Mada za sehemu hiiBranch AccountMada 4
- BRANCH ACCOUNTS/ACCOUNTING
- DEBTORS METHOD
- STOCK AND DEBTORS SYSTEM /METHODS
- INCOME STATEMENT(FINAL ACCOUNTS) METHOD
Under this system accounts related to branch are maintained in a more comprehensive and detailed manner as compared to debtors system.
- Under this system separate accounts are prepared for various accounting functions.
- The accounting procedures under this system depend upon policy of the head office with regard to pricing of goods sent to the branch.
Therefore, the head office adopts one of the following methods/systems for invoicing goods:
- At cost to head office
- At selling price of the branch
- At cost price plus fixed margin of profit
In this case, branch may sell goods at higher or lower than the invoice price. The accounting procedures under these three situations are as follows:
- Branch stock account
- Goods sent to branch account
- Branch debtors account
- Branch expenses account
- Branch profit and loss account
- Branch cash account
1. When goods are sent to the branch
- DR: Branch stock account
- CR: Goods sent to branch account
2. If goods are returned by branch
- DR: Goods sent to branch account
- CR: Branch stock account
3. If goods are returned by customs
- DR: Branch expenses account
- CR: Cash
4. When cash sales are made at the branch
- DR: Cash
- CR: Branch stock account
5. When sales on credit
- DR: Branch debtors account
- CR: Branch stock account
6. When cash is received on account of debtors
- DR: Cash
- CR: Branch debtors account
7. For loss of stock
- DR: Branch profit and loss account
- CR: Branch stock account
8. For balance of branch stock account (gross profit)
- DR: Branch stock account
- CR: Branch profit and loss account
9. For balance of goods sent to branch account
- DR: Goods sent to branch account
- CR: Trading account
10. For cash remitted by branch to head office
- DR: Cash account
- CR: Branch cash account
11. For net profit as per branch
- DR: Branch profit and loss account
- CR: General profit and loss account
Kasa Ltd is a retailing company whose headquarter is in Dar es Salaam and a branch in Morogoro. The company policy is to sell its goods to customers at a 25% profit margin and the same price is used to transfer goods to the branch.
The following information relates to the branch operations for June 2021:
| Particulars | TZS |
|---|---|
| Opening balances: | |
| Stock | 9,000,000 |
| Debtors | 2,000,000 |
| Cash sales remitted to head office | 23,000,000 |
| Cash received from debtors and remitted to head office | 14,500,000 |
| Goods invoiced to branch | 36,000,000 |
| Closing balances: | |
| Stock | 8,000,000 |
| Debtors | 1,500,000 |
Required
Show the necessary ledger accounts in the Kasa Ltd., under the stock and debtor's method.
From the information provided, the books of accounts showing the transactions of the branch would be as follows under the stock and debtors (integrated) method:
| Dr. | Particulars | Amount (TZS) | Cr. | Particulars | Amount (TZS) |
|---|---|---|---|---|---|
| Balance b/d (opening stock) | 9,000,000 | Cash sales | 23,000,000 | ||
| Goods invoiced to branch | 36,000,000 | Debtors – credit sales (balancing figure) | 14,000,000 | ||
| Balance c/d (closing stock) | 8,000,000 | ||||
| 45,000,000 | 45,000,000 | ||||
| Balance b/d | 8,000,000 |
Goods sent to branch account (at cost)
| Dr. | Particulars | Amount (TZS) | Cr. | Particulars | Amount (TZS) |
|---|---|---|---|---|---|
| Transfer to head office – income statement | 27,000,000 | Branch stock | 27,000,000 | ||
| 27,000,000 | 27,000,000 |
Branch debtors account (at selling price)
| Dr. | Particulars | TZS | Cr. | Particulars | TZS |
|---|---|---|---|---|---|
| Balance b/d | 2,000,000 | Cash | 14,500,000 | ||
| Branch stock (credit sales) | 14,000,000 | Balance c/d | 1,500,000 | ||
| 16,000,000 | 16,000,000 | ||||
| Balance b/d | 1,500,000 |
Branch adjustment account (profit aspect)
| Dr. | Particulars | Amount (TZS) | Cr. | Particulars | Amount (TZS) |
|---|---|---|---|---|---|
| Gross profit – income statement | 9,250,000 | Unrealised profit b/d | 2,250,000 | ||
| Unrealised profit c/d | 2,000,000 | Branch stock – goods sent | 9,000,000 | ||
| 11,250,000 | 11,250,000 |
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