Branch Accounting

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Advanced Accounting Branch Accounting, Branch Accounting, Presentation Branch Accounting, Accounting.

Transcript of Branch Accounting

Presented By:Bilal Yasir M.Rahat Javaid Razi-ud-din Zuhaib Farooq Asad Sattar Ateeq Taj Noree n Malik Uswah Tahir Ayesha Tahir

Branch Accounting

Branch AccountingIn tro d u ctio nA s a b u sin e ss flo u rish e s , it b e co m e s n e ce ssa ry to o p e n u p b ra n ch e s in v a rio u s o th e r to w n s a n d citie s in o rd e r to m a rk e t its se rv ice s / p ro d u cts w h ich re su lts in th e in cre a se o f its p ro fits . A b ra n ch is g e n e ra lly d e fin e d a s a se ctio n o f a n e n te rp rise th a t is g e o g ra p h ica lly se p a ra te d fro m th e re st o f th e b u sin e ss . T h e a ctiv itie s o f th e b ra n ch a re co n tro lle d b y a h e a d o ffice a n d u su a lly it ca rrie s o n th e sa m e fu n ctio n s a s o f e n te rp rise s . F o r e x a m p le

Branch AccountingvBranch is not a separate legal entity; it is simply a segment of business.

vIn order to exercise great control over the branches it is necessary to ascertain profit or loss made by such branches separately.

vThe head office and branch keep

Need for Branch AccountingvAscertain profit of each branch separately vAscertain the financial position of each branch vAsses the progress and performance of each branches. vFulfill the audit requirement under companies ordinance 1984. vAscertain the quantity of stock held by each branch at the end

Types of Branches

Types of Dependent Branches

Goods transferred From Head office at cost

Wholesale price

Goods transferred From head office at loaded (invoice) price

vThe Accounting arrangement of a branch depends upon its size, the type of activities, the method of operation and degree of control to be exercised by head office. vThe Main methods of accounting for branch transaction are:1.Debtors System 2.Stock and Debtor system

Accounting arrangement of Retail Dependent Branches

vDebtor system

Accounting arrangement of Retail Dependent Branches

vThis system of accounting is suitable for the small size branches. Under this a branch account is opened for each branch in the head office ledger. vHead office may send goods to branch at either at cost price or selling price.

1.Cost price method 2.Selling price method (Invoice price)

1.Cost price method:

Accounting arrangement of Retail Dependent Branches

Under this method at the beginning of the year branch account is debited with the opening balance of assets such as stock (at cost), debtors, petty cash, furniture, prepaid expenses, accrued income, lying with the branch. Similarly, it is credited with the opening balances of liabilities of the branch such as creditors, outstanding salaries, rent. Branch Account Dr. Branch Assets Account (Individual) Journal entry: Branch Liabilities Account (Individual) Dr. Branch Account

Accounting arrangement of Retail Dependent Branches

In the books of Head office Branch Account

Date Jan. 1

Particulars Branch b/d Stock Debtors Petty Cash Furniture Prepaid expenses

Rs

Date Jan.1

Particulars Balance b/d Creditors Outstanding Salaries

Rs

1.Cost price method:

Accounting arrangement of Retail Dependent Branches

Branch Accounting is then debited with the amount of goods sent to the branch (at cost) and other amount remitted to meet various expenses such as, salaries rent and taxes etc. Branch account is credited with the return of goods (at cost) by the branch and receipts from debtors and cash sales. At the year end, branch account is debited with the closing values of liabilities and credited with the closing values of assets.

1.Cost price method:

Accounting arrangement of Retail Dependent BranchesDr.

Journal entries

For goods sent to branch: BranchAccount Goods sent to Branch Account

Accounting arrangement of Retail Dependent Branches

In the books of Head office Branch Account

Date Jan. 1

Particulars

Rs

Date Jan.1

Particulars Balance b/d Creditors Outstanding Salaries

Rs

Branch b/d Stock Debtors Petty Cash Furniture D e c . 3 1 Prepaid expenses b ra n ch G o o d s s e n t to A /c

1.Cost price method:

Accounting arrangement of Retail Dependent Branches

Journal entries

For goods sent to branch: BranchAccount Dr. Goods sentof Cash/cheque Account expenses e.g Salaries, rent, petty expenses For remittance to Branch to branch for Branch Account Dr. Cash/bank Account

Accounting arrangement of Retail Dependent Branches

In the books of Head office Branch Account

Date Jan. 1

Particulars

Rs

Date Jan.1

Particulars Balance b/d Creditors Outstanding Salaries

Rs

Branch b/d Stock Debtors Petty Cash Furniture D e c . 3 1 Prepaid expenses b ra n ch G o o d s s e n t to A /c B a n k A /c R e n t, R a te s & Ta x e s P e tty C a s h re m itta n ce

1.Cost price method:

Accounting arrangement of Retail Dependent Branches

Journal entries

For goods sent to branch: BranchAccount Dr. Goods sent to Branch Account for expenses e.g Salaries, rent, petty For remittance of Cash/cheque to branchexpenses

Branch Account Dr. For cash/cheque received from branch (Cash sales plus Cash/bank Account collection from debts) Cash/Bank Account Dr. Branch Account

Accounting arrangement of Retail Dependent Branches

In the books of Head office Branch Account

Date Jan. 1

Particulars

Rs

Date Jan.1

Particulars Balance b/d Creditors Outstanding Salaries

Rs

Branch b/d Stock Debtors Petty Cash Furniture D e c . 3 1 Prepaid expenses b ra n ch G o o d s s e n t to A /c B a n k A /c R e n t, R a te s & Ta x e s P e tty C a s h re m itta n ce

Dec . 31 Bank A / c Cash sales Collection from debts

1.Cost price method:

Accounting arrangement of Retail Dependent Branches

Journal entries

For goods sent to branch: BranchAccount Dr. Goods sent to Branch Account for expenses e.g Salaries, rent, petty For remittance of Cash/cheque to branchexpenses

Branch Account Dr. For cash/cheque received from branch (Cash sales plus Cash/bank Account collection from debts) Cash/Bank Account of assets at the branch: Dr. For closing balance BranchAAccount B ra n ch sse t A / c D r.B ra n ch A cco u n t

Accounting arrangement of Retail Dependent Branches

In the books of Head office Branch Account

Date Jan. 1

Particulars

Rs

Date Jan.1

Particulars Balance b/d Creditors Outstanding Salaries

Rs

Branch b/d Stock Debtors Petty Cash Furniture D e c . 3 1 Prepaid expenses b ra n ch G o o d s s e n t to A /c B a n k A /c R e n t, R a te s & Ta x e s P e tty C a s h re m itta n ce

Dec . 31 Bank A / c Cash sales Collection from debts Balance c / d Stock Debtors Petty Cash Furniture Prepaid expenses

1.Cost price method:

Accounting arrangement of Retail Dependent Branches

Journal entries

For Closing balances of liabilities at the branch: Branch Account Dr. Liabilities account (Individual) For transferring profit and loss; if profit Branch Account Dr. To General Profit and loss A/c For transferring profit and loss; if loss General profit and loss Account Dr. Toshould be noted that the closing balances of branch asset It Branch Account and liabilities are shown in balance sheet

Accounting arrangement of Retail Dependent Branches

In the books of Head office Branch Account

Date Jan. 1

Particulars

Rs

Date Jan.1

Particulars Balance b/d Creditors Outstanding Salaries

Rs

Dec . 31

Branch b/d Stock Debtors Petty Cash Furniture Prepaid expenses Goods sent to branch A / c Bank A / c Rent , Rates & Taxes Petty Cash remittance Balance c / d Creditors Outstanding Expenses General Profit and loss A/c ( Profit )

Dec . 31

Bank A / c Cash sales Collection from debts Balance c / d Stock Debtors Petty Cash Furniture Prepaid expenses General Profit and loss A/c (Loss)

1.Cost price method:

Accounting arrangement of Retail Dependent Branches

Journal entries

For Abnormal loss: Abnormal loss account Dr. (Total) Branch Account Generalprofit and loss Account Dr. (Loss) Insurance claim Account Dr. (Claim) Abnormal loss Account

Illustration A ltd had a branch office at Sialkot. The following were the transactions took place between Head office and its branch office for the year ending 31 December 2009.

Accounting arrangement of Retail Dependent Branches

Branch openingStock 1.1.2009 Goods sent to Branch Goods sent to branch for expenses: to Head office Cash sent Salaries, Rent, Telephone, Petty Branch stock on 31.12.2009 Cash cash balance Branch

3000 67000 4950 79000 8000 100

Accounting arrangement of Retail Dependent Branches In the books of Head office

Sialkot branch Account For the year ended 31 Dec. 2009

Particulars

Rs

Particulars

Rs

Opening Stock Goods sent to branch Cash for salaries Cash for rent Cash for telephone Cash for petty cash

3,000 Cash (from 67,000 branch) Closing balances stock Closing balance 4,950 cash 12150

79,00 0 8,000 100

General profit and Loss (Net profit) 87,100

87,10 0

2. Invoice Price Method

Accounting arrangement of Retail Dependent Branches

It is the method of sending goods to its branches at sale price. Methods of selling goods at invoice price is excellent from the point of view of stock control. Goods may be invoiced at selling price to keep the margin of profit a secr