1. Advanced Financial Accounting FIN-611
Mian Ahmad Farhan
Lecture-13
Branch Accounting

2. Branch Account Opening stock (At cost)
Goods sent to branch (At invoice price)
xxx
Reversal of loading for goods sent to branch
Closing stock

3. Margin Rate Sales 100% Less Cost 80% Gross Profit 20% Cost Rs. 1,600
Gross profit = 1,600 / 80 x 20 = 400
Sales = 1,
Sales = 2,000
Gross profit = 2,000 x 20% = 400

4. Sales = Invoice price
Cost = Cost
Gross profit = Loading

5. Question Opening stock at invoice price (1 Jan, 2008) Rs. 3,000
Goods sent to branch at invoice
price Rs. 24,000
Remittance from branch Rs. 25,000
Cash paid by the head office
for sundry expenses Rs. 4,500
Return from the branch
invoice price Rs. 150
Closing stock at invoice price Rs. 8,000

6. Working Cost of opening stock = 3,000 / 125 x 100 = 2,400
Cost of closing stock = 8,000 / 125 x 100 = 6,400
Goods sent to branch = 24,000
Goods return from HO =
23,850
Invoice price of the goods sent
to branch netted off by good return
from HO = 23,850
Loading = 23,850 / 125 x 25 = 4,770

7. Lahore Branch In the books of Head Office
Opening stock
Goods sent to branch
Cash send to branch for expenses
Profit/Loss
2,400
24,000
4,500
5,420
Cash received from HO
Goods return to HO
Goods sent to branch (Reverse of loading)
Closing stock
25,000
150
4,770
6,400
36,320

8. Normal Loss Normal loss has no effect on Debtor system and Income
Statement system.

9. Accounting Entries (Abnormal Loss)
At the time of loss
Abnormal loss A/c 4,000
Branch A/c 4,000
Insurance claim
Insurance claim A/c 3,500
Abnormal loss A/c 3,500
Profit & loss
Profit & loss A/c 500
Abnormal loss A/c 500

10. Stock & Debtor System

11. Branch stock account
Branch debtors account
Goods sent to branch account
Branch stock reserve account
Branch expenses account
Branch adjustment account
Branch profit & loss account

12. Journal Entries Goods sent to branch Goods sold by branch
Branch stock A/c xxx
Goods sent to branch A/c xxx
(Invoice price)
Goods sold by branch
A- Cash sales
Branch cash A/c xxx
B- Credit sales
Branch debtors A/c xxx
Branch stock A/c xxx

13. Journal Entries Cash received from debtor Goods returned by customer
Cash A/c xxx
Branch debtors A/c xxx
Goods returned by customer
Branch stock A/c xxx
Goods sent to branch A/c xxx
Bad debts and Discount debtors
Branch Exp. A/c
Branch debtors

14. Bad debts
Bad debts A/c
Debtors A/c

15. Branch Debtors Account
Opening balance b/f
Branch stock
(Credit sales)
xxx
Cash
(Cash received from debtors)
Branch Exp.
(Bad debts )
Discount allow.
(Stock return)
Closing balance

16. Journal Entries Branch return goods HO Goods sent to branch A/c xxx
Branch stock A/C xxx
(Invoice price)
Stock theft
Branch adjustment A/c xxx
Branch stock A/c xxx
Cash sent by HO to branch for expenses
Branch Exp. xxx
Cash / Bank A/c xxx

17. Branch stock Opening balance (Invoice price) Goods sent to branch xxx
Branch debtors /cash (Sales of goods)
Branch debtors
(Sales return)

18. Branch Expenses Branch debtors (Bad debts) (Discount on debtors)
Cash/Bank
(Cash sent to branch for expenses)
xxx
Balance (Transfer to branch adjustment A/c)

19. Journal Entries Transfer branch exp. to branch adjustment A/c
Branch adjustment A/c xxx
Branch Exp. A/c xxx
Surplus in Branch stock
Branch stock A/c xxx

20. Branch Stock Account Goods send to branch Balance 120 30
Branch debtors
150