4.PARMATMA Ltd. Delhi invoices goods to its Mumbai and Kolkata branch offices at 20% less than the list price which is cost
plus 50% with instructions that cash sales are to be made at invoice price and credit sales at list price.
Opening Stock at Mumbai at its cost ₹ 1,53,600.
Goods Sent to Mumbai (at cost to Delhi) ₹ 2,20,000.
Cash Sales ₹ 1,49,600, Credit Sales ₹ 2,90,000.
Goods returned by Credit Customers to Mumbai ₹ 90,000.
Goods returned by Mumbai to Delhi ₹ 72,000.
Loss of Goods by fire (at invoice price) ₹ 6,000 against which 80% of cost was recovered from the insurance Company.
Loss of Goods at Mumbai through normal pilferage (at list price) ₹ 6,000.
Debtors at Mumbai:Opening ₹ 10,000
Cash remitted by MumbaI Branch to HO: ₹ 3,24,870.
Discount Allowed to Debtors ₹ 26,730.
Goods received by Mumbai till close of the year ₹ 2,54,000.
Provision is to be made for discount on Debtors at 15% on prompt payments at year end on the basis of year’s trend of prompt
payments.
Cash remitted by HO to Branch for Expenses: ₹ 18,000
Branch Expenses still outstanding:
₹ 1,482
Manager is entitled to a commission @ 6% of net profits after charging such commission.
Required: Prepare Mumbai Branch Debtors A/c, Mumbai Branch Stock Account, Mumbai Branch Adjustment A/c, Mumbai
Branch Expenses Account and Mumbai Branch Profit & Loss A/c under Stock & Debtors Method
Answers
Answer:
Branch Accounts: Problem and Solution # 1.
Branch Accounts: Problem and Solution # 1.The Kanpur Shoe Company opened a branch at Delhi on 1st April 2010. From the following figures, prepare all the necessary accounts for the year ended 31st March, 2011 and Delhi Branch Account for the year ended 31st March 2012:
Explanation:
Branch Accounts: Problem and Solution # 2.
From following particulars relating to Patna Branch for the year ending 31st March, 2012, prepare accounts in the head office books:
Branch Accounts: Problem and Solution # 3.
Amrit Oils Ltd. open a branch at Delhi on 1st April, 2010. Goods are invoiced to the branch at cost plus 33⅓% which is the selling price. From the following particulars relating to 2010-11 and 2011-2012 ascertain the profit made at Delhi Branch in the two years. For 2010-11 give journal entries and show how the relevant items will appear in the company’s Balance Sheet as on 31st March, 2011.
Branch Accounts: Problem and Solution # 4.
Vijay Merchant of Mumbai has a branch at Poona. Goods are invoiced to the branch at cost plus 25%. Branch is instructed to deposit cash every day in the head office account with the bank. All expenses are paid through cheques by the head office except petty cash expenses which are paid by the branch manager.
Prepare Branch Account in the books of head office after taking into account the following information also:
Branch Accounts: Problem and Solution # 5.
Kanpur Cloth Mills opened a branch at Delhi on 1st April, 2011. The invoiced to the branch at selling price which was 125% of the cost to the head office.
ADVERTISEMENTS:
The following are the particulars of the transactions relating to branch during the year March, 2012:
Branch Accounts: Problem and Solution # 6.
Calico Printers Ltd. opened a shop at Delhi on 1st April, 2010. Goods were invoiced at selling price which was fixed by adding 25% to the cost. From the following particulars relating to 2010-11 and 2011-2012, ascertain the profit or loss made in two years by the stock and debtors system:
Note:
ADVERTISEMENTS:
The Branch Adjustment Account should rather be split into two parts—one to show the trading results or gross profit and the other to show net profits. In that case, the adjustments on opening stock, on goods sent to branch and on closing stock should be shown in the first part and the branch expenses shown in the second part. The balance of the first part will be transferred to the second part as gross profit.
As regards spoilage or wastage, the “inflation” part of it should be shown in the first part and the cost of the goods lost should be shown in the second part. The same rule applies to any surplus that the Branch Stock Account may reveal.
If this were to be followed, the