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  ± Usually carries a line of samples or displays merchandise but does not carry stocks of it.

   ± normally carries stocks of merchandise, which may be obtained solely from the home office or
a portion may be purchased from outside suppliers.

 
Transaction Home office Books
1. A working fund of P10,000 is established Working Fund ± agency 10,000
Cash 10,000

2. Shipped merchandise to agency ( as samples) Samples Inventory- agency 2,000

amounted P2,000 Shipments to agency 2,000

3. Fill sales orders from agency Accounts receivable 90,000

amounted 90,000 sales ± agency 90,000

4. Cost of goods sold, 60,000 Cost of sales ± agency 60,000

Shipments to agency 60,000
 Transactions Home office Books

5. Replenishment of working fund Expenses ± agency 8,000

amounted to 8,000 Cash 8,000

6. Closing Entries Sales ± agency 90,000

Cost of sales 60,000
Expenses 8,000
Agency Income 22,000

7. Close Agency Income to Agency Income 22,000

Income Summary account Income Summary 22,000
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Home office and the branch maintain separate accounting systems. Each maintain full set of books with a
complete self-balancing set of accounts.

   
 !"  

Transactions with outside parties are recorded in the usual manner. Transactions between the home office and a
branch are recorded  
 !  . These accounts are     between home office
and the branch.

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 ± Investment in branch (treated as asset account)

  ± Home office ( treated as liability or equity account)

#
   

   |
  
Transfer Assets to branch Investment in branch xxx Assets xxx
Assets xxx Home Office xxx

Merchandise Shipments Investment in branch xxx Shipment from HO xxx

to branch Shipment to branch xxx Home Office xxx
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If there is Freight Charges Investment in branch xxx Shipment from HO xxx

Shipment to branch xxx Freight in xxx
Cash xxx HO xxx

       

-     are recorded in the # $  #  , and plant assets are  #!|%

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Investment in Branch xxx Office Equipment xxx
Cash xxx Home Office xxx
-    are recorded in the # $ |% rather than on the books of the branch.

Office Equipment - xxx No Entry

Cash xxx
-    the plant assets that are recorded in the books of |%
Office Equipment xxx Home Office xxx
Investment in branch xxx Cash xxx
 
  & 
a. Expenses incurred by the branch but paid by the home office.
b. Expenses incurred by home office on behalf of branch
c. Allocations of expenses incurred by home office. (ex. General advertising)

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Investment in Branch xxx Expenses Account xxx

Expenses Account xxx Home office xxx

Preparation of Combined Financial Statements

Elimination Entry:

1. Home Office xxxx

Investment in Branch xxx

2. Shipments to branch xxx

shipments From Home Office xxx