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中六級 會計學原理科. Principles of Accounts. Branch Accounts. Head Office maintains all the accounting records. The accounts are used for three main purposes : (1) to record transactions showing changes in assets, liabilities and capital;

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中六級會計學原理科

Principles of Accounts



Head Office maintains all the

accounting records

The accounts are used for three main purposes:

(1) to record transactions showing changes

in assets, liabilities and capital;

(2) to ascertain the profitability of each branch:

(3) to check whether anyone at the branches is

stealing goods or cash.


Internal control
Internal Control

  • (1) Inventory control

  • Head Office does all buying. Goods are

  • transferred to the Branch by Head office.

  • Spot inspections of stock in Branch.


  • (2) Cash control

  • All branches should bank their full cash

  • takings everyday. Cash payments made

  • by the branch will be kept on a basis

  • similar to the petty cash imprest system.


The head office will keep the following accounts for each branch
The Head Office will keep the following accounts for each Branch

  • (1) Branch Stock A/C

  • (2) Branch Total Debtors A/C

  • (3) Branch Cash A/C

  • (4) Branch Expenses A/C

  • (5) Goods Sent to Branch


Goods sent to branch at cost
Goods sent to Branch at cost Branch

  • Beginning stock b/dCash: Cash sales

  • Goods sent to BranchBranch Debtors: credit sales

  • Cash/Branch debtors: Goods Goods sent to Branch: Good returned to

  • returned to Branch by customers Head Office

  • Branch Debtors: profit loading on Branch Profit & Loss: wastage;Loss

  • goods returned to Closing stock c/d (given)

  • Head Office by

  • Customers

  • Branch Gross Profit (Cr.-Dr.)_____ ______

  • ==== =====

Branch Stock


Goods sent to Branch Branch

Branch stock: goods returned fromBranch Stock

Branch to Head Office

Branch Debtors: goods returned by

Branch customers

Head Office Trading a/c _____ _____

==== ====


Goods sent to branch at selling price
Goods sent to branch at Branchselling price

(I) Memorandum Column Method

Branch Stock

Selling Cost Selling Cost

priceprice

$ $$ $

Bal. b/dBranch

debtors -sales

Goods sent to branch Cash: sales

Branch Gross Profit Goods sent to branch

-goods returned to H.O.

Branch P/L

-goods stolen

Branch P/L

-normal wastage

Branch P/L

-excess deficiency

Bal. c/d


Branch debtors
Branch BranchDebtors

$$

Bal. b/d Branch P/L -bad debts

Branch stock -sales Cash

Branch P/L -discounts allowed

Bal. c/d

Goods sent to Branch

$ $

Branch stock -goods returned Branch stock -goods

to H.O sent to branch

Head office Trading A/C


Notes
Notes : Branch

1. Goods sent to Branch : use the COST value

2. Values of sales : no need to change into

cost value in Cost column

3. Returns to H.O. : use the COST value

4. Unknown loss

5. Gross profit = Cr. side - Dr.side

( Only in COST column )

*The selling price column of Branch Stock is not

part of the double-entries while the Costcolumn is.


Selling price column
Selling Price Column Branch

- to find out the closing stock ( Dr.side - Cr.side )

- the closing stock figure in the A/C should be

compared with the stock figure found out by

physical stock taking.

If there is a difference

stock discrepancy / deficiency

Cost Column

- to calculate the gross profit of the branch


Advantages of including a selling price column
Advantages of including a selling price column Branch

(1) The branch manager is not able to calculate the amount of profit the branch is making. Head office is able to preserve the secrecy of certain key information.

(2) It highlights stock discrepancies. Separate adjustment is not required in the double entry column for these discrepancies as they are automatically included in the gross profit.


Goods sent to branch at selling price1
Goods sent to branch at Selling Price Branch

  • Branch Stock a/c - at selling price

    to control upon stock deficiency

  • Branch Adjustment a/c - to calculate the gross profit earned by each branch

Branch Adjustment a/c method


Example of branch adjustment
Example of Branch Adjustment Branch

Branch Adjustment (Profit loading)

Branch Stock: Goods Returned to

Head Office by branch

Branch Stock: Reduction in selling price

Branch Stock: Normal loss/wastage of

goods

Branch Stock: Deficiency of stock

Gross Profit of branch (Cr.-Dr.)

Unrealized Profit on closing stock c/d

Unrealized Profit on beginning stock b/d

Goods sent to branch: Profit loading


Journal entries
Journal Entries Branch

1. Profit element on opening stock

2.Goods sent to branch

Dr. Branch Stock

Cr. Goods sent to branch

Branch Adjustment

at selling price

at cost

profit loading

3.Goods Returned to Head Office

Dr. Branch Adjustment

Goods sent to branch

Cr. Branch Stock

4.Reduction in selling price

To be continue...

Dr. Branch Adjustment

Cr. Branch Stock


5. BranchNormal loss/wastage of goods (at selling price)

Dr. Branch Adjustment

Cr. Branch Stock

6.Deficiency of stock (at selling price)

Dr. Branch Adjustment

Cr. Branch Stock

7.Gross Profit on branch

Dr. Branch Adjustment

Cr. Branch Profit and loss

8.Profit element on closing stock


Head Office & Branch maintains Branch

separate records


Profit and loss account
Profit and Loss Account Branch

Head office Branch Combined

Gross Profit xxx xxx xxx

Less: Expenses

Distribution expenses xx xx xxx

Administrative expenses xx xx xxx

Depreciation xx xx xxx

Provision for bad debts xx xx xxx

xxx xxx xxx

Net Profit xxx xxx xxx


B goods sent to branch at selling price
(b) Goods sent to branch at selling price Branch

Trading Account

Head office Branch Combined

Sales xx xx xxx

Goods Sent to Branch xx --- ----

xx xx xxx

Less:Cost of goods sold

Opening stock xx xx xxx

Add: Purchases xx --- xxx

Goods received

from Head office--- xx ----

xx xx xxx

Less: closing stock xx xx xxx

xx xx xxx

Gross Profit xx xx xxx


Example: Branch

Peter & Sally

Trading and Profit and Loss account for the year ended 31 October,20X1

Head Office Branch Combined

Sales

Less: Cost of goods sold

Opening Stock

Add: Purchases

Goods sent to branch

Less: Closing Stock

Cost of goods sold

Gross Profit

Less: Expenses

Administrative Expenses

Distribution Expenses

Depreciation

Provision for bad debts

Manager’s Commission

Net Profit

$ $ $ $ $ $

XXX XXX XXX

XX XX XX

XX XX XX

XX XX XX

XX XX XX

XX XX XX

XX XX XX

XX XX XX

XX XX XX

XX XX XX

XX XX XX

XX XX XX

XX XX XX

XXX XXX XXX ====== ======= ======


Net Profit XXXXX

Less: commission to Peter XXX

Less: Interest on Capital:--Peter XXX

--Sally XXXXXXXXXXXX

XXXXX

Balance of Profit shared:--Peter ¾ XXX

--Sally ¼ XXX

XXXXX

=======


The end
THE END XXXXX


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