Download Branch Account

BRANCH
•
A TRADING COMPANY MAY TRY TO EXPAND ITS BUSINESS BY OPENING
BRANCHES AS ANOTHER ESTABLISHMENT OF THE COMPANY IN DIFFERENT
LOCATIONS
2
Branch Accounts
~ Branches keep their own records
~ Head office keeps records for branches
Procedures:
Procedures:
Separate trial balances for the head
Branch adjustment account (= Branch
office and the branches
trading account)
Separate trading and profit and loss
Branch profit and loss account
accounts for the head office and the
branches
Trading and profit and loss account for the
whole business
Separate balance sheets for the
head office and the branches
3
Balance sheet for the whole business
ACCOUNT KEPT BY BRANCH
• HEAD OFFICE AND BRANCH WILL OPEN A FULL SET OF BOOKS TO RECORD
THEIR WON TRANSACTIONS INSTEAD OF BRANCH BOOKS ARE KEPT BY THE
HEAD OFFICE
5
•IN HEAD OFFICE BOOKS:
• BRANCH CURRENT ACCOUNT IS OPENED TO RECORD TRANSACTIONS
BETWEEN THE HEAD OFFICE AND THE BRANCH
•IN BRANCH BOOKS:
• HEAD OFFICE CURRENT ACCOUNT IS OPENED TO RECORD TRANSACTIONS
BETWEEN THEM
6
HO’s Book:
Branch Current
$
X
X
Bal b/f
Branch net profit
Goods in Transit
Remittance from branch
Cash in Transit
Bal c/f
X
Branch’s Book:
Remittance to HO
Bal c/f
X
HO Current
$
X
Bal b/f
X
Net profit
X
$
X
X
X
X
7
$
X
X
X
GOODS IN TRANSIT (GIT)
• GOODS WERE SENT BY THE HEAD OFFICE BEFORE THE END OF THE FINANCIAL
PERIOD, BUT RECEIVED BY THE BRANCH AFTER THE END OF THE FINANCIAL
PERIOD
• GIT =GOODS SENT TO BRANCH – GOODS RECEIVED
FROM HO
8
REMITTANCES/CASH IN TRANSIT (CIT)
• THE REMITTANCE OR CASH WAS REMITTED BY THE BRANCH BEFORE THE END
OF THE FINANCIAL PERIOD, BUT WAS RECEIVED BY THE HEAD OFFICE AFTER
THE END OF THE FINANCIAL PERIOD
• CIT= REMITTANCE TO HEAD OFFICE –
REMITTANCE FROM BRANCH
9
PREPARATION OF THE FINAL ACCOUNTS
• SEPARATE TRADING AND PROFIT AND LOSS ACCOUNTS AND BALANCE SHEETS
WOULD BE PREPARED FOR THE HEAD OFFICE AND THE BRANCH(ES)
10
Transactions
Head office (HO) Branch books
books
1 Opening Stock
Dr HO Trading
Cr Stock (opening
stock)[at cost]
2 Goods purchased
directly from HO
suppliers[at cost]
Dr Purchase(Trading) No entry
Cr Creditors
3 Goods purchased NO entry
directly from Branch
suppliers [at cost]
11
Dr Branch Trading
Cr Stock (Opening
stock)[at Cost or
Cost+profit]
Dr Purchase(trading)
Cr Creditors
Transactions
Head office (HO) Branch books
books
4 Goods sent from
HO to Branch
[cost+profit]
Dr Branch Current
Cr Goods sent to
Branch
Dr Good received
from HO
Cr HO Current
5 Goods returned
from Branch to HO
Dr Goods sent to
branch
Cr Branch Current
Dr HO Current
Cr Good received
from HO
6 Cash sales/Credit
sales
Dr HO
Cash/Debtors
Cr HO Sales
Dr Branch cash/
debtors
Cr Branch sales
12
Transactions
Head office (HO) Branch books
books
7 Closing stock
Dr Stock(Closing)
Cr HO Trading
Dr Stock (Closing)
Cr Branch Trading
good purchased directly
from Branch suppliers [at
cost] & goods received
from HO [cost+profit]
8 Gross profit on
trading
Dr HO Trading
Cr HO profit and
loss
Dr Branch Trading
Cr Branch profit and
loss
9 HO expenses paid Dr Expenses (P&L) No entry
by HO
Cr Cash/Bank
13
Transactions
Head office (HO) Branch books
books
10 Branch expenses Dr Branch Current
paid by Head Office Cr Cash/Bank
Dr Expenses (P&L)
Cr HO Current
11 Branch expenses No entry
paid by Branch
Dr Expenses (P&L)
Cr Cash/Bank
12 Administrative
charges for services
rendered by HO to
Branch
Dr Branch P&L
Cr HO Current
Dr Branch Current
Cr HO P&L
(Income)
14
Transactions
Head office (HO) Branch books
books
13 Provision for
Unrealized Profit
(Branch & Goods in
Transit)[cost+profit]
Increase in provision
Dr HO P&L
Cr Prov. For Unrealized
profit
Decrease in provision
Reverse
No entry
14 Goods in
Transit(GIT)
Dr Goods in Transit
Cr Branch Current
NO entry
15 Cash in Transit
(CIT)
Dr Cash in Transit
Cr Branch Current
No entry
15
Transactions
Head office (HO) Branch books
books
16 Profit made by
the branch
Dr Branch Current Dr Branch P&L
Cr Retained profit Cr HO Current
17 Profit made by
HO
Dr P&L
Cr Retained profit
No entry
18 Cash
remittances from
the branch
Dr Bank
Cr Branch Current
Or
Dr Bank
Cr remittance from
branch
Dr Remittance from
branch
16
Cr Branch Current
Dr HO Current
Cr Bank
Or
Dr Remittance to HO
Cr Bank
Dr HO Current
Cr Remittances to HO
INTER-COMPANY TRANSACTIONS
• IT WOULD NOT BE TRANSFERRED TO THE TOTAL COLUMN OF THE
TRADING AND PROFIT AND LOSS ACCOUNT AND THE BALANCE
SHEET
• FOR EXAMPLE, GOODS SENT TO THE BRANCH, GOODS FROM THE
HEAD OFFICE, SERVICE OVERHEADS CHARGED BY THE HEAD
OFFICE TO THE BRANCH, HEAD OFFICE CURRENT ACCOUNT,
BRANCH CURRENT ACCOUNT PROVISION FOR UNREALIZED
PROFIT
17
EXAMPLE -1
Colour Toys Ltd. has its head office in Central and a branch in
Shatin and separate final accounts are prepared for HO and
Branch.
Trial Balance as at 31 December as at 31 Dec 1997
HO
Branch
$
$
$
$
Cash and Bank
114300
80800
Debtors
360000
40000
HO Current
146000
Branch Current
194000
Fixed assets
1532000
152000
Stock,1Jan 1997
60000
36000
Creditors
96000
10000
Prov. For dep
38300
3800
Remittances to HO
11000
Remittances from Branch
10000
19 1200000
Capital
HO
$
$
112000
900000 1400000
664000
Retained Profits
Purchases and Sales
Good sent to branch
Good from HO
Selling Expenses
120000
Service Charged Received
5000
Administrative Expenses
245000
3525300 3525300
Branch
$
$
860000
616000
48000
36000
1019800 1019800
Additional information:
1. Goods purchased by the HO are sent to the branch at cost
2. Stock at 31 Dec 1997: HO $80000; Branch $10600
3. Depreciation is to be provided at 10% on cost per annum
4. Administrative expenses include an annual charge of $5000
for services rendered by the head office
Required:
20 for the year ended 31Dec
Prepare final accounts of HO and Branch
1997
Trading and profit and loss a/c for the year ended 31 Dec 1997
HO
Branch
Total
$000
$000
$000
$000
$000
$000
Sales
Good Sent to Branch
Less COGS
Opening Stock
Purchases
Goods from HO
1400
664
2064
860
860
60
900
960
Less Closing stock(WK1)80
36
616
652
880
Gross profit
1184
Add: Service charges received
5
Less: Depreciation
153.2
Selling expense 120
Admin. Exp.(WK2)245
518
Net profit
670.8
10.6
80+10.6+48
641.4
218.6
-
15.2
48
36
21
99.2
119.4
245+36-5
2260
2260
96
900
996
138.6 857.4
1402.6
168.4
168
276 612.4
790.2
WK1:
The total closing stock should be included Goods in transit
as GIT are still unsold goods at year end but those goods are
transported on the way
=> 80+10.6+48 = 138.6
Wk2:
The total administrative expenses should deduct the interCompany service charges of $5000
=> 24.5+36-5=276
22
HO’s Book:
Branch Current
$
$
Bal b/f
194000 Goods in Transit
Branch net profit 119400 (664000-61600)
48000
Remittance from branch 10000
Cash in Transit
(11000-10000)
1000
Bal c/f
254400
313400
313400
Branch’s Book:
HO Current
$
Remittance to HO 11000 Bal b/f
Bal c/f
254400 Net profit
265400
23
$
146000
119400
265400
Balance Sheet as at 31 Dec 1997
HO
Branch
$000
$000
$000
$000
Fixed Assets
Less provision for Dep
Current Assets
Stock
Goods in Transit
Branch Current
Debtors
Cash and Bank
Cash in Transit
Less Current Liabilities
Creditors
Working Capital
Capital
Retained profit
Head Office Current
1532
191.5
1340.5
80
48
254.4
360
114.3
1
857.7
96
Total
$000
$000
152
19
133
1684
210.5
1437.5
10.6
80+10.6+48
40
80.8
131.4
138.6
400
196.1
734.7
10
106
114.3+80.8+1
761.7
121.4
2102.2
254.4
1200 112+670.8+119.4 902.2
254.4
24
212.2
254.4
628.7
2102.2
1200
902.2
2102.2
GOODS SENT TO BRANCH AT MARK-UP
GOODS SENT TO BRANCH AT A MARK UP
• THE HEAD OFFICE SUPPLIES GOODS TO ITS BRANCH WITH
AN INVOICE PRICE AT COST PLUS PROFIT
• GOODS SENT TO BRANCH A/C AND GOODS RECEIVED FROM
HO A/C ARE VALUED AT INVOICE PRICE.
• IF THERE IS UNSOLD STOCK AT THE END OF THE
ACCOUNTING PERIOD, THE UNREALIZED PROFIT-IN-STOCK
MUST BE ELIMINATED FROM THE CONSOLIDATED FINAL
ACCOUNTS
• A PROVISION FOR UNREALIZED PROFIT A/C WILL BE
OPENED TO MEASURE UNEARNED PROFIT INCLUDED IN THE
CLOSING STOCK OF THE BRANCH AND REFLECT IN THE HO’S
BOOK
26
PROVISION FOR UNREALIZED PROFIT
=STOCK AT MARK UP* MARK UP
100%+MARK UP
• STOCK MARK UP= CLOSING STOCK AT BRANCH SENT FROM HO + GOODS IN
TRANSIT
• CLOSING STOCK OF BRANCH INCLUDE GOODS DIRECTLY PURCHASED FROM
SUPPLIERS WILL NOT BE CONCERNED IN THE CALCULATION OF THE PROVISION OF
UNREALIZED PROFIT
27
Account entries
Increase in Provision Dr P/L
Cr Provision for unrealized profit
Decrease in Provision Dr Provision for unrealized profit
Cr P/L
•The increase or decrease in the provision should be entered
in the profit and loss a/c
•The balance should be appear in the balance sheet under
Current Liabilities
•The total stock= stock in HO+stock in branch+stock in transit
- provision for unrealized profit
28
Goods sent form the head office are charged to the branch
At cost plus 10% the closing stock was valued as follows:
Date
HO
31 Dec 1991
80000
(1st year of business)
31 Dec 1992
96000
31 Dec 1993
84000
31 Dec 1994
108000
Branch
66000
86900
71500
75900
Goods in transit
22000
5500
4950
550
Required
Prepare Provision for unrealized profit account for 1992-1994
30
Provision for unrealized profit
91
$
Dec 31 Bal c/d
8000
(66000+22000*10/110
91
Dec 31
92
Dec 31 Bal c/d
8400
(869000+5500)*10/110
8400
93
Dec 31
P/L
1450
Dec 31 Bal c/d
6950
(71500+4950)*10/110
8400
94
Dec 31 Bal c/d
6950
(75900+550)*10/110
92
Jan 1
Bal b/d
Dec 31
P/L
P/L
$
8000
8000
400
8400
93
Jan 1
Bal b/d
8400
8400
94
Jan 1
31
Bal b/d
6950
STOCK LOSS
Normal stock loss
Abnormal stock loss
Related to the ordinary
activities of the business
e.g. Obsolete stock,
damaged stock
No entry needed
Caused by an exceptional
events
e.g. fire loss, burglary loss
Accounting recorded
needed
32
Accounting entries – abnormal Loss
Events
HO’s book
Branch’s
book
Total column
Stock loss in
the HO
Dr P/L
Cr Trading (cost)
No entry
Dr P/L
Cr Trading
(Cost)
Stock loss in
transit
Dr Goods sent to
Branch
Cr Branch Current
(Mark up)
Dr P/L
Cr Trading (Cost)
No entry
Dr P/L
Cr Trading
(cost)
Stock loss in
Branch
NO entry
Dr P/L
Cr Trading
33(cost)
Dr P/L
Cr Trading
(cost)
Colour Toys Ltd. has its head office in Central and a branch in
Shatin and separate final accounts are prepared for HO and
Branch. All goods sold by branch are supplied by the HO
at cost plus 10%
Trial Balance as at 31 December as at 31 Dec 1997
HO
Branch
$
$
$
$
Share Capital
260000
Profit and loss account
125000
HO Current
79500
Branch Current
85000
Fixed assets
345000
70000
Stock,1Jan 1997
48500
15400
Debtors/Creditors
60400 35000 14700
37200
Prov. For dep
13700
16400
Remittances to HO
26000
35 22000
Remittances from Branch
HO
$
15900
255000
Bank and cash
Purchases and Sales
Good sent to branch
Good from HO
Provision for unrealized profit
Administrative Expenses
31000
840800
Branch
$
$
$
3100
229700 44600 199700
154000
148500
1400
10500
840800 332800 332800
Additional information:
1. Stock as at 31 Dec 1997 excluding goods in transit was valued at
followings:
Head office, at cost $32600
Branch, at cost to branch
- received from HO $16500
- own purchases
$8000
The branch stock at 31 Dec 199636
consisted wholly of goods
received from the head office
2. On 20 Nov 1997 some goods received by the branch from the
head office were destroyed by fire. No entry has been made for
this loss. The cost of these goods to the branch was $11000
3. Depreciation is to be provided on fixed asset at 2% per
annum on cost
Required
Prepare final accounts for HO and Branch separately as at 31 Dec
1997
37
Trading and profit and loss a/c for the year ended 31 Dec 1997
HO
Branch
Total
$000
$000
$000
$000
$000
$000
Sales
Good Sent to Branch
Less COGS
Opening Stock (WK1) 48.5
Purchases
255
Goods from HO
303.5
Less:Fire loss (WK2) Less Closing stock(WK3)32.6
Gross profit
Less: Depreciation
6.9
Fire loss
Administrative 31
Prov for
Unrealized profit 0.6
(1.5+5)-1.4
229.7
154
383.7
16.5+8
199.7
199.7
15.4
44.6
148.5
208.5
11
270.9
24.5
112.8
38.5
74.3
429.4
429.4
62.5
299.6
362.1
10
173
60.6 291.5
26.7
38
1.4
11
10.5
-
137.9
8.3
10
41.5
22.9
3.8
-
59.8
78.1
WK1:
HO and Branch value stock on different bases in this case. HO’s
Stock is valued at cost; while Branch’s stock is valued at mark-up.
Total opening stock should be recorded at cost price
HO+Branch(at mark up) – Opening prov. for unrealized profit
= 48.5+15.4+1.4
= 62.5
WK2:
Fire loss in total column should be recorded at cost price rather
than mark-up price
Invoice price = Cost + Profit
Cost = Invoice Price – Profit
= 1.1 – 1.1*10/110
= 10
39
WK3:
Total closing stock should be included HO’s stock, Branch’s
Stock and Goods in transit
HO’s stock and Branch (own purchases)’s stock are valued at
cost;while Branch (received from HO)’s stock and Goods in
transit are valued at mark-up. Those goods should be adjusted
at cost price
Total closing stock should be included:
32.6+8+(16.5-16.5*10/110)+(1.1-1.1*10/110)
= 60.6
40
WK4
:
Provision for unrealized profit
Bal c/f
2000
(16500+5500)*10/110
Bal b/f
P/L
2000
1400
600
2000
41
Balance Sheet as at 31 Dec 1997
HO
Branch
$000
$000
$000
$000
Fixed Assets
Less provision for Dep
Current Assets
Stock
Goods in Transit
Branch Current(WK1)
Debtors
Cash and Bank
Cash in Transit
345
20.6
324.4
32.6
5.5
57.3
60.4
15.9
1
175.7
Less Current Liabilities
Creditors
35
Prov for unrealized
2
profit
Working Capital
Capital
Retained profit
Head Office Current WK2)
Total
$000
$000
70
17.8
52.2
24.5
14.7
3.1
42.3
37.2
-
138.7
463.1
260 12.5+74.3+3.8
203.1 42
463.1
15.9+31+4
5.1
57.3
57.3
57.3
415
38.4
376.6
60.6
75.1
23
158.7
72.2
-
86.5
463.1
260
203.1
463.1
WK1:
HO’s book:
Branch Current
Bal b/f
85000 Goods in transit
5500
Branch net profit 3800 Remittance from branch22000
Cash in transit
(26000-22000)
4000
Bal c/f
57300
88800
88800
Wk2:
Branch’s book:
Remittance to HO
Bal c/f
HO Current
26000 Bal b/f
57300 Branch net profit
43
833000
79500
3800
833000
ACCOUNT KEPT BY HO
• THE BRANCH DO NOT KEEP THEIR WON RECORDS, THE HO WILL KEEP ALL
ACCOUNTING RECORDS FOR THE BRANCH TRANSACTIONS
45
GOODS ARE INVOICED TO THE BRANCH
AT COST PLUS PROFIT
Cost
Goods Sent to
Branch a/c
+
Profit
Branch Stock
Adjustment a/c
=
Invoiced price
Branch Stock a/c
The gross profit will be calculated in Branch Stock
Adjustment account
46
Transactions
Accounting entries
Opening stock balance
Branch stock a/c-opening “debit”
balance recorded as “cost plus
profit”
Branch Stock Adjustment a/cOpening “Credit” balance recorded
as “Profit” portion only
Goods sent to branch
Dr Branch Stock [cost+profit]
Cr Goods sent to Branch [cost]
Cr Branch stock adjustment [profit]
Goods returned by
Branch to HO
Dr Goods sent to Branch [cost]
Dr Branch stock adjustment [profit]
Cr Branch Stock [cost+profit]
47
Transactions
Accounting entries
Credit Sales at the
Branch
Dr Branch Debtors (selling price)
Cr Branch Stock
Cash Sales at the
Branch
Dr Branch Cash (selling price)
Cr Branch Stock
Goods returned by
customer to Branch
Dr Branch Stock (selling price)
Cr Branch Debtors
Bad debts, Discount
Allowed to customer
Dr Branch Profit and loss
Cr Branch Debtors
Branch expenses
Dr Branch Profit and loss
Cr Cash/Bank
Branch income
Dr Cash/Bank
Cr Branch Profit and loss
48
Transactions
Accounting entries
Treatment of closing stock Branch Stock a/c- actual stock+ GIT
recorded as “cost plus profit” will be
entered on the credit side as closing
debit balance
Branch stock adjustment a/c- actual
stock + GIT recorded as “Profit” portion
will be entered on debit side as closing
credit balance
Net amount of Goods sent
to Branch deducted from
HO Purchases a/c and
transfer to trading a/c
Dr Goods sent to Branch [cost]
Cr Head Office Purchases/Trading
Branch transferred Stock
adjustment to branch P/L
Dr Branch Stock Adjustment
Cr Branch Profit and loss
Treatment of Branch net
profit
Dr Branch
49 Profit and loss
Cr Head Office profit and loss
Sino Ltd. Sends goods at the selling price to the branch.
The selling price is cost plus 10 per cent. The branch
accounts are maintained by the head office. Transactions
between the head office and the branch for the year ended
31 December 1997 were as follows:
Opening stock at branch at selling price
$
110,000
Goods sent to branch at cost
Goods returned to the head office at cost
Credit sales by branch
Cash sales by branch
Goods returned to branch at selling price
Closing stock at branch at selling price
51price
Closing goods in transit at selling
750,000
50,000
354,000
350,000
33,000
171,500
37,500
Branch Stock(SP)
$
Bal b/f
110000 Return to HO (50000*1.1)
Gd sent to branch
Branch debtors
(750000*1.1)
825000 Branch cash
Branch debtors-return 33000 Bal c/f (171500+37500)
968000
$
55000
354000
350000
209000
968000
Branch Adjustment(Profit)
$
Return to HO
Bal b/f (110000*10/110)
(55000*10/110)
5000 Branch stock (75000*0.1)
Branch P/L
61000
Bal c/f(209000*10/110) 19000
85000
$
10000
75000
85000
Goods Sent to Branch(cost)
Branch stock
HO Purchase
$
50000 Branch stock
52
700000
750000
$
750000
750000
Transactions
Stock Loss in Branch
Accounting entries
Dr Branch Stock Adjustment [cost+profit]
-Normal Loss
event related to ordinary Cr Branch Stock
activities of the business
e.g. pilferage, stock
wastage, unaccounted
stock
-Abnormal Loss
caused by exceptional
event e.g. fire, burglary
etc
-Goods lost in transit
Dr Branch Profit & Loss [cost]
Dr Branch Stock Adjustment [profit]
Cr Branch Stock [cost+profit]
Dr Branch adjustment [profit]
Dr Profit & Loss [cost]
Cr Branch Stock
53 [cost+profit]
Transactions
Accounting entries
Stock transfer from branch
A to branch B
Dr Goods sent branch A [cost]
Dr Branch A Adjustment [profit]
Cr Branch A Stock [cost+profit]
Dr Branch B Stock [cost+profit]
Cr Good sent to branch B [cost]
Cr Branch B stock [cost+profit]
Branch Stock Valuation
-reduction in selling price
Dr Branch Adjustment
Cr Branch Stock [with the total
reduction off the selling price]
Addition mark up
-Goods are sent to the branch Dr Branch Stock [cost+profit]
at mark up lower than selling Cr Branch adjustment [profit]
price
Cr Goods sent to branch [cost]
-Goods are sold to customers
with an additional mark up
54
Dr Branch Stock
Cr Branch adjustment [profit]
Transactions
Cash Misappropriation
-loss from the theft of the
cash takings
Accounting entries
Dr Cash Misappropriated
Cr Cash
Dr Branch profit and loss
Cr Cash Misappropriated
55
Joyce Ltd. Has a head office in Central and two branches,
one in Shatin and the other in Tsuen Wan. Branch accounts
are maintained by the head office. Goods are invoiced to
Shatin at cost plus 20 per cent. This is the selling price.
Joyce Ltd. Sent goods at cost plus 25 per cent to Tsuen
Wan. The selling price in this branch was cost plus 30 per
cent.
The head office books showed the following balances
related to transactions between the head office and its two
branches for the year ended 31 December 1997:
Shatin Tsuen Wan
Opening stock at cost
Credit sales by branches
57
$
100,000
800,000
$
56,000
476,840
Shatin Tsuen Wan
$
Goods sent to branches at cost
$
806,000
400,000
Goods returned by branches at cost
80,000
--
Stock lost in first at cost
64,000
--
Reduction in selling price
13,500
--
Cash received from debtors
Discount allowed
Bad debts written off
Returns by debtors
340,200
345,320
2,000
3,000
500
800
2,400
Branch transfer at selling price from Shatin
To Tsuen Wan
58
960
--
Shatin Tsuen Wan
$
Closing stock at selling price
91,680
$
117,000
Goods in transit from head office to Shatin
At selling price
4,800
Expenses
26,800
34,500
Any stock unaccounted for may be regarded as pilferage and
normal wastage.
59
Shatin Branch
Bal b/f (100000*1.2)
Gd sent to branch
(806000*1.2)
Branch Stock(SP)
$
120000 Branch debtors
Return to HO (80000*1.2)
967200 Fire loss (64000*1.2)
Branch adj.-reduction in
selling price
$
800000
96000
76800
13500
Branch Adjustment (Profit)
$
$
Return to HO(80000*0.2) 16000 Bal b/f (100000*0.2)
20000
Fire loss (64000*0.2)
12800 Branch stock (806000*0.2)
161200
Branch adj.-reduction in
selling price
13500
Goods Sent to Branch(cost)
$
$
Gd return to HO
80000 Branch stock
806000
Branch Debtors(SP)
$
$
Branch stock
800000
Branch profit and loss account for60
the year ended 31 Dec 1997
$
$
Fire loss
64000
Branch Stock
$
Bal b/f (100000*1.2) 120000 Branch debtors
Gd sent to branch
Return to HO (80000*1.2)
(806000*1.2)
967200 Fire loss (64000*1.2)
Branch debtors-return
2400 Branch adj.-reduction in
selling price
Shatin Branch
$
800000
96000
76800
13500
Branch Debtors
$
$
340200
Branch stock
800000 Branch cash
Discount allowed
2000
Bad debts
500
Branch stock-return
2400
Branch profit and loss account for the year ended 31 Dec 1997
$
$
Fire loss
64000
Discount allowed
2000
Bad debts
500
61
Branch Stock
$
Bal b/f (100000*1.2) 120000 Branch debtors
Gd sent to branch
Return to HO (80000*1.2)
(806000*1.2)
967200 Fire loss (64000*1.2)
Branch debtors-return
2400 Branch adj.-reduction in
selling price
Branch transfer
Shatin Branch
Branch Adjustment
$
Return to HO(80000*0.2) 16000 Bal b/f (100000*0.2)
Fire loss (64000*0.2)
12800 Branch stock (806000*0.2)
Branch adj.-reduction in
selling price
13500
Branch transfer
160
(960*20/120)
Goods Sent to Branch
$
Gd return to HO
80000 Branch stock
Branch transfer
62
(960*100/120)
800
$
800000
96000
76800
13500
960
$
20000
161200
$
806000
Branch Stock
$
$
800000
Bal b/f (100000*1.2) 120000 Branch debtors
Gd sent to branch
Return to HO (80000*1.2)
96000
(806000*1.2)
967200 Fire loss (64000*1.2)
76800
Branch debtors-return
2400 Branch adj.-reduction in
selling price
13500
Branch transfer
960
Pilferage & wastage(Bal fig)
5860
Bal c/f (91680+4800)
96480
1089600
1089600
Branch Adjustment
$
$
Return to HO(80000*0.2) 16000 Bal b/f (100000*0.2)
20000
Fire loss (64000*0.2)
12800 Branch stock (806000*0.2)
161200
Branch adj.-reduction in
selling price
13500
Branch transfer
160
(960*20/120)
Pilferage & wastage
5860
Branch P/L(Bal fig)
116800
63
Bal c/f(96480*20/120) 16080
181200
181200
Shatin Branch
Gd return to HO
Branch transfer
(960*100/120)
HO Purchase(bal.fig.)
Branch stock
Goods Sent to Branch
$
80000 Branch stock
800
725200
806000
Branch Debtors
$
800000 Branch cash
Discount allowed
Bad debts
Branch stock-return
Bal c/f
800000
$
806000
806000
$
340200
2000
500
2400
454900
800000
Branch profit and loss account for the year ended 31 Dec 1997
$
$
116800
Fire loss
64000 Branch Adj.- gross profit
Discount allowed
2000
Bad debts
500
64
Expense
26800
Net profit
23500
116800
116800
TSUEN WAN BRANCH
Tsuen Wan Branch
Bal b/f (56000*1.3)
Gd sent to branch
(400000*1.25)
Branch adj
(400000*0.05)
Branch Stock
$
72800 Branch debtors
$
476840
500000
20000
Branch Adjustment
$
$
Bal b/f (56000*0.3)
16800
Branch stock (400000*0.25) 100000
Branch stock (400000*0.05) 20000
Goods Sent to Branch
$
$
Branch stock
400000
Branch stock
Branch Debtors
$
476840 Branch cash
66
$
345320
Branch stock
Branch Debtors
$
476840 Branch cash
Discount allowed
Bad debts
$
345320
3000
800
Branch profit and loss account for the year ended 31 Dec 1997
$
$
Discount allowed
3000
Bad debts
800
67
Tsuen Wan Branch
Branch Stock
$
72800 Branch debtors
$
476840
Bal b/f (56000*1.3)
Gd sent to branch
(400000*1.25)
500000
Branch adj
(400000*0.05)
20000
Gd sent to branch
(800*1.25)
1000
Branch adj.(800*0.05)
40
Branch Adjustment
$
$
Bal b/f (56000*0.3)
16800
Branch stock (400000*025) 100000
Branch stock (400000*0.05) 20000
Branch stock-branch transfer
(800*0.25)
200
Branch stock (800*0.05)
40
Goods Sent to Branch
$
68
Branch stock
Branch stock-branch transfer
$
400000
800
Tsuen Wan Branch
Branch Stock
$
72800 Branch debtors
Bal c/f
500000
$
476840
117000
Bal b/f (56000*1.3)
Gd sent to branch
(400000*1.25)
Branch adj
(400000*0.05)
20000
Gd sent to branch
(800*1.25)
1000
Branch adj.(800*0.05)
40
593840
593840
Branch Adjustment
$
$
16800
Branch P/L(Bal fig)
110040 Bal b/f (56000*0.3)
Bal c/f(117000*30/130) 27000 Branch stock (400000*025) 100000
Branch stock (400000*0.05) 20000
Branch stock-branch transfer
(800*0.25)
200
Branch stock (800*0.05)
40
137040
69
137040
Goods Sent to Branch
$
HO Purchase(bal.fig.)
400800 Branch stock
Branch stock-branch transfer
Branch stock
400800
Branch Debtors
$
476840 Branch cash
Discount allowed
Bad debts
Bal c/f
476840
$
400000
800
400800
$
345320
3000
800
127720
476840
Branch profit and loss account for the year ended 31 Dec 1997
$
$
110040
Discount allowed
3000 Branch Adj.- gross profit
Bad debts
800
Expense
34500
70
Net profit
71740
110040
110040
PREPARATION OF THE FINAL ACCOUNTS
FOR THE HEAD OFFICE
• AFTER CALCULATING THE BRANCH PROFITS OR LOSSES, THE OVERALL PROFIT
AND LOSS FOR THE HEAD OFFICE CAN BE COMPUTED
71
Account entries
Transactions
Accounting Entries
Balance transferred from
goods sent to branch
account to the head office
purchases account
Dr Goods sent to
branch
Cr HO
purchases/trading
Dr Branch Profit
and loss
Cr HO P/L
Branch net profit
transferred to head office
profit and loss account
72
The following trial balalnce was extracted from the books of
Joyce Ltd
Trial Balance as at 31 December as at 31 Dec 1997
Share Capital
Profit and loss account
Fixed assets
Stock at Head Office,1Jan 1997
Debtors/Creditors
Prov. for dep
Purchases
Sales
Administrative expenses
Selling expenses
Bank and cash
$
800000
250000
774600
200000
3800000
74
225000
108000
456500
$
1656000
300900
950000
3463200
$
Branch stock 1 Jan 1997-Shatin
$
250000
- Tsuen Wan 120000
Branch adjustment- Shatin
20000
- Tsuen Wan
16800
6606900
6606900
Additional information:
1. On 31 Dec 1997, stock in the HO was valued at $180000
2. The branches paid local expenses and remitted all the
remianing cash received from debtors to the HO. NO entry
had been made about the remittances from the branches.
3. Depreciation is to be charged on the fixed asset at 10% per
75
annum on cost.
Prepare final account for Joyce Ltd for the year ended 31 Dec1997
Joyce Ltd.
Trading and Profit and Loss Account for the year ended 31 December 1997
$
Opening Stock
3,800,000
Less Goods sent to Branch
1,126,000
Less Closing Stock
Cost of Goods Sold
Gross Profit
$
250,000 Sales
Purchases
($725,200 + $400,800)
$
3,463,200
2,674,000
2,924,000
180,000
2,744,000
719,200
3,463,200
3,463,200
Provision for Depreciation
80,000 Gross Profit
Administrative Expenses
225,000 Branch Profit
Selling Expenses
108,000 - Shatin
23,500
Net Profit
401,440 -Tsuen Wan
71,740
814,440
76
719,200
814,440
Joyce Ltd.
Balance Sheet as at 31 December 1997
$
$
Fixed Assets
800,000 Share Capital
Less Provision for Depreciation
280,000 Profit & Loss Account ($300,900 + $401,440)
1,656,000
702,340
520,000
Current Assets
Stock
Current Liabilities
350,400 Creditors
Debtors ($774,600 + $454,900 + $127,720)
1,357,220
Bank and Cash (W1)
1,080,720
3,308,340
77
950,000
3,308,340
Workings:
W1.
Branch Cash
Shatin
$
Branch Debtors
340,200
Tsuen Wan
Shatin
$
345,320 Expenses
Remittances to HO
340,200
345,320
Note
Total Stock:
HO
Shatin
Tsuen Wan
Goods in transit
Provision for Unrealized Profit
$
180,000
91,680
117,000
4,800
(43,080)
78
350,400
Tsuen Wan
$
$
26,800
34,500
313,400
310,820
340,200
345,320