Branch Account PDF
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This document provides an overview of branch accounts, including different types of branches (dependent and independent) and methods for keeping branch accounts. It includes examples of journal entries and calculations in the context of branch accounting practices. This document appears to be part of a larger course or textbook on financial management and accounting.
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BRANCH ACCOUNT Meaning of Branch many time a trading company does not operates a business from one place only but opens shops in different countries, cities or localities of the same city. These shops are known as branches. Ex. Bata shoes, L.G. These branches are controlled by their parenta...
BRANCH ACCOUNT Meaning of Branch many time a trading company does not operates a business from one place only but opens shops in different countries, cities or localities of the same city. These shops are known as branches. Ex. Bata shoes, L.G. These branches are controlled by their parental unit or Head office. Types of branch: Dependent branch: - Receives goods only from HO, can’t purchase from local market Dependent - Can make a sale only on cash basis not on credit branch Inland branch/ - It receives cash from HO for their expenses Domestic branch Independent - It does not allow to keep all books of accounts Branch branch Foreign branch - Required to send all report regularly to the HO Independent branch: - Receives goods from HO as well as purchase from local market - Can make a sale on cash and credit both - It pays their expenses out of their cash balance - It maintains all books of accounts - Send the report at the end of the year to the HO5 (In this chapter we are going to cover dependent branch only) SHORT SUMS 1. A remittance of Rs. 15,000 in cash which was made by the Valsad branch to head office on 29-3-2011 was received by the head office of Surat on 3-4-2011. The accounting year closed on march 31st. Pass the journal entries in the books of head office and branch both. (VNSGU. April 2013) Solution: ENTRY FOR THE CLOSING YEAR ON 31-3-2011 Particular Debit Credit IN THE BOOKS OF BRANCH 1. Surat HO a/c dr. 15,000 To cash /bank a/c 15,000 (remittance sent to HO) 2. Remittance in transit a/c dr. 15,000 To Surat HO a/c 15,000 (remittance in transit) IN THE BOOKS OF HEAD OFFICE THERE WILL BE NO ENTRY. 29-3-2011 CASH SENT 31-3-2011 CLOSING YEAR 3-4-2011 CASH RECEIVED 2. The Mumbai head office sent goods worth Rs. 1,20,000 to its Surat branch on march 28, 2010. the branch received these goods on April 4, 2010. Surat branch sent Rs.70,000 to the head office on march 28, 2010 against the goods. The head office receives this money on April 5, 2010. Accounting year closed on march 31st. Pass journal entry in the books of H.O. and branch. Solution: ENTRY FOR THE YEAR CLOSING ON 31-3-2010 Goods in transit Cash in transit IN THE BOOKS OF HEAD OFFICE IN THE BOOKS OF HEAD OFFICE 1. Branch a/c dr. 1,20,000 THERE WILL BE NO ENTRY. To goods sent to branch 1,20,000 (goods sent to branch) 2. Goods in transit a/c dr 1,20,000 To branch a/c 1,20,000 (goods in transit) IN THE BOOKS OF BRANCH IN THE BOOKS BRANCH There will be no entry. 1. Mumbai HO a/c dr. 70,000 To cash a/c 70,000 (cash sent to HO) 2. Cash In transit a/c dr. 70,000 To Mumbai HO a/c 70,000 (cash in transit) 3. Head office sent petty cash of Rs.4,545 to its branch during the year. In the beginning and at the closing of the year, there were Rs. 1,699 and Rs, 2,245 of petty cash respectively with the branch. Pass journal entry for petty cash expenses in the books of branch for the closing year on march, 31. (VNSGU April 2014) Solution: w.n-1 Petty cash account PARTICULAR AMT PARTICULAR AMT To balance b/d 1,699 By petty expenses (?) 3,999 To petty received from 4,545 By balance c/d 2,245 HO 6,244 6,244 Journal entry in the books of branch Branch profit and loss a/c dr. 3,999 To petty cash a/c 3,999 (transferring the petty cash expenses to P&L) OR Opening balance 1,699 Add: HO sent petty 4,545 Total 6,244 Less: closing bal. 2,245 Petty expenses 3,999 4. Branch has opening balance of petty cash Rs. 1,620 and closing balance Rs. 8,181. during the year branch has incurred sundry expenses of Rs. 7,074. Find out the amount of petty cash received from H.O. by branch. (VNSGU April 2015) Solution: Petty cash account Particulars Amt Particulars Amt To balance b/d 1,620 By petty expenses 7,074 To petty cash received 13,635 (P&L) 8,181 from HO By balance c/d 15,255 15,255 Petty cash received from head office is Rs. 13,635. OR Petty expenses 7,074 Add: closing 8,181 15,255 Less opening balance 1,620 Petty cash rec. from HO 13,635 5. The balance of furniture as on 1-4-2015 was Rs. 18,800 which was sent to branch on 1-10-2014. on 31-3-2016 depreciation was charged on furniture at 12% per annum on straight line method. Write a journal entry in the books of H.O. for furniture on 31-3-2016. (VNSGU April 2016) Solution: 1-10-2014 HO sent the furniture (?) Rs. 20,000 In the books of HO 1-4-2015 balance 18,800 Branch furniture a/c dr 16,400 31-3-2016 closing balance To branch a/c 16,400 (closing balance of furniture) Wn-1 1-10-2014 HO SENT FURNITURE 100 31-3-2015 DEPRECIATION 6 (100*12%*6/12) 1-4-2015 OPENING BALANCE 94_____________________Rs. 18,800 COST PRICE 100_____________________ (?) (1-10-2014) cost price of furniture: 18,800*100 / 94 = 20,000 Depreciation as per SLM: 20,000*12/100 = 2,400 PER YEAR Calculation of closing balance 1-4-2015 opening 18,800 Less: depreciation 2,400 Closing bal 16,400 6. The balance of furniture on 1-04-2018 was Rs. 38,000 in the books of Surat branch, Mumbai head office sent some furniture on 31-12-2018. On 31-03-2019 the balance of furniture in the books of branch was Rs. 43,950. Depreciation on furniture is 10% as per reducing balance method. Write journal entry for furniture sent in the books of H.O. (VNSGU- March/April 2019) SOLUTION: Closing balance as on 31-3-2019 43,950 Calculation for the cost price of new furniture Less: opening bal. of furniture after dep. 34,200 Supp. Cost price of furniture sent on 31-12-2018 is (38,000 – 10%) 100 New furniture after depreciation 9,750 Less: depreciation at 10% (100*10%*3/12) 2.5 Value of new furniture after depreciation is 97.5 So, we have the after-depreciation value of new furniture at 97.5-------- 9,750 So, the cost price new furniture at 100------ (?) So, the cost price of new furniture: 9,750*100/97.5 = 10,000 Journal entry for furniture sent in the books of HO Branch a/c dr. 10,000 To furniture sent to branch 10,000 Important note: (a) Previous year (opening (b) Current year (closing balance) balance) Prepaid expenses (Assets) (a) (+) (-) Unpaid /outstanding expenses (Liabilities) (-) (+) (b) Q:8 Branch account Rent outstanding (1-4-2019) 1,000 Particulars Amt. Particulars Amt. To salary & wages pre By rent o/s (PY) 1,000 Salary and wages prepaid (1-4-2019) 2,200 (PY) 2,200 Rent outstanding (31-3-2020) 1,200 To cash /bank (expenses) Rent 12,000 Salary and wages prepaid (31-3-2020) 800 Salary 10,000 Other 4,950 26,950 Expenses paid by HO on behalf of branch: Rent 12,000 To rent o/s (CY) 1,200 By salary prep. (CY) 800 Salary and wages 10,000 Other expenses 4,950 26,950 Accounting year ended on 31-3-2020. Prepare branch account and branch profit and loss account. Branch profit and loss account Particulars Amt. Particulars Amt. To rent 12,000 Less: o/s (PY) (1,000) 11,000 + o/s (CY) 1,200 12,200 To salary 10,000 +prep. (PY) 2,200 12,200 Less: prep. (CY) (800) 11,400 To Other expenses 4,950 Q-9 Branch account Prepaid rent (1-1-2020) 750 Particulars Amt. Particulars Amt. To prep. Rent (PY) 750 By o/s salary (PY) 1,050 Prepaid rent (31-12-2020) 600 Outstanding salary (1-1-2020) 1,050 To cash bank (expenses) Rent 2,000 Outstanding salary (31-12-2020) 2,350 Salary 6,000 Insurance 12,000 20,000 Expenses paid by HO on behalf of branch: By prep. Insurance 6,000 Rent 2,000 To o/s salary (CY) 2,350 By prep. Rent (CY) 600 Salary 6,000 Insurance (up to 30-6-2021) 12,000 20,000 Accounting year ended on 31-12-2020. Prepare branch account and branch Branch profit and loss account profit and loss account. Particulars Amt. Particulars Amt. SOLUTION To rent 2,000 + prep (PY) 750 WN 1 Prepaid insurance 2,750 Less: prep. (CY) (600) 2,150 31-12-2020 closing date To salary 6,000 Less: o/s (PY) (1,050) 30-6-2021 paid up to this date (6 months prepaid) 4,950 + o/s (CY) 2,350 7,300 Prepaid insurance: 12,000/12*6 = 6,000 To insurance 12,000 Less: prep. (CY) (6,000) 6,000 Q:9 Rajkamal stores of Rajkot has a branch in sidhpur. It dispatches the WN 1: goods to the branch with specific instruction to sell the goods at 33 1/3 % All sales are at selling price (with profit of 33 1/3% on cost price). above the cost price. form the following find out closing stock So first convert sales price into cost price Opening stock of branch (cost price) Rs. 60,000 Supp. Cost price is 100 Goods sent to branch (cost price) Rs. 3,60,000 + profit 33.33333 Goods return by branch (cost price) Rs. 33,000 Sales price 133.33333 Cash sales by branch Rs. 1,40,000 Credit sales by branch Rs. 3,60,000 So net sales are Goods return by branch debtors Rs. 12,000 Cash 1,40,000 Solution: + credit 3,60,000 Statement of stock: - return by cust. (12,000) Opening stock 60,000 Net sales 4,88,000 (sales price) + GSTB 3,60,000 - return by branch (33,000) Net sales at cost price or cost of slaes: Goods in hand with branch 3,87,000 SP 133.33333------ 4,88,000 (Less) What will CP @ 100--------- ? Net Sales (at cost price) (3,66,000) Closing stock 21,000 4,88,000*100/133.333333333 = 3,66,000 (cost of sales) Q-1 Ex-5. Messrs Paras Electricals of Rajkot has a branch at Ribda. Head office sends goods to Ribda branch at cost price. Branch sells goods on cash and on credit. The head office meets all the expenses except petty expenses of branch and collects cash from branch daily. From the following information of the branch for the year ended 31st march, 2011, prepare branch account and branch trading and profit and loss account: PARTICULARS Rs. 1st 2nd 3RD Stock (1-4-2010) 15,000 BR-DR TRD-DR Stock (31-3-2011) 20,000 BR-CR TRD-CR Debtor (31-3-2011) 30,000 BR-CR DEB-CR Furniture (31-3-2011) 13,500 BR-CR - Petty cash (31-3-2011) 500 BR-CR PETT-CR Goods sent to branch 1,20,000 BR-DR GSTB-CR TRD-DR Petty cash sent to branch 2,000 BR-DR PETT-DR Cash sales (40% of total sales) 81,600 BR-CR TRD-CR Petty expenses by branch 2,500 P&L-DR PETTY-CR Cash received from debtor 1,12,400 BR-CR DEB-CR Goods return by debtor 4,000 TRD-CR Goods return by branch 5,000 BR-CR TRD-DR Gstb-dr Discount allowed to debtors 2,000 P&L-DR DEBT-CR Bad debts written off 4,000 P&L-DR dEBT-CR Expenses paid by H.O on behalf of branch: Salaries and wages 15,000 Rent and rates 10,000 Other expense 5,000 Furniture to be depreciated by 10%. SOLUTION: (In books of HO) Branch trading a/c RIBDA Branch a/c Particulars Amt. Particulars Amt. To balance b/d 15,000 By sales Particulars Amt. Particulars Amt. To goods rec. from HO Cash 81,600 To opening balances 1,20,000 Add: credit 1,22,400 Stock 15,000 By goods ret. by branch 5,000 Less return 5,000 1,15,000 Total sales 2,04,000 Furniture 15,000 By cash /bank To branch P&L (gross 90,000 Less. return (4,000) 2,00,000 Petty cash 1,000 Cash sales 81,600 pro.) By balance c/d 20,000 Debtors 30,000 61,000 Debtor rec. 1,12,400 1,94,000 2,20,000 2,20,000 Branch profit and loss a/c To goods sent to branch 1,20,000 By closing balances To cash /bank (petty cash) 2,000 Stock 20,000 Particulars Amt. Particulars Amt. To cash/bank (exp) Debtor 30,000 To petty exp 2,500 By branch trading (gross Salaries 15,000 Furniture 13,500 To bad debt 4,000 profit) 90,000 Rents 10,000 Petty cash 500 64,000 To discount 2,000 Others 5,000 30,000 To salaries 15,000 To profit 50,000 To rent 10,000 2,63,000 2,63,000 To other exp 5,000 Goods sent to branch a/c To depre. On furniture 1,500 Particulars Amt. Particulars Amt. To general P&L (profit) 50,000 To branch a/c (return) 5,000 By branch (goods sent) 1,20,000 To trading 1,15,000 1,20,000 1,20,000 90,000 90,000 Petty cash a/c Branch debtor a/c Particulars Amt. Particulars Amt. Particulars Amt. Particulars Amt. To balance b/d 1,000 By P&L (exp) 2,500 To balance b/d 30,000 By cash from debtors 1,12,400 To petty received from HO 2,000 By balance c/d 500 To credit sale 1,22,400 By good ret. By debtors 4,000 3,000 3,000 By disc 2,000 By bad debt 4,000 [NOTE: For preparing branch a/c & goods sent to branch a/c, think from the view point of HO, and for preparing remaining accounts think from the view By balance c/d 30,000 point of branch] 1,52,400 1,52,400 WORKING NOTES W.N.-1 credit sales Total sales: 100 Less cash 40 (81,600) Credit sale 60 CASH SALES 40%--------81,600 CREDIT SALES 60%-------- (?) Credit sales: 60*81600/40 = 1,22,400 W.N 2 DEPRECIATION/ opening balance of furniture Opening 100 Less depre. 10 Closing 90 Opening balance: 13,500*100/90 = 15,000 Depreciation: 15,000*10% = 1,500 Q.2 EX.25 Hafiz brother has a branch in Surat. The H.O. sends goods to branch at an invoice price by adding 25% profit on cost. The branch does cash as well as credit sales. All the expenses are paid by H.O. The H.O. sends cash to branch for miscellaneous expenses. The cash collected by branch is credited in the bank account of head office daily. After considering the following details prepare branch account, branch trading account and profit and loss account in the books of head office for the year ended 31st march,2011: Particular Amt. Expenses paid by head office: Debtor (31-3-2010) 65,000 Wages and salary 14,000 Furniture (31-3-2010) 16,000 Rent 15,200 Petty cash (31-3-2010) 900 Insurance (up to 30-6-2011) 4,800 Stock (invoice price) (31-3-2010) 1,05,000 Advertisement expenses 13,000 Rent outstanding (31-3-2010) 1,200 Additional info: Goods sent to branch (invoice price) 2,75,000 Petty cash sent to branch 300 Furniture sent to branch (1-7-2010) 13,000 Debtors (31-3-2011) 72,000 Goods return by branch (invoice price) 11,000 Stock (invoice price) (31-3-2011) 95,000 Cash sales 75,000 Furniture (31-3-2011) ? Total sales 3,85,000 petty cash (31-3-2011) 700 Goods return by debtor 17,000 Outstanding wages and salary (31-3-2011) 1,500 Discount allowed debtor 1,500 Bad debts 6,000 Calculate depreciation 8% on furniture. Cash directly sent to head office 68,000 SOLUTION: (in the books of HO) Goods sent to branch a/c Particulars Amt. Particulars Amt. Surat Branch a/c To diff in goods sent 55,000 By branch (goods sent) (IP 2,75,000 Particulars Amt. Particulars Amt. To branch (return) (IP) 11,000 By diff. in goods return 2,200 To opening balances By diff. in opening stock 21,000 Stock (IP) 1,05,000 By diff. in goods sent 55,000 To trading a/c 2,11,200 Debtors 65,000 By goods return (IP) 11,000 2,77,200 2,77,200 Furniture 16,000 Petty cash 900 1,86,900 By rent outstanding (PY) 1,200 By cash / bank Petty cash a/c To goods sent to branch Cash sales 75,000 (IP) 2,75,000 Direct sent 68,000 Particulars Amt. Particulars Amt. To diff. in goods return 2,200 Collection 2,10,500 3,53,500 To opening balance 900 By P&L (expenses) 500 To diff. in closing stock 19,000 To petty rec. from HO 300 By closing balance 700 To furniture sent (1-7-10) 13,000 1,200 1,200 To cash / bank (expenses) Branch trading a/c Wages 14,000 Rent 15,200 Particulars Amt. Particulars Amt. Insurance 4,800 To opening balance 84,000 By sales: Advt. 13,000 47,000 To goods rec. from HO Cash 75,000 To cash (petty cash sent) 300 2,20,000 Credit 3,10,000 Less: return (8,800) 2,11,200 Total sales 3,85,000 Less: return (17,000) 3,68,000 To wages 14,000 To outstanding wages (CY) 1,500 By closing balances + o/s (CY) 1,500 15,500 Stock (IP) 95,000 Prep. Insurance 1,200 Debtors 72,000 Furniture 26,940 Petty cash 700 1,95,840 To branch P&L (gross 1,33,300 To general P&L (profit) 92,640 profit) By closing balance 76,000 6,37,540 6,37,540 4,44,000 4,44,000 Branch profit and loss a/c Particulars Amt. Particulars Amt. To discount 1,500 By branch trading (GP) 1,33,300 To bad debt 6,000 To rent 15,200 Less: o/s (PY) (1,200) 14,000 To insurance 4,800 Less. prep. (CY) (1,200) 3,600 To advertisement expense 13,000 To dep. On furniture 2,060 To petty expenses 500 To general P&L (profit) 92,640 1,33,300 1,33,300 Branch debtor a/c Particulars Amt. Particulars Amt. To opening balance 65,000 By goods return 17,000 To credit sales 3,10,000 By discount 1,500 By bad debts 6,000 By cash direct sent to HO 68,000 By cash collection from debtors (?) 2,10,500 By closing balance 72,000 3,75,000 3,75,000 Important note: (a) Previous year (opening balance) 25% profityear (b) Current on(closing invoice price (NOT IN THIS SUM) balance) Prepaid expenses (Assets) (a) (+) Supp invoice(-) 100 Unpaid /outstanding expenses (Liabilities) (b) (-) Less profit (+) 25 Cost 75 Working notes: Wn-1: invoice price (25% on cost) WN 2 insurance prepaid Particular Cost (100) + profit (25) 31-3-2011 closing date = Invoice price (125) Opening stock 84,000 (100*1,05,000/125) 21,000 (25*1,05,000/125) 30-6-2011 up to (3 months prepaid) 1,05,000 (trading dr) (branch cr) (Branch -dr) Prepaid insurance: 4,800/12*3 = 1,200 Goods sent to branch 2,20,000 (100*2,75,000/125) 55,000 (25*2,75,000/125) 2,75,000 (Trading-dr) (Branch cr, GSTB-dr) (Branch dr, GSTB-cr) Goods return by branch 8,800 (100*11,000/125) 2,200of furniture WN 3 closing 11,000 (Trading-dr (-)) (Branch-dr, GSTB-cr) (GSTB-dr, Branch-cr) Opening balance 16,000 Closing stock 76,000 19,000 95,000 (trading cr) Les dep. (31-3-2011) (Branch -dr) (1,280) (16,000*8%) (Branch-cr) After dep. (31-3-2011) 14,720 25% profit on cost Supp cost 100 Furniture sent on 1-7-2010 13,000 + profit 25 Less: dep. (31-3-2011) (780) (13,000*8%*9/12) Invoice 125 After dep. (31-3-2011) 12,220 Opening stock: on Invoice 125------1,05,000 Closing balance: 14,720 + 12,220= 26,940 What on cost 100----- ? Depreciation: 1,280 + 780= 2,060 1,05,000*100/125= 84,000 Q-3 Ex.54 Suman of Surat has a branch at Silvasa. Head office sends goods Solution: to the branch at invoice price by adding 33% profit on cost price. branch sells (in the books of Surat HO) the goods for cash as well as on credit and all cash received by branch are sent SILVASA Branch account to head office through bank draft. From the following information, in the Particulars Amt. Particulars Amt. To opening balance By diff. in open stock 1,66,617 books of Head Office, prepare branch account, Branch trading account and Furniture 74,250 Branch profit and loss account for the year ending on 31-12-2010: Petty cash 5,940 By diff in goods sent 3,62,637 Particular 1-1-2010 31-12-2010 Stock (IP) 6,71,517 By goods return by branch Debtors 1,58,400 9,10,107 (IP) 57,057 Rs. Rs. By o/s rent 5,775 Furniture 74,250 ? Petty cash 5,940 3,960 By cash/bank Stock (Invoice price) 6,71,517 2,01,455 To diff. in closing stock 49,985 Cash sale 4,93,020 Outstanding rent 5,775 - To goods sent to branch Collection 10,45,935 15,38,955 Outstanding wages salary - 5,940 (IP) 14,61,537 Debtor 1,58,400 3,41,550 To diff. in goods return 14,157 Rs. To cash / bank (expenses) Goods sent to branch (Invoice price) 14,61,537 Wages 29,997 Bad debts 34,485 Rent 53,328 Expenses paid by HO: Insurance 17,820 Advt. 19,635 1,20,780 Wages and salary 29,997 Rent 53,328 To furniture sent (30-06- Insurance (paid up to 31-3-2011) 17,820 2010) 31,350 By closing balance Advertisement expenses 19,635 1,20,780 To cash (petty cash sent) 1,782 Furniture Furniture sent to branch (30-06-2010) 31,350 To o/s wages and salary 5,940 Petty cash 3,960 Goods return by branch 57,057 Stock 2,01,455 Cash sales 4,93,020 Debtor 3,41,550 Goods return by debtors 51,150 Prep. Insurance 4,455 Furniture 97,507 6,44,471 Total sales 18,13,152 Discount allowed to debtors 5,412 To general P&L (profit) 1,84,330 Petty cash sent to branch 1,782 Depreciation on furniture is charged at 9%. 27,79,968 27,79,968 (VNSGU: April 2014) Goods sent to branch a/c Particulars Amt. Particulars Amt. Branch profit and loss a/c To diff. in goods sent 3,62,637 By branch (goods sent) (IP) 14,61,537 To branch (return) (IP) 57,057 By diff. in goods return 14,157 Particulars Amt. Particulars Amt. To bad debts 34,485 By branch trading (GP) 3,16,635 To trading 10,56,000 To rent 53,328 14,75,694 14,75,694 - o/s (PY) (5,775) 47,553 To insurance 17,820 Petty cash a/c - prepaid (4,455) 13,365 To advertisement exp. 19,635 Particulars Amt. Particulars Amt. To discount to debtors 5,412 To balance b/d 5,940 By P&L (exp) 3,762 To petty expenses 3,762 To petty rec. from HO 1,782 By balance c/f 3,960 To dep. On furniture 8,093 7,722 7,722 To general P&L (profit) 1,84,330 3,16,635 3,16,635 Branch trading a/c Branch debtor a/c Particulars Amt. Particulars Amt. Particulars Amt. Particulars Amt. To opening balance 5,04,900 By sales: To opening balance 1,58,400 By bad debts 34,485 Cash 4,93,020 To credit sales 13,20,132 By return by debtors 51,150 To goods rec. from HO Credit 13,20,132 By discount allowed 5,412 10,98,900 Total sales 18,13,152 By collection from Less return (42,900) 10,56,000 Less: Return (51,150) 17,62,002 debtors (?) 10,45,935 To wages & salary By closing balance 3,41,550 29,997 14,78,532 14,78,532 + o/s (CY) 5,940 35,937 To branch P&L (GP) 3,16,635 By closing balance 1,51,470 19,13,472 19,13,472 Working notes: Wn-1: invoice price (25% on cost) Particular Cost (100) + profit (33) = invoice price (133) Stock (1-10-2010) 5,04,900 1,66,617 6,71,517 Stock (31-12-2010) 1,51,470 49,985 2,01,455 Goods sent to branch 10,98,900 3,62,637 14,61,537 Goods return by branch 42,900 14,157 57,057 W.N 2: Depreciation of furniture Opening balance 74,250 Less: dep. (31-12-2010) (6,682) (74,250*9%) After dep. 67,568 Furniture sent on (30-06-2010) 31,350 Less: dep. (31-12-2010) (1,411) (31,350*9%*6/12) After dep. 29,939 Closing stock: 67,568 + 29,939 = 97,507 Depreciation: 6,682 + 1,411 = 8,093 Q: 4 Ex 50. Krishna of Surat has a branch at Valsad. Goods are supplied from the head office at cost plus 33 1/3%. Expenses of the branch except petty expenses are paid directly by the head office. Petty expenses are paid by the branches which are allowed to maintain petty cash balance Rs. 400 on imprest system. from the following you are required to prepare branch account:(VNSGU 2013) St Balances on 1 April, 2009 Rs. Stock in hand at invoice price 40,000 Payment made by H.O. Debtor 5,000 Petty cash in hand 400 Rent for one year (paid on 1-7-09) 2,000 Furniture and fixtures 6,000 Salary 3,000 Creditors at branch 3,000 Insurance paid for the year ending 30-6-2010 400 Rent pre-paid (up to 30-6-2009) 400 Payment made by branch Transaction during the year ended 31-03-2010: Petty expenses 200 Goods sent to branch (invoice price) 1,00,000 Cash sales at branch 75,000 Balance on 31st march 2010 (stock at cost) 65,000 Credit sales at branch 50,000 Write off 10% depreciation on furniture. Bad debts written off 300 Allowances to debtors 600 Cash received from debtors 30,000 Cash purchase by branch (with 40,000 permission) Cash paid to creditors 6,000 Creditors at the end 7,000 Solution: (In the books of KRISHNA HO) Branch trading account VALSAD Branch account Particulars Amt. Particulars Amt. To opening balance 30,000 By sales: Particulars Amt. Particulars Amt. To goods sent rec. from HO 75,000 Cash 75,000 To opening balance By diff. in opening stock 10,000 Credit 50,000 1,25,000 Stock (IP) 40,000 By diff. in goods sent 25,000 To purchase Debtor 5,000 By creditors 3,000 Cash 40,000 Petty cash 400 + credit 10,000 50,000 Furniture 6,000 By cash bank 59,000 Prep. Rent 400 51,800 To branch P&L (GP) 35,000 By closing balance 65,000 To goods sent to branch 1,90,000 1,90,000 (IP) 1,00,000 To cash bank (expenses) Branch profit and loss account Rent 2,000 Salary 3,000 Particulars Amt. Particulars Amt. Insurance 400 5,400 By closing balance To rent 2,000 By branch trading (?) 35,000 Petty cash 500 + prep. (PY) 400 To cash (petty sent) 200 Prep. Rent 500 2,400 To creditor 7,000 Prep. Insurance 100 Less: prep. (CY) (500) 1,900 Stock 65,000 Furniture 5,400 To bad debts write off 300 To general P&L (profit) 28,100 Debtor 24,100 95,500 To allowances to debtors 600 To salary 3,000 To insurance 400 1,92,600 1,92,500 Less. prep. (CY) ) (100) 300 To petty exp. 200 To dep. on furniture 600 Petty cash account Particulars Amt. Particulars Amt. To general P&L (profit) 28,100 To opening balance 400 By P&L (expenses) 200 55,000 55,000 To petty rec. from HO (?) 200 By closing balance 400 600 600 Branch debtor account Working notes Particulars Amt. Particulars Amt. W.N. 1 Invoice price To opening balance 5,000 By bad debts 300 To credit sales 50,000 By allowances to debtor 600 Particular Cost (100%) + Pro. (33.1/3%) = IP (133.1/3%) By cash from debtors 30,000 Opening stock 30,000 10,000 40,000 (40,000*100/133.33) (40,000- (Branch -Dr) By closing balance (?) 24,100 (Trading-Dr) 30,000) (Branch-Cr) 55,000 55,000 Goods sent to 75,000 25,000 1,00,000 branch (1,00,000*100/133.33) (1,00,000- (Branch -Dr) Branch creditor account (Trading-Dr) 75,000) (Branch- Cr) Particulars Amt. Particulars Amt. To cash paid 6,000 By opening balance 3,000 To closing balance 7,000 By credit purchase (?) 10,000 13,000 13,000 Branch Cash account Particulars Amt. Particulars Amt. To cash sales 75,000 By cash purchase 40,000 By cash paid to creditors 6,000 To cash rec. from debtors 30,000 By cash sent to HO (?) 59,000 1,05,000 1,05,000 Q 5 Ex-37. Navyug brothers of Surat has a branch in Bharuch. Transaction during the year The head office sends goods to Branch at invoice price by Goods sent to branch (IP) 3,00,000 adding 25% profit on cost. The branch makes both cash and credit sales. All expenses of branch are paid by head office. H.O. Total sales (25% credit sales) 4,40,000 sends the petty cash to the branch for miscellaneous expenses. Cash directly sent to H.O by debtors 10,000 The cash collected by branch is credited in the bank a/c of H.O. daily. Prepare branch a/c, branch trading and profit and loss a/c Discount allowed to debtors 500 in the books of H.O. for the year ended 31st march 2009. Bad debts recovered 500 Expenses paid by H.O 17,500 Particulars 1-4-2008 31-3-2009 Rent 4,500 Stock (invoice price) 40,0000 50,000 Salaries (up to 31-1-09) 8,500 Debtors 18,000 22,000 Insurance 2,500 Petty cash (sent to branch) 2,000 Petty cash 1,500 2,000 Goods return by branch (IP) 25,000 Furniture 20,000 ? Goods return by debtors 10,000 Prepaid insurance 750 250 Goods destroyed by fire (IP) 2,500 Unpaid salaries 500 ? (Insurance co. accepted a claim of 75%) Sale of furniture on 1-10-2008 5,200 (book value of sold furniture on 1-4-2008 was Rs. 6,000) Provide depreciation on furniture at 10 % Solution: Goods sent to branch a/c SOLUTION: (in the books of HO) Particulars Amt. Particulars Amt. Surat Branch a/c To diff. in goods sent 60,000 By branch (sent) (IP) 3,00,000 Particulars Amt. Particulars Amt. To branch (return) (IP) 25,000 By diff. in goods return 5,000 To opening balance By diff. in opening stock 8,000 To trading 2,20,000 Stock (IP) 40,000 By diff. in goods sent 60,000 3,05,000 3,05,000 Debtors 18,000 By goods return (IP) 25,000 Petty cash 1,500 By unpaid salary (PY) 500 Petty cash a/c Furniture 20,000 Prep. Ins. (PY) 750 80,250 By cash bank Particulars Amt. Particulars Amt. Cash sales 3,30,000 To opening balance 1,500 By P&L (Expenses) 1,500 Direct sent 10,000 To rec. from HO 2,000 BD recovered 500 By closing balance 2,000 Insurance claim 1,500 3,500 3,500 To GSTB (IP) 3,00,000 Sale of furniture 5,200 To diff. in closing stock 10,000 Collection 85,500 4,32,700 Branch trading a/c To diff. in goods return 5,000 To cash bank (expense) Particulars Amt. Particulars Amt. Rent 4,500 To opening balance 32,000 By sales Salaries 8,500 By closing balances Cash (75%) 3,30,000 Insurance 2,500 15,500 Stock (IP) 50,000 To goods rec. from HO Credit (25%) 1,10,000 To cash bank (petty sent) 2,000 Debtors 22,000 2,40,000 Total sales 4,40,000 To o/s salary (CY) 1,600 Petty cash 2,000 Less: return (20,000) 2,20,000 Less: return (10,000) 4,30,000 Furniture 12,600 To general P&L (NP) 1,98,700 Pre. Ins. (CY) 250 86,850 To goods destroyed 2,000 6,13,050 6,13,050 To branch P&L (GP) (?) 2,20,000 By closing balances 40,000 4,72,000 4,72,000 Branch profit and loss a/c WN 1 INVOICE PRICE Particulars Amt. Particulars Amt. Particular Cost (100) Profit (25) IP (125) To discount allowed 500 By bad debts recovered 500 To rent 4,500 By branch trading (GP) 2,20,000 Opening stock 32,000 8,000 40,000 To salaries 8,500 (40,000*100 Less: o/s (PY) (500) /125) 8,000 + o/s (CY) 1,600 9,600 Closing stock 40,000 10,000 50,000 (50,000*100 To insurance 2,500 /125) + prep. (PY) 750 GSTB 2,40,000 60,000 3,00,000 Less: pre. (CY) (250) 3,000 To loss on goods destroyed 500 Goods return by 20,000 5,000 25,000 To loss on slae of furniture 500 branch To dep. on furniture 1,700 Goods 2,000 500 2,500 To petty expenses 1,500 destroyed (Trad cr) (no entry) (no entry) To general P&L (NP) 1,98,700 25% profit on cost 2,20,500 2,20,500 Branch debtor a/c Supp cost price 100 Particulars Amt. Particulars Amt. + profit 25 To opening balance 18,000 To cash direct sent to HO 10,000 To credit sales 1,10,000 To discount allowed 500 Invoice price 125 To sales return 10,000 To cash collection / received from debtors (?) 85,500 By closing balance 22,000 WN 3 goods destroyed 1,28,000 1,28,000 Cost of goods destroyed 2,000 (trading cr) Less: claim (75% of 2,000) (1,500) (branch cr) WN 2 outstanding salaries Loss by goods destroyed 500 (P&L dr) 8,000*2 months / 10 months = 1,600 WN 4 Furniture sale & closing of furniture Sale of furniture Value of sold furniture on 1-4-2008 6,000 Less: dep (on 1-10-2008) (6 months) (300) (P&L dr) After dep. value of sold furniture on 1-10-2008 5,700 Less: sales price of furniture (5,200) (br. cr) Loss on sale of furniture 500 (P&L dr) Closing of furniture Value of furniture on 1-4-2008 20,000 Less sold on 1-10-2008 (6,000) 14,000 Less dep. on 31-3-2009 (10%) (1,400) (P&L dr) Closing balance of furniture 12,600 (Br cr) Total dep: 300 (sold) + 1,400 (closing) = 1,700 JOURNAL ENTRIES AS PER STOCK AND DEBTOR SYSTEM IN THE BOOKS OF HEAD OFFICE 1. goods sent to branch 8. discount allowed to debtors/ bad debts Branch stock a/c Dr. Branch expenses a/c Dr. To goods sent to branch To branch debtor a/c 2. goods return by branch 9. if Gross profit (Difference in branch stock) Goods return by branch a/c Dr. Branch stock a/c Dr. To branch stock a/c To branch P&L a/c 3. Expenses are incurred for branch 10. if gross loss then vice versa of entry 9 Branch expenses a/c Dr. 11. transfer of branch expenses to branch P&L To cash bank a/c Branch P&L a/c Dr. 4. cash sales To branch expenses Cash a/c Dr. 12. profit of branch P&L (if any) To branch stock a/c Branch P&L a/c Dr. 5. credit sales To general P&L a/c Branch debtor a/c Dr. 13. If loss of branch P&L (vice versa of entry 12) To branch stock a/c 6. cash received from branch debtors Cash a/c Dr. To branch debtor a/c 7. goods return by branch debtors (sales return) Branch stock a/c Dr. To branch debtor a/c STOCK AND DEBTOR METHOD Solution: (In the books of HO) Q 6 Ex. 51 Manthan toys ltd. Has a branch at Surat. All goods are supplied to Branch stock a/c the branch at invoice price which is fixed by adding 25% to the cost and are Particulars Amount Particulars Amount sold at invoice price only. From the following particulars relating to the year To balance opening (IP) 10,000 By sales; 2010-11 ascertain the net profit or loss of the branch by stock and debtor To GSTB (IP) 1,08,000 Cash 40,000 system. (VNSGU 2013) Less: return (IP)(4,000) 1,04,000 Credit 60,000 PARTICULARS Rs. Total sales 1,00,000 Less: return (2,000) 98,000 Opening stock (invoice price) 10,000 Debtor (1-4-2010) 12,000 By closing bal. (IP) (?) 16,000 1,14,000 1,14,000 Goods supplied to branch (invoice price) 1,08,000 Cash sales 40,000 Goods sent to branch a/c Credit sales 60,000 Particulars Amount Particulars Amount Cash received from debtors 53,000 To branch adj. (profit) 21,600 By branch stock (IP) 1,08,000 Goods returned by branch (invoice price) 4,000 To goods return (IP) 4,000 By branch adj. (profit) 800 Bad debts 3,000 To trading (?) 83,200 Discount allowed to customers 1,000 1,08,800 1,08,800 Goods returned by customer 2,000 Stock reserve a/c Cash remitted to branch for: Particulars Amount Particulars Amount Rent 4,000 To adjustment 2,000 By balance b/d (open) 2,000 Salary 2,400 6,400 To balance c/f (Closing) 3,200 By adjustment 3,200 (IP) 5,200 5,200 Branch expenses a/c Working notes: Particulars Amount Particulars Amount Particulars Cost (100) Profit (25%) IP (125%) To bad debts 3,000 By branch adj. 10,400 Opening stock 8,000 2,000 10,000 To discount allowed 1,000 (transfer) (?) (10,000*100 /125) Reserve cr. Stock Dr. To rent 4,000 No entry Reserve Dr. To salary 2,400 Adj. cr. GSTB 86,400 21,600 1,08,000 No entry GSTB Dr. Stock Dr. Branch adj. cr GSTB Cr. Goods return 3,200 800 4,000 10,400 10,400 No entry GSTB cr. GSTB Dr. Branch adj. dr Stock cr Closing stock 12,800 3,200 16,000 Branch adjustment a/c No entry Reserve Dr. Stock cr. Particulars Amount Particulars Amount Reserve cr. To GSTB (return profit) 800 By stock res. Opening 2,000 Adj. Dr. To stock res. Closing 3,200 By GSTB (profit) 21,600 To branch expenses 10,400 (if gross profit asked) To gen. P&L (NP) (?) 9,200 Branch adjustment a/c 23,600 23,600 Particulars Amount Particulars Amount To GSTB – transfer 800 By stock res.-transfer 2,000 Branch debtors account To stock res.- transfer 3,200 By GSTB - transfer 21,600 To branch P&L (GP) 19,600 Particulars Amount Particulars Amount To opening balance 12,000 By cash received 53,000 23,600 23,600 To credit sales 60,000 By bad debts 3,000 Branch P&L account By discount allowed 1,000 By sales return 2,000 Particulars Amount Particulars Amount To branch expenses 10,400 By branch adj. ()GP 19,600 By closing balance (?) 13,000 To general P&L (NP) 9,200 72,000 72,000