How to prepare Branch stock
Account
Answers
Answer:
While preparing Branch Accounts, special care should be taken with respect to the following items (points worth noting):
(1) Credit Sales, Bad Debts, Discount Allowed, Sales Returns:
Credit sales, Bad debts, Discount allowed, Returns from Debtors to branch are not direct transactions from the Head office and as such they are not recorded in the Branch Account. However, these items will be taken into consideration while ascertaining the amount of Closing or Opening Balance of Debtors or Cash Received from Debtors, in the Memorandum Branch Debtors Account.
In short, the above items are not shown in the Branch Account, however; the net effect of these items is automatically given effect in the Branch Account, by showing Opening Debtors. Closing Debtors and Cash Received from Debtors.
(2) Loss of Stock, Surplus of Stock:
ADVERTISEMENTS:
Shortage or surpluses of stock at the Branch due to normal or abnormal reasons are not shown in the Branch Account.
(3) Depreciation of Fixed Assets:
Depreciation of Branch fixed assets is not shown in the Branch Account. However, the opening balance of the fixed assets and closing balance of the fixed assets (of course deducting depreciation) are shown in the Branch Account.
It is important to note that when opening balance and closing balance of fixed assets are entered in the Branch Account, automatically the effect of depreciation is there.
(4) Goods in Transit:
Goods – in – transit is the difference between goods sent by Head Office and received by the Branch. Such goods will be shown either on both sides of the Branch Account or will be ignored altogether while preparing the Branch Account.
(5) Expenses Incurred by Branch:
ADVERTISEMENTS:
Expenses actually paid by Branch are not shown in the Branch Account. But the amount remitted by Head Office to Branch for meeting expenses is debited in Branch Account. If actual amount spent by Branch is less, the cash balance is shown as a part of closing balance, in the credit side of the Branch Account.
This will be clear from the following example:
Example:
If Opening Balance of Branch cash is Rs. 100; cash remitted by Head Office to Branch is Rs. 600 and the closing Balance of cash with Branch is Rs. 50; actual amount spent is Rs. 650 (Rs. 100 + Rs. 600 – 50), these items appear in Branch Account, as under:
Branch Account
(6) Purchase of Fixed Asset by Branch:
When the Branch has purchased any fixed asset for cash, the remittance from the Branch to Head Office is to be reduced by the amount and fixed asset should be shown on credit side of Branch Account, as closing balance. If the Branch has purchased fixed asset on credit basis, the liability arising from such purchases should be shown on the debit side of Branch Account as closing balance of liability.
(7) Sale of Fixed Asset:
When the Branch has sold fixed asset for cash, the proceeds is remitted to Head office. The asset will reduce in value to be shown on the credit side of the Branch Account. If the Branch has sold fixed asset on credit basis, the amount due is shown as debtors at the Branch at the close of the accounting period. Loss or profit arising from such sale of fixed asset will not be shown in the Branch Account as this is automatically adjusted through the above adjustments.
(8) In case Opening or Closing balance of Branch Debtors are not given. Memorandum Branch Debtors Account has to be prepared to find out missing figure. This account is prepared on the same pattern on which Total Debtors Account is prepared under Single Entry System. Similarly, if opening or closing balance of Branch stock is missing, then Memorandum Branch Stock Account has to be prepared.
While preparing Branch Accounts, special care should be taken with respect to the following particulars( points worth noting)
1) Credit Deals, Bad Debts, Discount Allowed, Deals Returns
Credit deals, Bad debts, reduction allowed, Returns from Debtors to branch aren't direct deals from the Head office and as similar they aren't recorded in the Branch Account. still, these particulars will be taken into consideration while catching on the quantum of ending or Opening Balance of Debtors or Cash entered from Debtors, in the Memorandum Branch Debtors Account.
In short, the below particulars aren't shown in the Branch Account, still; the net effect of these particulars is automatically given effect in the Branch Account, by showing Opening Debtors. ending Debtors and Cash entered from Debtors.
2) Loss of Stock, supernumerary of Stock
deficit or overpluses of stock at the Branch due to normal or abnormal reasons aren't shown in the Branch Account.
( 3) deprecation of Fixed means
deprecation of Branch fixed means isn't shown in the Branch Account. still, the opening balance of the fixed means and closing balance of the fixed means( of course abating deprecation) are shown in the Branch Account.
It's important to note that when opening balance and ending balance of fixed means are entered in the Branch Account, automatically the effect of deprecation is there.
4) Goods in Transit
Goods – in – conveyance is the difference between goods transferred by Head Office and entered by the Branch. similar goods will be shown either on both sides of the Branch Account or will be ignored altogether while preparing the Branch Account.
5) Charges Incurred by BranchExpenses actually paid by Branch aren't shown in the Branch Account. But the quantum remitted by Head Office to Branch for meeting charges is debited in BranchAccount.However, the cash balance is shown as a part of closing balance, in the credit side of the Branch Account, If factual quantum spent by Branch is less.
6) Purchase of Fixed Asset by Branch
When the Branch has bought any fixed asset for cash, the remittance from the Branch to Head Office is to be reduced by the quantum and fixed asset should be shown on credit side of Branch Account, as closingbalance.However, the liability arising from similar purchases should be shown on the disbenefit side of Branch Account as closing balance of liability, If the Branch has bought fixed asset on credit base.
7) trade of Fixed Asset
When the Branch has vended fixed asset for cash, the proceeds is remitted to Head office. The asset will reduce in value to be shown on the credit side of the BranchAccount.However, the quantum due is shown as debtors at the Branch at the close of the account period, If the Branch has vended fixed asset on credit base. Loss or profit arising from similar trade of fixed asset won't be shown in the Branch Account as this is automatically acclimated through the below adaptations.
( 8) In case Opening or ending balance of Branch Debtors aren't given. Memorandum Branch Debtors Account has to be prepared to find out missing figure. This account is prepared on the same pattern on which Total Debtors Account is prepared under Single Entry System. also, if opening or ending balance of Branch stock is missing, also Memorandum Branch Stock Account has to be prepared.
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