi Branch.
(e) Agra Branch collected ₹ 20,000 from a customer of Delhi Branch.

Solution:
Required:
Journal Entries of the Transactions in the Books of
(a) Head Office
(b) Delhi Branch
(c) Agra Branch
S.No. Transactions Head Office Delhi Branch Agra Branch
Particulars Dr Cr Particulars Dr Cr Particulars Dr Cr
1 Goods Agra Branch A/c. Dr 50,000 HO A/c. Dr 50,000 Goods A/c. Dr 50,000
Supplied To Delhi Branch A/c. 50,000 To Goods sent 50,000 To HO A/c. 50,000
by Delhi Br
to Agra Br
2 Delhi Br Delhi Branch A/c. Dr 40,000 B/R A/c. Dr 40.000 HO A/c. Dr 40,000
draws B/R To Agra Branch A/c. 40,000 To HO A/c. 40,000 To B/P A/c. 40,000
on Agra Br
3 Delhi Br Delhi Branch A/c. Dr 10,000 Cash A/c. Dr 10,000 HO A/c. Dr 10,000
received To Agra Branch A/c. 10,000 To HO A/c. 10,000 To Cash A/c. 10,000
cash from
Agra Br.
4 Agra Br Delhi Branch A/c. Dr 20,000 Goods A/c Dr 20,000 HO A/c. Dr 20,000
Cus. To Agra Branch A/c. 20,000 To HO A/c. 20,000 To Drs A/c. 20,000
returned
goods to
Delhi Br
5 Agra Br Agra Branch A/c. Dr 20,000 HO A/c. Dr 20,000 Cash A/c. Dr 20,000
received To Delhi Branch A/c. 20,000 To Drs A/c. 20,000 To HO A/c. 20,000
cash from
Delhi Cust.

15. A Delhi head office passes one entry at the end of each month to adjust the
position arising out of inter- branch transactions during the month. From the
following inter-branch transactions in March 2013, make the entries in the
books of Delhi Head office.

(a) Kolkata Branch :

(i) Received goods from Patna branch ₹ 9,000 and Ahmedabad branch ₹
6,000.
(ii) Sent goods to Ahmedabad branch ₹ 15,000 and Patna branch ₹
12,000.
(iii) Sent acceptances to Patna branch ₹ 6,000 and Ahmedabad branch ₹
3,000.
 (b) Kanpur branch [apart from (a) above] :
(i) Sent goods to Ahmedabad branch ₹ 9,000.
(ii) Received B/R from Ahmedabad branch ₹ 9,000.
(iii) Received cash from Ahmedabad branch ₹ 5,000.
Solution:
In the Books of Head Office
Inter Branch Transactions Reconciliation Statement
S.No. Transactions Kolkatta Branch Patna Branch Ahmedabad Kanpur Branch
Branch
Dr Cr Dr Cr Dr Cr Dr Cr
(a) Kolkatta Branch
(i) Received goods from Patna branch ₹ 15,000 9,000 6,000
9,000 and Ahmedabad branch ₹ 6,000.
(ii) Sent goods to Ahmedabad branch ₹ 27,000 12,000 15,000
15,000 and Patna branch ₹ 12,000.
(iii) Sent acceptances to Patna branch ₹ 9,000 6,000 3,000
6,000 and Ahmedabad branch ₹ 3,000.
(b) Kanpur Branch
(i) Sent goods to Ahmedabad branch ₹ 9,000 9,000
9,000
(ii) Received B/R from Ahmedabad branch 9,000 9,000
₹ 9,000.
(iii) Received cash from Ahmedabad branch 5,000 5,000
₹ 5,000
Total 15,000 36,000 18,000 9,000 27,000 20,000 14,000 9,000
Balance C/d 21,000 9,000 7,000 5,000
Total 36,000 36,000 18,000 18,000 27,000 27,000 14,000 14,00
0
Balance B/d 21,000 9,000 7,000 5,000
Journal Entry for Inter Branch Transactions in the Books of Head Office
Patna Branch A/c. Dr 9,000
Ahmedabad Branch A/c. Dr 7,000
Kanpur Branch A/c. Dr 5,000
To Kolkatta Branch A/c. 21,000

16. Give Journal entries in the books of Head office to record the following
transactions on the closing date 31st March 2016
a. Depreciation amounting to ₹11,000 on Kolkata Branch fixed assets
when such accounts are opened in books of Head office
b. Goods amounting to ₹7,500 transferred from Kolkata Branch to Delhi
Branch under the instruction from Head office.
c. The Delhi Branch paid ₹2,10,000 for machinery purchased by Head
office in Delhi
d. The Kolkata Branch collected ₹8,000 from a Kolkata customer of the
Head office.
e. Goods of ₹20,000 sent by the Head office to Delhi Branch on 28 th
March and received by the later on 10th April 2016.
Solution:
Required:
Journal Entries in the Books of Head Office
Date Particulars L/F Dr Cr
/S.No.
1 Depreciation amounting to ₹11,000 on Kolkata Branch fixed assets
when such accounts are opened in books of Head office
Kolkata Branch Profit & Loss A/c. Dr
(or) 11,000
Kolkata Branch Depreciation A/c. Dr
To Kolkata Branch Fixed Assets A/c. 11,000
2 Goods amounting to ₹7,500 transferred
from Kolkata Branch to Delhi Branch
under the instruction from Head office
Delhi Branch A/c. Dr 7,500
To Kolkata Branch A/c. 7,500
3 The Delhi Branch paid ₹2,10,000 for
machinery purchased by Head office in
Delhi
Machinery A/c. Dr 2,10,000
To Delhi Branch A/c. 2,10,000
4 The Kolkata Branch collected ₹8,000 from
a Kolkata customer of the Head office.
Kolkata Branch A/c. Dr 8,000
To Debtors A/c. 8,000
5 Goods of ₹20,000 sent by the Head office
to Delhi Branch on 28th March and
received by the later on 10th April 2016.
31-3- Goods – in – Transit A/c. Dr
2016 To Delhi Branch A/c.

Goods in Transit
Goods of ₹20,000 sent by the Head office to Delhi Branch on 28 th
March and received by the later on 10th April 2016.
 In the Books of HO
Date Particulars L/F Dr Cr

28-3- Delhi Branch A/c. Dr

16 To Goods Sent A/c.
31-3- Goods – In Transit A/c. Dr
16 To Delhi Branch A/c.
Goods of ₹20,000 sent by the Branch to HO on 28th March and
received by the later on 10th April 2016.
In the Books of HO
Date Particulars L/F Dr Cr
28-3- No Entry
16
31-3- Goods in Transit A/c. Dr
16 To Branch A/c.
10-4- Branch A/c. Dr
16 To Goods Sent A/c.

17. Salt Lake Corporation presented the following trial balance on 31.03.2013
to the H.O. at New Delhi.
Particulars Debit Particulars Credit
Amount ₹ Amount ₹
Delhi H.O. 6,480 Sales 76,000
Stock 1.4.2012 12,000 Goods supplied to H.O. 12,000
Purchase 35,600 Creditors 3,700
Goods Return From H.O. 18,000
Salaries 3,000
Debtors 7,400
Rent 1,920
Misc. Expense 940
Furniture 2,800
Cash and Bank 3,560

Additional Information:
The branch account on H.O. books on 31.03.2013 stood at ₹ 920 (Debit).
On 31.03.2013, the, H.O. forwarded goods to the value of ₹5,000 to the
branch which are received on 3rd July.
A cash remittance of ₹2,400 by branch on 29th March 2013, was
received by the H.O. on 2nd April 2013.
 Closing Stock was valued at ₹5,400
Show the incorporation entries in the books of H.O. showing separate
Branch Trading and Branch Profit and Loss Account, and Prepare
Branch Account and Branch Balance Sheet also in H.O. books.
Solution:
Required
1. Incorporation Entries
2. Branch Trading A/c.
3. Branch Profit & Loss A/c.
4. Branch Accounts
a. Alternative – 1
b. Alternative – II Debtors Method
c. Alternative – III Final Accounts Method
5. Branch Balance Sheet

Alternative – 1
Reconciliation
In the Books of Head Office New Delhi
Salt Lake Corporation Branch A/c.
Dr Cr
Particulars Rs. Particulars Rs.
To Balance B/d 920 By GIT A/c. 5,000
To Balance C/d 6,480 By CIT A/c. 2,400
Total 7,400 Total 7,400
By Balance B/d 6,480

In the Books of HO
Salt Lake Corporation Branch Trading A/c.
Dr Cr
Particulars Rs. Particulars Rs.
To Op. Stock 12,000 By Sales 76,000
To Purchases 35,600 By Goods supply to 12,000
HO
To Goods Return from 18,000 By Cl. Stock 5,400
HO
To GP 27,800
Total 93,400 Total 93,400

Salt Lake Corporation Branch Profit & Loss A/c.

Dr Cr
Particulars Rs. Particulars Rs.
To Salaries 3,000 By GP 27,800
To Rent 1,920
To Mis. Exp. 940
To NP 21,940
Total 27,800 Total 27,800
 Branch Balance sheet as at 31-3-2013
Liabilities Assets
Particulars Amt. In Rs. Particulars Amt. In Rs.
Capital Funds Non Current Assets
HO / Capital Fund (6,480) 1. Furniture 2,800
Add: GIT 5,000 -
Add: CIT 2,400 -
- 920
Add: NP 21,940 22,860
Non Current Liabilities Current Assets
1. Debtors 7,400
Current Liabilities -
1. Creditors 3,700 2. Cash& Bank 3,560
Add: CIT 2,400 5,960
3. Stock 5,400
Add: GIT 5,000 10,400

Total 26,560 Total 26,560

Alternative – II
Salt Lake Corporation Branch A/c.
Dr Cr
Particulars Rs. Particulars Rs.
To Balance B/d 920

To Balance C/d By Balance C/d

- Creditors 3,700 - Furniture 2,800
- Debtors 7,400
To NP (Bal. Fig.) 21,940 - Cash 5,960
- Stock 10,400
26,560 Total 26,560
Alternative – III
Salt Lake Corporation Branch A/c.
Dr Cr
Particulars Rs. Particulars Rs.
To Balance B/d 920 By Br. Trading A/c. 65,600
To Br. Trading A/c. 93,400 By Br. Profit & Loss 5,860
A/c.
To Br. Creditors A/c. 3,700 By Furniture A/c. 2,800
- By Debtors A/c. 7,400
By Stock A/c. 5,400
By Cash A/c. Dr 3,560
By GIT A/c. 5,000
By CIT A/c. 2,400
Total 98,020 Total 98,020

Incorporation Entries in the Books of HO

Date Particulars L/F Dr Cr
/S.No.
 1 Closing Entry for the Branch Trading Account (Dr)
Br. Trading A/c. Dr (12,000+35,600+18,000) 65,600
*To Branch A/c. 65,600
2 Closing Entry for the Branch Trading Account (Cr)
*Branch A/c. Dr 93,400
To Br. Trading A/c. (76,000+12,000+5,400) 93,400
3 GP Transfer
Br. Trading A/c. Dr 27,800
To Br. Profit & Loss A/c. 27,800
4 Closing Entry for the Branch Profit & Loss Account (Dr)
Br. Profit & Loss A/c. Dr 5,860
*To Branch A/c. (3,000+1,920+940) 5,860
5 NP Transfer
Br. Profit & Loss A/c. 21,940
To General Profit & Loss A/c. 21,940
6 Assets Incorporation
Furniture A/c. Dr 2,800
Debtors A/c. Dr 7,400
Stock A/c. Dr 5,400
Cash A/c. Dr 3,560
*To Branch A/c. 19,160
7 Liabilities Incorporation
*Branch A/c. Dr 3,700
To Creditors A/c. 3,700
8 Goods in Transit Adjustment
GIT 5,000
*To Branch A/c. 5,000
9 CIT Adjustment
CIT A/c. Dr 2,400
*To Branch A/c. 2,400

18. Puskar Enterprise has its H.O. in Ranchi and a branch in Imphal. The
following Trial Balance has been extracted from the books of accounts as at
31st March, 2013:
Particulars Head office Branch
Dr. ₹ Cr. ₹ Dr. ₹ Cr. ₹
Capital --- 16,50,000 --- ---
*Debtors 3,00,000 --- 1,80,000 ---
Creditors -- 1,50,000 --- ---
Purchases 27,42,000 --- --- ---
Sales --- 25,50,000 --- 13,11,000
Goods sent to Branch
--- 11,40,000 11,25,000 ---
at I.P.
*Fixed Assets (Net) 10,50,000 --- 2,00,000 ---
Stock (1.4.2012) 24,000 --- 60,000 ---
Stock Adjustment
- --- - 12,000 --- ---
(Unrealised Profit)
*H.O./Branch Current
5,25,000 --- --- 3,60,000
A/c
Administrative &
8,41,500 --- 74,500 ---
Selling Expenses
*Cash and Bank 46,500 --- 39,000 ---
Provision for Bad
--- 27,000 --- 7,500
Debts
55,29,000 55,29,000 16,78,500 16,78,500

Other relevant information:

1) All goods are purchased by the H.O. Goods are sent to branch at
cost plus 25%.
2) Stock 31.3.2013 are valued at:
i. H.O. ₹ 36,000
ii. Branch ₹ 45,000 (Invoice Price)
3) Depreciation is to be provided on fixed assets at 10% on book value.
4) Bad debts provision is to be maintained at 5% on debtors as at the
end of the year.
5) Cash-in-transit from branch to H.O. at 31st March 2013 was
₹1,50,000.
6) Goods-in-transit from H.O. to branch at 31st March, 2013 at invoice
price was ₹15,000.

Prepare in Columnar from, the branch and H.O. Trading and Profit and Loss
Accounts for the year ended 31st March, 2013 and a combined Balance Sheet
of Puskar Enterprises as on that date.
Solution:
Required
1. Columnar Branch Trading and Profit & Loss A/c.
2. Consolidated Balance Sheet of HO
 Columnar HO and Branch Trading A/c for the year ending 31-3-2013
Dr Cr
Particulars HO Branch Particulars HO Branch
To Op. Stock 24,000 60,000 By Sales 25,50,000 13,11,000
To Purchases 27,42,000 By Goods Sent 11,40,000
To Goods HO 11,25,000 By Cl. Stock 36,000 45,000
To GP 9,60,000 1,71,000
37,26,000 13,56,000 Total 37,26,000 13,56,000

Columnar HO and Branch Profit & Loss A/c for the year ending 31-3-2013
Dr Cr
Particulars HO Branch Particulars HO Branch
To Adm & Selling Exp. 8,41,500 74,500 By GP 9,60,000 1,71,000
To Stock Reserve 12,000 ByOld Provision for BD 27,000 7,500
To Depreciation 1,05,000 20,000 By Stock Reserve 12,000
To New Provision 15,000 9,000
To NP 25,500 75,000
.Total 9,99,000 1,78,500 Total 9,99,000 1,78,500

Balance sheet as at 31-3-2013

Liabilities Assets
Particulars Amt. In Rs. Particulars Amt. In Rs.
Capital Funds Non Current Assets
Capital 16,50,000 2. FA
Add: Profit - HO 10,50,000
- HO 25,500 - Branch 2,00,000
- Branch 75,000 17,50,500 12,50,000
Less: Dep (1,25,000) 11,25,000
3. Branch Adj
- HO 5,25,000
- Branch (3,60,000)
Less: CIT (1,50,000)
Less: GIT (15,000) Nil
Non Current Liabilities Current Assets
Nil 2. Debtors
Current Liabilities - HO 3,00,000
4. Creditors - Branch 1,80,000
- HO 1,50,000 4,80,000
- Branch Nil 1,50,000 Less: Provision (24,000) 4,56,000
(New)
5. Cash
- HO 46,500
- Branch 39,000
- CIT 1,50,000 2,35,500
6. Stock
- HO 36,000
- Branch 45,000
- GIT 15,000
- 96,000
Less: Stock Reserve (12,000) 84,000
Total 19,00,500 Total 19,00,500
MODEL - 5 -FOREIGN BRANCH

19. On 31st December 2015 the following balances appeared in the books of
Chennai branch of English firm having its HO in New York.
Particulars Amount In ₹ Amount In ₹
st
Stock on 1 Jan 2015 2,34,000
Purchases and Sales 15,62,500 23,43,750
Debtors and Creditors 7,65,000 5,10,000
Bills Receivables and Payables 2,04,000 1,78,500
Salaries and Wages 1,00,000
Rent, Rates and Taxes 1,06,250
Furniture 91,000
Bank Account 5,68,650
New York Account 5,99,150
36,31,400 36,31,400

Stock on 31st December 2015 was ₹6,37,500

Branch account in New York Account Books showed a debit balance of
$13,400 on 31st December 2015 and furniture appeared in the Head office
books at $1,750.

The rate of exchange for 1$ on 31st December 2014 was ₹52 and on 31st
December 2015 was ₹ 51. The average rate for the year was ₹50.

Prepare in the Head office books the profit and loss account and the Balance
sheet of the Branch

Solution:
Statement showing Exchange of Currency in terms of $ (HO Denominated
Currency)
Particulars Dr Rs. Cr Rs. Basis Exchange Dr $ Cr $

Exchange Rates Rate per $

Stock on 1st Jan 2015 2,34,000 Op. Rate Rs.52 4,500

Purchases and Sales 15,62,500 23,43,750 Avg. Rate Rs.50 31,250 46,875

Debtors and Creditors 7,65,000 5,10,000 Cl. Rate Rs.51 15,000 10,000
Bills Receivables and Payables 2,04,000 1,78,500 Cl. Rate Rs.51 4,000 3,500

Salaries and Wages 1,00,000 Avg. Rate Rs.50 2,000

Rent, Rates and Taxes 1,06,250 Avg. Rate Rs.50 2,125

Furniture 91,000 Given - 1,750

Bank Account 5,68,650 Cl. Rate Rs.51 11,150

New York Account 5,99,150 Given - 13,400

Exchange Loss Difference in TB 2,000

36,31,400 36,31,400 71,775 73,775

In the Books of HO (New York)

Branch Trading A/c.
Dr Cr
Particulars $ Particulars $
To Op. Stock 4,500 By Sales 46,875
To Purchases 31,250 By Cl. Stock 6,37,500/51 12,500
To GP 23,625
Total 59,375 Total 59,375

Branch Profit & Loss A/c.

Dr Cr
Particulars $ Particulars $
To Salaries & Wages 2,000 By GP 23,625
To Rent Etc. 2,125
To Exchange Loss 2,000
To NP 17,500
Total 23,625 Total 23,625

Branch Balance sheet as at 31-3-2013

Liabilities Assets
Particulars Amt. In $ Particulars Amt. In $
Capital Funds Non Current Assets
HO Capital Fund 13,400 1. Furniture 1,750
Add: NP 17,500 30,900 -
Non Current Liabilities Current Assets
1. Debtors 15,000
Current Liabilities 2. B/R 4,000
1. Creditors 10,000 3. Bank A/c. 11,150
2. B/P 3,500 4. Stock 12,500

Total 44,400 Total 44,400