ACCOUNTS PROJECT
(Branch Account Basic Theory)
Meaning of Branch Accounts
Account which are opened in the books of
head office and branches, related to
branches are called Branch Accounts. The
main objectives of these accounts is to
know the working ability and profit and loss
of branches. The also include the final
accounts related to them, by which their
financial condition is known.
Types Of Branches
1) Branches receiving goods from Head Office at
Cost Price and making Cash Sales only:
These Branches receive goods from Head
Office at cost and make cash sales only. All sales
proceeds are sent to head office. Head Office
send amount separately for the expenses of the
Branch.
2) Branches receiving Goods from Head Office Cost
Price and making Cash and Credit Sales:
These Branches are like the first type of
Branch, the only difference is that they sell goods
on credit also
3) Branches receiving Goods from Head
Office at Selling Price or Invoice Price and
making Cash and Credit Sales :
These Branches are like the second type of
Branches with the only difference that goods to
these Branches are sent by the Head Office at
Invoice Price which is always above Cost Price.
4) Independent Branches:
These Branches receive goods from the Head
Office and may manufacture or purchase goods
from the market also. They are independent in
all respects expect that they are under the
control oh Head Office and thus they have to
follow the instructions of Head Office.
5) Foreign Branches:
These Branches may be of any discussed
above. They are known as Foreign
Branches because they work in foreign
countries .
Accounting Records of
Branches in the Head Office
Books
In case of dependent branch the accounting records
as regard to branch are kept in head office books as
per following methods:
1) Simple system or debtor system:
When branches are very small than this method
is adopted. In this method only branch account is
prepared in the books of head office whose credit
balance indicates profit and debit balance
indicates loss. This method is also called as
debtors method. The branch account prepared
under this method is of the nature of nominal
account.
2) Final Accounts System:
In this method, the Branch account and Trading and Profit and
loss account or statement of P&L is prepared in the books of
Head Office with branch account. The branch account prepared
under this method is of the nature of personnel account. The
object of preparing the branch account is to know what the
branch owes from head office or what Branch owes to head
office, hence, the balance in Branch account is shown as by the
By Balance c/d.
3) Stock Debtor Account:
In this method, various accounts are prepared in the books of
Head Office viz. Branch Stock Account, goods supplied to
branch, Reserved Account, Branch Adjustment Account etc.
4) Wholesale Branch Method:
This method is applied when the manufacturers supplies
the goods to the whole seller and also to the consumers
from their own branches. The goods are transferred to
branch at the same value at which it is transferred to whole
sellers.
Specimen of Branch Account in
Head Office Books
Particulars Amoun Particulars Amou
t nt
To Balance b/d: By Balance b/d (Op.
Liabilities)
Opening Stock By Cash A/c
Opening Petty By Goods Supplied to
Cash Br. (Return)
Opening Assets By Assets (Closing
Balance) :
To Goods Supplied to Stock at Branch A/c
Br. A/c
To Cash A/c (Exps.) Petty Cash at
Branch A/c
To Liabilities By General P.&L. A/c (if
(Closing) Loss)
To General P.&L. A/c
(if Profit)