ACCOUNTING SOLUTIONS

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BRANCH ACCOUNTING
Ans. Meaning of Independent Branch:- Always H.O. maintains books of accounts related to Branch
itself to avoid cost of maintaining accounts at two places. This method is useful when branches
are small. If the branch is big it usually maintains its own books of accounts, extracts own trial
balance and prepare its own trading and profit & Loss Account. When Branch maintains its own
books it is treated as an Independent branch.
Books Maintained by branch
The independent branch maintains the whole lot of books as required by normal business
activity.
The following books are maintained:
a. Journal Book
b. Ledger book
c. Cash Book
d. Bank Account
e. Debtor Ledger
f. Creditor ledger
g. Fixed Assets Ledger
h. Purchase and Sales book
INCORPORATION OF BRANCH TRIAL BALANCE IN HEAD OFFICE BOOKS
As we know that in case of independent branches, separate set of books have been
maintained at every branch. But to get the overall performance and result of the business, the
accounts of Branch should be incorporated in the books of head office. Thus, Trial balance of
branch has been incorporated in the books of Head Office at the year end.
The following is the procedure to incorporate the branch Trial balance under the two
different methods:

FIRST METHOD:- In this method, the trading 7 profit & Loss A/c of the branch is prepared in the
regular way in the books of head Office.
The entries to be passed are as follows:
(i)
Debit branch Trading Account and Credit Branch Account with the total of the items
usually debited to a trading Account, such as opening stock, purchases, wages.
Manufacturing expenses etc.
Branch Trading A/c
Dr.
To branch A/c
(With Opening Stock, Purchases, Direct expenses, Wages)
(ii)
Debit branch account and credit branch trading A/c with the total of items to be
credited to the Trading Account such as sales and closing stock.
Branch A/c
To branch Trading A/c
(With sale & closing Stock)
(iii)
Debit branch Trading Account and Credit branch P & L A/c with the Gross profit revealed
by the Trading A/c.
Branch Trading
To branch P & L
(For Profit)
While for loss entry will be:
Branch P&L
To branch Trading A/c
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ACCOUNTING SOLUTIONS
SCO: 209, First Floor, Sector-36/D. Chandigarh (M): 0172-5017149, 9876149390,9915169925
(iv)

(v)

(vi)

(vii)

(viii)

(ix)

Debit Branch P & L A/c and Credit Branch Account with total of various expenses and
losses, e.g., Salaries, Rent, Depreciation, Discount etc.
Branch P & L A/c
Dr.
To branch A/c
Debit branch A/c and Credit Branch P & L with the total of gains or incomes such as
Discount earned etc.
Branch A/c
Dr.
To Branch P & L
Debit branch P & L A/c and credit General P & L A/c with the Net Profit revealed by
branch p & L A/c. (the entry will be reversed if there is loss).
For Profit
Branch P & L A/c
Dr.
To General P & L A/c
For (Loss)
General P & L A/c
Dr.
To Branch P & L A/c
Debit branch Assets individually and Credit branch Account with the total of the assets.
Branch Assets
To branch A/c
Debit Branch Account and Credit branch Liabilities.
Branch A/c
To branch liab.
Debit Goods in Transit & Cash in Transit and Credit Branch A/c.
(If such items, shown in Adjustment)
Goods in Transit A/c
Dr.
Cash in Transit A/c
Dr.
To branch A/c

SECOND METHOD:-Under

this method branch results are prepared in Memorandum

Manner. The entries needed under this method are:
(a) For incorporating branch net Profit after making Trading & P & L A/c
Branch A/c
Dr.
To General P & L A/c
(b) For incorporating branch Assets & Liabilities, the following entries has been made:
Branch Assets
To branch A/c
Branch A/c
To Branch Liabilities
Thus in the second method, only one entry regarding Net Profit is required after making trading
& P & L as a result reducing the volume of entries.

SCO: 209, F.F.Sector-36/D Chandigarh.0172-5017149, 9876149390, 9915169925

ACCOUNTING SOLUTIONS
SCO: 209, First Floor, Sector-36/D. Chandigarh (M): 0172-5017149, 9876149390,9915169925
1.

What do you mean by an Independent branch? How does it differ from Dependent branch?

Ans. Meaning of an independent Branch

DIFFERNCE BETWEEN INDEPENDENT & DEPENDENT BRANCH

Sr.
1.

Basis
Accounting System

Independent Branch
Dependent Branch
Independent branch keeps full The accounts of branches are
system of accounting at their place. maintained at the Head Office
level. At branch only Cash
Register. Debtors Register are
maintained.
2. Sale of Goods
These branches sell goods received These branches sell only those
from head office as well as from goods which are supplied by the
the purchases made by them.
Head office. They are normally
not allowed to make own
purchases.
3. Point of Payment Branch keep the required cash to All branch expenses of regular
of Expenses
meet the expenses of regular nature like salary, Rent normally
nature with themselves.
paid directly by head office.
Branch managers are allowed to
incur petty expenses only.
4. Remittance of Cash Independent Branches are not All the daily cash sale and
required to remit all the cash daily collection from debtors will be
to head office.
deposited at local bank or
remitted to H.O.
5. Trial Balance
A trial balance has been extracted Trial Balance is not required to be
from the ledger maintained at extracted as accounts are
branch level.
maintained at Head Office.
6. Reconciliation
Reconciliation between branch There is no need of reconciliation
Account in books of head office as accounts are maintained at
and head office Account in the head office level itself.
books of Branch is to be made
before finalising the Accounts.
7. Methods
of Accounting is done on the double Accounting under Dependent
Preparing
Final entry system basis, so Trading/P&L branches can be made by three
Account
A/c has been prepared in normal different methods viz., Debtors
way.
system. Final Account system and
Stock and Debtors system.
Incorporation of branch trail balance in head office books.
2.
How are Branch and Departmental Account Differ?
Ans. Difference between branch & Department Accounts
The following are the main points of difference between branch Account and Departmental
Accounts.
Sr.
Basis
Branch Account
Departmental Account
1. Place of Activity
In case of branch account, the In case of departmental accounts,
same activity of business is done at different activities are done
the various locations either in same under the same roof at one
town or different towns. E.g. Bata location e.g. X Deptt. Store deals
shoes operating at different in Grocery, Gift items, Cards etc.
location through its outlet.
1

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ACCOUNTING SOLUTIONS
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2.

Accounting

3.

Treatment
Expenses

4.

Reconciliation

5.

Types

In case of branch accounting is

done at the head office level
except in case of an independent
branch which kept their own
records.
of As branches are at different
locations and expenses of them are
specifically related to them these
are directly charged to the said
branch.
In
branch
accounting,
Reconciliation of accounts between
H.O. and branch is must activity
because if there is any difference
between two if should be adjusted
accordingly.
Branches can be divided in
different headings like Dependent
Branch,
Independent
branch,
foreign Branch, wholesale and
Retail Branch.

In case of departmental account

there is no way to maintain
separate set of accounts as all
activities done collectively.
In
departmental
account,
expenses are common for whole
business and as a result these
have been allocated to different
departments on some equitable
basis.
In case of departmental accounts
there is no need of reconciliation
as
activities
of
different
departments are at one place.

Departments can be divided only

on basis of activity like Garments
Deptt. Toys Deptt. Grocerry
Deptt. Of one business.

DEBTORS SYSTEM:
This system is adopted generally in those branches which are fairly small in size. Under this
system, the head office opens s separate account for each branch in order to record all transactions
relating to branch. This account is a nominal account in nature and is prepared to calculate profit and
loss for each branch. The goods supplied by the head office to branch may be either at cost price or at
cost plus profit. The following are the journal entries which are passed in the books of the head office
to record branch transactions.
Sr.
Transactions
Debit
Credit
1. When goods are sent to Branch A/c
Goods sent to branch A/c
branch
2. For return of goods to Goods sent to Branch A/c
Branch A/c
H.O.
3. For
transferring
the Goods sent to branch A/c
Purchase (in trading concerns)
balance of goods sent to
or Trading A/c (in mfg.
branch A/c
Concern)
4. When cheque or draft is Branch A/c
Bank A/c
sent for branch expenses
5. When cheque or draft is Bank A/c
Branch A/c
received for remittance
6. For closing balance assets Branch Assets A/c
Branch A/c
7. For beginnings balances Branch A/c
Branch Assets A/c
of assets (next year)
8. For closing balances of Branch A/c
Branch Liabilities A/c
liabilities
9. For opening balances of Branch Liabilities A/c
Branch A/c
liabilities (next year)
10. For branch profit
Branch A/c
General profit & Loss A/c
11. For branch loss
General profit & Loss A/c
Branch A/c

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ACCOUNTING SOLUTIONS
SCO: 209, First Floor, Sector-36/D. Chandigarh (M): 0172-5017149, 9876149390,9915169925
Invoice Price Method:- When the goods are sent by the head office to the branch at invoice price, i.e.,
cost plus some percentage 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:
(a) In order to keep secret from the branch manager the cost price of the goods and profit made,
so that the branch manager may not start a rival and competitive business with the concern;
and
(b) In order to have effective control on stock i.e., stock at any time must be equal to opening
stock plus goods received from head office minus sales made at the branch.
Accounting Adjustment 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 of loss made
by the branch, some accounting adjustments, as stated below are required to be passed in the books
of the H.O. for eliminating the profit element included in (1) branch opening stock, (2) goods sent to
branch less returns made by branch to head office and (30 branch closing stock.
(i)
For adjustment of excess price of the opening stock at branch
Stock Reserve A/c
Dr.
To Branch A/c
(ii)
For adjustment of excess price of the closing stock of unsold goods at branch
Branch Account
Dr.
To Stock Reserve A/c
(iii)
For adjustment of excess price of goods sent to branch less returns to head office
Goods sent to branch A/c
Dr.
To branch A/c
Closing stock should always be valued at cost or market price whichever is lower.

FINAL ACCOUNT SYSTEM:According to this system, the profit or loss made by the branch is determined by preparing
branch Trading and Profit & Loss Account at cost price. It should be carefully noted that all expenses
whether paid by the head office of by the branch are debited to the Trading and profit & Loss Account
prepared for the branch. The profit and loss as disclosed by this account is exactly same as that of the
branch account prepared according to Debtors/ Synthetic system. It should be further noted that the
branch. Trading and profit & Loss Account is only a memorandum account not forming part of the full
accounting system. If the branch account is also prepared, in addition to the branch Trading & profit
and loss Account, then such a branch account will be treated as a personal account and not considered
in the nature of a nominal account under the Debtors system. Then branch account under such
circumstances, will show a debit balance which will be equal to net worth or net assets available at
branch at the end of the according period. The working of this system will be clear from the following
examples.

STOCK AND DEBTORS SYSTEM:

There is yet another method of calculating profit and loss of a branch which is popularly known
as Stock & Debtors system or analytical Method. It is an elaborate method of keeping branch
accounts and is considered very useful where the branch turnover is sufficiently large and where 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 Debtors system, separate
accounts are opened for various transactions at branch. According to this system, a separate ledger for
each branch will have to be maintained at head office for keeping accounts, such as branch stock,
branch Debtors, goods sent to branch, branch Expenses, and branch Asset etc. The branch cash or
petty Cash account may sometime be required to be maintained if the branch is permitted to use the
available cash for making certain payments. Preparation of Branch stock Account will, however, vary
from branch to branch depending upon the method of charging out the goods sent to branch. The
working of the system will be clear from the following example.

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ACCOUNTING SOLUTIONS
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(a)
1.

2.

3.

4.

5.

6.

Goods charged to Branch at Cost Price:

In this case the following accounts are prepared in the books of the head office.
Branch Stock Account:- This account is similar to that of the branch Trading Account where
items like goods received from head office, goods returned to head office goods sold by branch
and goods returned by customers to the branch etc. are dealt with This account is debited with
opening stock at branch, goods sent to branch and goods returned to the branch by customers.
This account is credited with cash sales, credit sales made by the branch, the goods returned by
branch to the head office and closing stock at branch. The balance of this account represents
gross profit or gross loss and the same is transferred to branch Profit & Loss Account.
Good sent to Branch Account:- This account maintained in the books of the head office is
credited with goods sent to branch and is debited with goods returned by branch. At the end of
the accounting period, the balance of this account is transferred to Purchases Account in case of
trading concern and to the Trading Account in case of a manufacturing concerns.
Branch Debtors Account:- This account is prepared when the branch sells goods on credit. It is
necessary for recording all transactions concerning branch debtors and for ascertaining the
balance of debtors at branch.
Branch Petty Cash Account:- This account is maintained where the branch makes some petty
cash payments. This account is debited with the balance of petty cash available in hand at the
beginning of the accounting year and with cash sent to the branch by the head office for petty
cash and is credited with all petty cash expenses incurred by the branch. The balance of this
petty cash account represent petty cash available in hand at the end of the accounting period.
Branch Profit & Loss Account:-This account is prepared to ascertain the profit or loss made by
the branch during the accounting period. The gross profit or loss at the branch, as determined
from the branch Stock Account is transferred to this account. The various branch expenses or
losses are debited and if there is any income, the same should be credited to this branch profit
& Loss Account. The balance of this account represents net profit or net loss for the year.
Branch Cash Account:-This account is maintained for recording all cash transactions relating to
the branch. This account is considered quite essential where the branch is permitted to
purchase goods locally and to incur expenses at branch out of cash available with the branch.
The following journal entries will be required for preparation of branch accounts
according to stock & Debtors system in the books of H.O.
Sr.
Transactions
Debit
Credit
1.
Goods sent to branch
Branch Stock A/c
Goods sent to branch A/c
2.
Goods returned by branch
Goods sent to branch A/c
Branch stock A/c
3.
Cash sales at branch remitted to Branch Cash A/c
Branch Stock A/c
H.O.
4.
Credit sales at branch
Branch Debtors A/c
Branch Stock A/c
5.
Returns from Customers
Branch stock A/c
Branch Debtors A/c
6.
Bad Debt & discount etc. allowed
Branch Expenses A/c
Branch Debtors A/c
7.
Cash received from branch debtors Branch Cash A/c
Branch Debtors A/c
remitted to H.O.
8.
Shortage of goods in branch stock
Branch P/L A/c
Branch Stock A/c
9.
Surplus of goods in branch stock
Branch Stock A/c
Branch P/L A/c
10. Expenses paid by head office
Branch Expenses A/c
Cash A/c
11
Transfer of branch expenses to Branch P/L A/c
Branch Expenses A/c
branch P/L A/c
12. Goods in transit
Good in transit A/c
Branch Stock A/c
13. Good lost in transit being abnormal Branch P/L A/c insurance Branch Stock A/c
loss
claim receivable A/c (if any
claim is admitted)
14. Transfer of branch gross profit
Branch Stock A/c
Branch P/L A/c
15. Transfer of branch net profit
Branch P/L A/c
General P/L A/c
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ACCOUNTING SOLUTIONS
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GOODS CHARGED TO BRANCH AT SELLING PRICE
The stock and Debtors system, as discussed above is particularly considered very useful and
appropriate where goods are invoiced to the branch t Selling Price. A brief description of various
account opened in the books of the head office is given below:
Branch Stock Account:- this account is prepared in the same way as that when goods are
invoiced at cost, except that all entries are made at invoice price. This method of accounting
helps the head office to exercise a better control over the branch stock. This account clearly
brings into focus the shortage or surplus in stock at branch. The balance of this account, after
posting all the relevant entries should be equal to the stock in hand available at branch, unless
there is any surplus or shortage. The profit or the load included in such surplus or shortage
should be transferred to the branch Adjustment Account while the cost of such surplus or
shortage should be adjusted to the branch profit & Loss Account.
Branch Adjustment Account:- This account is prepared for ascertaining the amount of gross
profit earned by the branch. This is done by eliminating the profit element or the loading
included in the value of opening and closing stock at branch, goods sent to branch, less returns
made by branch to head office and in surplus or shortage in branch stock etc. The balance of
the account represents the gross trading profit or loss which is then transferred to the branch
profit & Loss Account.
Goods sent to branch Account:-the purpose of preparing this account is to ascertain the exact
value of the goods sent to the branch during the accounting period. This account is credited
with the value of goods sent to branch selling price and is debited with the value of goods
returned by the branch at the same invoice value. After adjusting the Loading i.e., the profit
included in such goods, the balance of this account is transferred to Purchases Account.
Branch profit & Loss Account:- This account is prepared to ascertain the net profit or loss at
the branch. The branch gross profit or loss as shown by the branch adjustment account is
transferred to the branch profit & loss account. The branch expanses, shortage of stock at cost
value and losses of stock etc. are debited to the account. This account is further credited with
incomes and gains, if any at branch and cost value of surplus in branch stock etc. The balance
of the account represents net profit or loss made at the branch during the accounting period,
which is finally transferred to general profit & loss account.
Stock Reserve/suspense Account:- This account is prepared to adjust the loads included in the
value of opening and closing stock at branch. This account is credited with the load included in
the closing stock at branch and its balance is carried forward to the next accounting period.
Apart from the above, the other accounts which are required to be prepared
according to Stock & Debtors system under method (B) referred to above, are branch
Expenses Account, Branch Debtors Account, Branch Cash Account and Branch Assets Account
etc. these accounts are prepared in the same way as those when goods sent to branch are
charged at cost, as already stated in method (A) above.
The following journal entries are made relating to various types of transactions under
this method.
(i)
When goods are sent to branch
Branch Stock A/c
Dr.
To goods sent to branch A/c
(ii)
When sales are made by the branch
(a) For Cash Sales
(b)
For Credit Sales
Cash A/c
Dr.
Branch Debtors A/c Dr.
To branch Stock A/c
to branch Stock A/c
(iii)
When cash is received from Debtors
Cash A/c
Dr.
To branch Debtors A/c
(iv)
For discount allowed, allowances and bad debts
Branch Expenses A/c
Dr.
To Branch Debtors A/c
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ACCOUNTING SOLUTIONS
SCO: 209, First Floor, Sector-36/D. Chandigarh (M): 0172-5017149, 9876149390,9915169925
(v)

(vi)

(vii)

(viii)

(ix)

(x)

(xi)

(xii)

(xiii)

(xiv)

(xv)

(xvi)

(xvii)

For agreed allowances to customers off selling price already taken into account while
invoicing.
Branch Adjustment A/c
Dr.
To branch Stock A/c
When goods are returned by branch debtors
Branch Stock A/c
Dr.
To branch Debtors A/c
When goods are retuned by branch debtors direct to head office
Goods sent to branch A/c (cost)
Branch Adjustment A/c (Loading)
To branch Debtors A/c
For normal loss of stock
Branch Adjustment A/c
Dr.
[with invoice price]
To branch Stock A/c
For abnormal loss, waste or leakage or shortage of stock
Branch Adjustment A/c
Dr.
[with loading only]
Branch P. & L. A/c
Dr.
[With cost]
To Branch Stock A/c
[with invoice price]
When goods are transferred from one branch to another branch
Transferor branch
Transferee Branch
Goods sent to branch
Dr.
Branch Stock A/c
Dr.
(With cost)
(With invoice price)
Branch Adjustment A/c
Dr.
To (Goods sent to Branch A/c
(With loading)
(With cost)
To branch Stock A/c
to branch Adjustment A/c
(with invoice price)
(with loading)
For apparent profit over the invoice price
Branch stock A/c
Dr.
To Branch Adjustment A/c
For branch expenses paid in cash
Branch Expenses A/c Dr.
To Cash
For closing branch expenses account (excluding cash in hand at the end) to branch
P. & L. account
Branch Adjustment A/c
(With non-recurring expenses)
Branch P. & L. A/c
Dr.
(With recurring expenses)
To branch Expenses A/c
For adjustment of excess price of the opening stock
Stock Reserve A/c
Dr.
To branch Adjustment A/c
For adjustment of excess price of the closing stock
Branch Adjustment A/c
Dr.
To Stock reserve A/c
For adjustment of excess price of goods sent to branch
Goods sent to branch A/c
Dr.
To Branch Adjustment A/c
For insurance Claim recoverable
Insurance Claim
Dr.
To Branch P. & L. A/c

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ACCOUNTING SOLUTIONS
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(xviii)

(xix)

(xx)

For transfer of balance of branch adjustment A/c (i.e. gross profit)

Branch Adjustment A/c
Dr.
To branch P. & L. A/c
For transfer of profit or loss to general profit and loss account
(a) If profit
(b) If loss
Branch P. & L. A/c
Dr.
General P. & L. A/c
To Generl P. & L. A/c
To branch P. & L. A/c
For closing the goods sent to branch account
Goods sent to Branch A/c
Dr.
To Purchases or Trading A/c

Dr.

DISTINCTION BETWEEN WHOLESALE AND RETAIL PROFIT AT BRANCH

Sometimes head office also sells goods at retail or list price besides sending the goods to
branches at wholesale prices. The difference between eh retail price and wholesale price will be the
profit made by the branch. Suppose if an article costs to head office Rs. 100 and it is supplied to the
branches at Rs. 160 at wholesale price but both head office and branches sell goods at Rs. 200, then,
profit made by the branch will be Rs. 40 (i.e., Rs. 200 Rs. 160) and not Rs. 100 (Rs. 200-Rs.100).
The goods are sent by the head office to the branches at Wholesale price and if all the goods
are sold there is no problem but if some goods remain unsold at the end of the accounting year, these
unsold goods at the branches must be reduced to cost price by making a stock reserve for unrealised
profit for the difference between eh wholesale and cost price and will be debited to the head office
profit and loss account, as previously the head office must have earned profit while sending goods to
the branches. This will be more clear from the following illustration.
BRANCH KEEPING FULL SYSTEM OF ACCOUNTING
Branches keeping full system of accounting or independent branches are those branches
which also purchase goods from the market besides getting the goods from the head office. They can
also supply goods to the head office, pay expenses from the cash rehashed and deposit cash in their
own account. In other words, these branches operate as an independent unit for all practical purposes
but their only link with the head office is that they are owned by the head office and whatever their
profit or loss will be, that belongs to the head office.
Such branches keep complete set of double entry books and prepare their own trial balance,
trading and profit and loss account and balance sheet. Such branches open head office account in
their books. This account is debited by cash sent to the head office, goods supplied to head office,
payment made by the branch for purchase of assets and loss to be borne by the head office and
credited by cash received from the head office, goods received from the head office, depreciation of
branch fixed assets, charge made by head office for rendering services and profit earned by the
branch. Similarly, the head office will also maintain a branch account for each branch. This account will
have the same entries but on the reverse sides.
Now we deal certain transactions which require special attention.
(i)
Purchase of Branch fixed Assets:- Generally the branch fixed assets are maintained in the
books of head office. When an assets is purchased, the following entries are passed.
Head office books
Branch Books
a)
If the payments is Branch fixed Assets A/c Dr.
Head Office A/c Dr.
Made by the branch
To branch A/c
To Cash
b)
If the payments is Branch Fixed Asses A/c Dr.
No Entry
Made by the head
To bank
Office
(ii)
Depreciation of Fixed Assets:- As branch fixed assets are maintained in the books of head
office so entries relating to depreciation will also be passed through head office account.
The following entry will be passed:

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ACCOUNTING SOLUTIONS
SCO: 209, First Floor, Sector-36/D. Chandigarh (M): 0172-5017149, 9876149390,9915169925
H.O. Books
Branch Account

Branch Books
Dr.

P. & L. A/c

To Branch Fixed Assets A/c

Dr.

To Head Office A/c

(iii) Head Office Expenses:- If some services such as administration or technical are rendered by
the head office to the branch then a proportionate charge for such expenses will be made to
each branch by the head office and entry for that will be as follows:
H.O. Books
Branch Account

Branch Books
Dr.

P. & L. A/c

To P. & L. A/c

Dr.
To head Office A/c

(iv) Reconciliation of transit items:- The balance of head office account (in branch books) and
branch account (in head office books) should normally be the same and one will make debit
and other will credit for all transactions affecting these accounts. But these accounts may
differ in balances because of the following reasons:

a) Cash in transit:- Sometimes the branch is remitting the cash to the head office before the
close of the accounting year, say on 28th December, when the account are closed on
31st December (next year). While remitting the cash to the head office the branch will
debit the head office account but if the remittance is received by the head office after the
closing date of accounting year, say on 4th January, then head office will not give a credit
for the same amount of remittance on 31st December, so the two balances, i.e., H.O. A/c
(in branch books) and branch Account (in H.O. passed in the books of branch or head
office (if the intimation of such remittance is received by the head office).
Branch Books
Cash in Transit A/c

Head office Books

Dr.

Cash in Transit A/c

To head office A/c

OR

Dr.

To branch A/c

b) Goods in transit:- Similarly the two balances may differ because of goods in transit
Suppose the head office sent goods to the branch on 28th December but those goods
were received by the branch on 4th January (next year), head office must have debited the
account of branch in its books but there will b no corresponding credit to head office
account in the books of branch; so on the last day of accounting year, i.e., 31st December
the head office will pass the following adjusting entry:
Goods in Transit A/c

Dr.

To Branch A/c
Cash in transit or goods in transit will be shown as an asset in the balance sheet.

SCO: 209, F.F.Sector-36/D Chandigarh.0172-5017149, 9876149390, 9915169925

ACCOUNTING SOLUTIONS
SCO: 209, First Floor, Sector-36/D. Chandigarh (M): 0172-5017149, 9876149390,9915169925
(v) Inter-branch transactions:- if the head office has many branches and there is a possibility that
some branch may supply goods or send cash to the other branch, such transactions among the
branches are called inter-branch transactions. Such transactions may be recorded either by
maintaining a current account of a branch in another branchs books or such transactions may
be recorded by all branches by passing entries thorough head office account. For example, if
goods are supplied by Kolkata branch to Delhi branch and the head office is at Mumbai, then
the following journal entries will be passed in the books of head office and the branches:
Mumbai books

Kolkata Books

Delhi branch A/c Dr.

Head office A/c Dr.

To Kolkata branch

Delhi Books
Goods Received from

To Goods supplied to

other branches A/c

Other branches A/c

Dr.

To head Office A/c

(vi) Cash paid by branch on behalf of H.O.:- if the branch has paid some amount of cash for
purchase made by H.O.) on behalf of H.O. then the following entries will be entered in the
books of H.O. and the branch:
H.O Books
Purchases A/c

Branch Books
Dr.

H.O. A/c

To branch A/c

Dr.

To Cash A/c

(vii) Cash collected by branch on behalf of H.O:- if the branch has collected some cash on behalf of
H.O. (say for calls in arrears from the shareholders of H.O.) then the following journal entries
will be passed in the books of H.O. and the branch:
H.O. Books
Branch A/c

Branch Books
Dr.

Cash A/c

To Calls in Arrears

Dr.

To H.O. A/c

(viii) If a bill is drawn by one branch on another branch: If a bill is drawn by Agra branch on
Mumbai branch and the H.O. is at Delhi, then the following entries will be passed in the books
of H.O. and branches:
H.O. Books

Agra branch

Agra branch A/c Dr.

To Bills payable
B/R A/c

B/R A/c
To H.O.

Mumbai Branch
Dr.

H.O. A/c

Dr.

To B/OP A/c

Dr.

To Mumbai Branch.

SCO: 209, F.F.Sector-36/D Chandigarh.0172-5017149, 9876149390, 9915169925