About Branch ACCOUNT
BRANCH
Accounting system for Retail Dependent Branch
There are three methods to calculate profits of a retail dependent branch. Any of these
can be used to calculate branch profits; nevertheless, selection of method will depend
upon the nature of operations, size and level of complexity of the transaction.
· Debtor system
· Income statement system
· Stock and debtor system
Debtor System
This system of accounting is suitable for the small sized branches. In this system a
Branch a/c is opened for each of the branches in the main ledger of head office. Each
and every transaction that is made in between the head office and its branches is
entered into the specific branch account. For example there are two branches of a
business one in Gujranwala and the second in Karachi. The head office will open two
ledger accounts in its main ledger one named and titled as Gujranwala Branch a/c and
the other as Karachi Branch a/c. The branch accounts are maintained in such a way
that these will give the amount of profits or losses of the respective branches.
Lets have a glance, how does a Branch a/c look like?
Books of the Head Office
Branch Account
Particulars
Rs.
Particulars
Rs.
Op. Stock
*** Op. Creditors
***
Opening
Op. Debtors
*** Op. Outstanding Expenses
***
Liability
Opening
Op. Petty Cash
*** Cash received from branch
Assets
Op. Furniture
Cash Sales
***
***
Drawings
Op. Prepaid Expenses
Collection from Debtors
***
***
Goods sent to Branch
*** Goods Returned by Branch
***
Fresh
Cash sent to branch
Cl. Stock
***
Capital
for branch expenses
*** Cl. Debtors
***
Closing
Assets
for any other purpose
*** Cl. Petty Cash
***
Cl. Creditors
*** Cl. Furniture
***
Closing
Liability
Cl. Outstanding Expenses
*** Cl. Prepaid Expenses
***
Profit & Loss A/c (Profit)
*** Profit and Loss A/c (Loss)
***
***
***
In the above Branch a/c we can very well observe few facts which are as under:
1. At the beginning of the year the Branch a/c is debited with the opening
balances of assets lying with the branch and credited with the opening balances
of the branch liabilities. Doing this debit and credit as a result we have opening
capital balance at debit side of the Branch a/c
2. At the ending of the year the Branch a/c is credit with the closing balances of
assets lying with the branch and debited with the closing balances of the branch
liabilities. Doing this debit and credit as a result we have closing capital balance
at credit side of the Branch a/c
51
Advance Financial Accounting (FIN-611)
VU
3. During the year the head office has sent to branch goods for selling and cash for
whatever purposes. These both are debited to the Branch a/c. This can be
considered as fresh capital (resources) introduced by head office into its branch.
4. During the year the head office has received goods (as returned goods) and
cash (resources) from its branch, the source might be any one e.g. cash sales or
credit customer or even by selling branch assets. This receipts of cash and
return of goods is credited to the Branch a/c. This can be considered as
drawings made by the head office out of the branch.
Now applying the rules studied in the single entry accounting system we can get
the amount of net profit/loss of the branch.
Accounting Entries in the Books of Head Office
1. For opening balances of assets at the branch
Branch a/c
Branch assets a/c (individual accounts)
2. For opening balances of liabilities at the branch
Branch liabilities a/c (individual accounts)
Branch a/c
3. For goods sent to the branch
Branch a/c
Goods sent to branch a/c
4. For return of goods by the branch
Goods sent to branch a/c
Branch a/c
5. For remittance of cash or cheque to the branch
Branch a/c
Cash/Bank a/c
6. For cash or cheque received from the branch
Cash/Bank a/c
Branch a/c
7. For closing balances of assets at the branch
Branch asset a/c (individual accounts)
Branch a/c
8. For closing balances of liabilities at the branch
Branch a/c
Branch liabilities a/c (individual accounts)
9. For closing goods sent to branch account.
Goods sent to branch a/c
Purchases a/c
