No.

1 for CA/CWA & MEC/CEC MASTER MINDS

12. BRANCH ACCOUNTS

SOLUTIONS TO ASSIGNMENT PROBLEMS
PROBLEM No. 1
(A) Debtors Method:
Dr. Delhi Branch Account Cr.
2010 Particulars Rs. Rs. 2010 Particulars Rs. Rs.
Jan. 1 To Balance b/d Dec.31 By Bank
Stock 7,000 Cash Sales 17,500
Debtors 12,600 Cash from
Petty cash 200 19,800 Sundry Debts. 28,500 46,000

To Goods sent to By Goods sent to

Branch A/c 26,000 Br. A/c
Returns to H.O 1,000
To Bank:
Salaries & Wages 6,200 By Balance c/d
Rent & Rates 1,200 Stock 6,500
Sundry Exp. 800 8,200 Debtors 9,800
Petty Cash 100 16,400
To Balance being
Profit carried
to (HO) P&L A/c
9,400
63,400 63,400
To Balance b/d 16,400

(B) Dr. Memorandum Branch Trading and Profit and Loss Account Cr.
Date Particulars Rs. Rs. Particulars Rs. Rs.
2010 By Sales:
Jan.1 To Stock 7,000 Cash 17,500
To Goods sent Credit 28,400
From H.O. 26,000 Less: Returns (500) 27,900 45,400
Less: Returns to By Closing Stock 6,500
H.O. (1,000) 25,000
To Gross profit c/d 19,900
51,900 51,900
To Salaries & Wages 6,200
To Rent & Rates 1,200 By Gross Profit b/d 19,900
To Sundry Exp. 800
To Petty Cash Exp. 100
To Allowance to 200
Customer 1,400
To Discounts 600
To Bad debts 9,400
To Net Profit
19,900 19,900

Stock and Debtors Method:

Dr. Branch Stock Account Cr.
2010 Particulars Rs. 2010 Particulars Rs. Rs. Rs.
Jan.1 To Stock 7,000 Dec. 31 By Sales:
To Goods sent to Cash 17,500
Branch A/c 26,000

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To Branch P & L A/c Credit 28,400
(Gross profit c/d) 19,900 Less: Ret. (500) 27,900 45,400
By Goods sent to
Br. A/c Returns 1,000

By Balance c/d 6,500

52,900 (Stock) 52,900
2011
Jan.1 To Balance b/d 6,500

Dr. Delhi Branch Debtors Account Cr.

2010 Particulars Rs. 2010 Particulars Rs.
Jan.1 To Balance 12,600 Dec.31 By Cash 28,500
Dec.31 To Sales 28,400 By Returns 500
By Allowances 200
By Discounts 1,400
By Bad debts 600
By Balance c/d 9,800
41,000 41,000
2011
Jan.1 To Balance b/d 9,800

Dr. Delhi Branch Expenses Account Cr.

2010 Particulars Rs. 2010 Particulars Rs.
Dec.31 To Salaries & Wages 6,200 Dec.31 By Branch P & L A/c 10,500
To Rent & Rates 1,200
To Sundry Expenses 800
To Petty Cash 100
Expenses(200-100)
To Allowance to customer 200
To Discounts 1,400
To Bad Debts 600
10,500 10,500

Dr. Delhi Branch Profit & Loss Account Cr.

2010 Particulars Rs. 2010 Particulars Rs.
Dec.31 To Branch Expenses A/c 10,500 Dec.31 By Gross Profit b/d 19,900
To Net Profit to General
Profit & Loss A/c 9,400
19,900 19,900
PROBLEM NO – 2
Books of Sell Well
Dr. Branch Accounts Cr.
Particulars Rs. Particulars Rs.
To Goods sent to Branch A/c By Cash collected from debts 1,06,000
110 By Goods sent to Branch Returns 4,200
× 1,50,000 1,65,000 By Goods sent to Branch
100
4,855 (W.No.1) 14,618
To Stock Reserve (W.N-2)
By Balance c/d Stock 53,400
To Balance Profit to General
37,363 Debtors 29,000 82,400
Profit & Loss A/c
2,07,218 2,07,218
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 No.1 for CA/CWA & MEC/CEC MASTER MINDS
Dr. Memorandum Branch Debtors Account Cr.
Date Particulars Rs. Date Particulars Rs.
2010 2010
Jan. 01 To Balance b/d - Jan-Mar. By Cash / Bank 1,06,000
Jan-Mar. To Sales 1,35,000 By Balance c/d 29,000
1,35,000 1,35,000

Dr. Goods Sent to Branch Account Cr.

Particulars Rs. Particulars Rs.
To Branch A/c (Returns) 4,200 By Branch Account A/c 1,65,000
To Branch A/c (Loading) 14,618
To Purchases A/c 1,46,182
1,65,000 1,65,000

Working Notes:
1. Loading on Goods sent to Branch = 1/11 of (Rs.1,65,000 – Rs.4,200) = Rs.14,618
2. Stock Reserve = 1/11 of 53,400 = Rs.4,855

PROBLEM NO – 3
In the books of head office
Dr. Nagpur Branch Stock Account Cr.
Date Particulars Rs. Date Particulars Rs.
1.4.2012 To Branch b/d 24,000 31.3.13 By Bank A/c 1,80,000
(Cash Sales)
31.3.13 To Goods sent to By Branch Debtors
Branch A/c 4,80,000 (Credit Sales) 2,80,000
To Branch Debtors 6,000 By Stock shortage:
Branch P & L A/c 1,500*
Branch Adjustment
A/c (Loading) 500(b/f) 2,000
By Balance c/d 48,000
5,10,000 5,10,000

Dr. Nagpur Branch Debtors Account Cr.

Date Particulars Rs. Date Particulars Rs.
1.4.12 To Branch b/d 30,000 31.3.13 By Bank A/c 2,70,000
(Collection)
31.3.13 To Bank A/c By Branch Stock A/c 6,000
(Dishonour of cheques) 5,000 By Bad debts 1,500
To Branch Stock(b/f) 2,80,000* By Discount allowed 1,000
By Balance c/d 36,500
3,15,000 3,15,000

Dr. Nagpur Branch Adjustment Account Cr.

Particulars Rs. Particulars Rs.
To Branch Stock A/c 500 By Stock Reserve A/c 6,000
(Loading of loss) By Goods sent to Branch A/c 1,20,000
To Stock Reserve 12,000
To Gross Profit c/d 1,13,500
1,26,000 1,26,000
To Branch Stock A/c By Gross Profit b/d 1,13,500
(Cost of loss) 1,500
To Branch Expenses
(53,500+1,000+1,500) 56,000
To Net Profit
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(Transferred to
General P & L A/c)
56,000
1,13,500 1,13,500

* Balance figure

Working Notes:
1. Credit Sales have not been given in problem. So, the balancing figure of Branch Debtor Account is
taken as credit sales.
2. Loading is 33 1/3% of Cost ; i.e. 25% of invoice value
Loading on opening stock = Rs.24,000 x 25% = Rs.6,000
3. Loading on goods sent = Rs.4,80,000 x 25% = Rs.1,20,000
4. Loading on Closing Stock = Rs.48,000 x 25% = Rs.12,000
5. Total Branch Expenses = Cash expenses + Bad debt + Discount allowed
= Rs.53,500 + Rs.1,500 + Rs.1,000 = Rs.56,000
33.33
6. Gross Profit: Total sales (at invoice price) – Goods returned by customers (at invoice price) x
100 + 33.33
33.33
{( Rs.1,80,000 + Rs.2,80,00 )− Rs.6,000 } × = Rs.1,13,500
133 .33

PROBLEM NO – 4
i. Calculation of profit earned by the branch
In the books of Jammu Branch
Dr. Trading Account Cr.
Particulars Rs. Particulars Rs.
To Opening stock 2,20,000 By Sales 12,00,000
To Goods received by Head office 11,00,000 By Closing stock (Refer W.N) 3,60,000
To Expenses 45,000
To Gross profit 1,95,000
15,60,000 15,60,000

Working Note:
Particulars Amount
Cost Price 100
Invoice Price 120
Sale Price 150
Calculation of closing stock at invoice price: Rs.
Opening stock at Invoice price 2,20,000
Goods received during the year at Invoice price 11,00,000
13,20,000
Less: Cost of goods sold at invoice price[12,00,000 x (120/150)] (9,60,000)
Closing stock 3,60,000
ii. Stock reserve in respect of unrealised profit = Rs.3,60,000 x (20/120) = Rs.60,000

PROBLEM NO – 5
S.No. Particulars Debit Credit
(i) Head Office Expenses A/c Dr. 1,35,000
To Head Office A/c 1,35,000
(Expenses allocated by the Head Office)

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 No.1 for CA/CWA & MEC/CEC MASTER MINDS
(ii) Depreciation of Fixed Assets A/d Dr. 1,15,000
To Head Office A/c 1,15,000
(Depreciation on fixed assets whose accounts are
maintained by the Head Office)
(iii) Head Office A/c Dr. 1,40,000
To Salaries A/c 1,40,000
(Rectification of errors regarding salary paid to head office
official)
(iv) Head Office A/c Dr. 1,30,000
To Debtors A/c 1,30,000
(Amount directly collected by Head Office from a branch
debtor)
(v) No entry will be passed in the books of the Branch.

Note: It is presumed that Global Ltd. has an independent branch which maintains comprehensive books
of account for recording their transactions.
PROBLEM NO – 6
Journal entry in the books Head Office

Date Particulars Debit (Rs,) Credit (Rs,)

th
30 April, 2013 Mumbai Branch Account Dr. 3,000
Chennai Branch Account Dr. 70,000
To Delhi Branch Account 15,000
To Kolkata Branch Account 58,000
(Being adjustment entry passed by Head Office in
respect of inter-branch transactions for the month of
April, 2013)

WORKING NOTE:

Delhi Mumbai Chennai Kolkata

S.No. Particulars
(Rs.) (Rs.) (Rs.) (Rs.)
A Delhi Branch
(1) Received Goods 50,000 (Dr) 35,000 (Cr) 15,000 (Cr)
(2) Sent goods 45,000 (Cr) 25,000 (Dr) 20,000 (Dr)
(3) Received bills receivable 20,000 (Dr) 20,000 (Cr)
(4) Sent acceptance 35,000 (Cr) 25,000 (Dr) 10,000 (Dr)

B Mumbai Branch
(5) Received goods 20,000 (Cr) 35,000 (Dr) 15,000 (Cr)
(6) Sent cash 15,000 (Dr) 22,000 (Cr) 7,000 (Dr)

C Chennai Branch
(7) Received goods 30,000 (Dr) 30,000 (Cr)
(8) Sent cash and acceptances 30,000 (Cr) 30,000 (Dr)

D Kolkata Branch
(9) Sent goods 35,000 (Dr) 35,000 (Cr)
(10) Sent cash 15,000 (Dr) 15,000 (Cr)
(11) Sent acceptances 15,000 (Dr) 15,000 (Cr)
15,000 (Cr) 3,000 (Dr) 70,000 (Dr) 58,000 (Cr)

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PROBLEM NO – 7
(a) In the books of Omega
Washington Branch Trial Balance (in Rupees)
th
Dr. as on 30 September, 2012 Cr.
Dr. Cr. Conversion Dr. Cr.
Particulars
US $ US $ Rate (Rs.’000) (Rs.’000)
Plant and Machinery 1,08,000 41 44,28,000
Depreciation on plant and machinery 12,000 41 4,92,000
Furniture and Fixture 7,200 41 2,95,200
Depreciation on furniture and fixture 800 41 32,800
Stock, Oct. 2011 56,000 39 21,84,000
Purchases 2,40,000 40 96,00,000
Sales 4,16,000 40 1,66,40,000
Goods from Omega (H.O) 80,000 39,40,000
Wages(2,000+1,000) 3,000 40 1,20,000
Outstanding wages 1,000 41 41,000
Carriage inward 1,000 40 40,000
Salaries 6,000 40 2,40,000
Rent, Rate and taxes 2,000 40 80,000
Insurance 1,000 40 40,000
Trade expenses 1,000 40 40,000
Head Office A/c 1,14,000 43,00,000
Trade debtors 24,000 41 9,84,000
Trade creditors 17,000 41 6,97,000
Cash at bank 5,000 41 2,05,000
Cash at hand 1,000 41 41,000
Exchange gain (bal. fig) 10,84,000
5,48,000 5,48,000 2,27,62,000 2,27,62,000
(b)
Washington Branch Trading and Profit and Loss Account
th
Dr. for the year ended 30 September, 2012 Cr.
Particulars Rs. Particulars Rs.
To Opening stock 21,84,000 By Sales 1,66,40,000
To Purchases 96,00,000 By Closing stock 21,32,000
To Goods from Head Office 39,40,000 (52,000 US $ x 41)
To Wages 1,20,000
To Carriage inward 40,000
To Gross profit c/d 28,88,000
1,87,72,000 1,87,72,000
To Salaries 2,40,000 By Gross Profit b/d 28,88,000
To Rent, Rates and Taxes 80,000
To Insurance 40,000
To Trade expenses 40,000
To Depreciation on plant and machinery 4,92,000
To Depreciation on furniture and fixture 32,800
To Net Profit c/d 19,63,200
th
Balance Sheet of Washington Branch as on 30 September, 2012
Liabilities Rs. Rs. Assets Rs. Rs.
Head Office A/c 43,00,00 Plant & Machinery 49,20,000
Add: Net Profit 19,63,200 62,63,200 Less: Depreciation (4,92,00) 44,28,000
Foreign currency Furniture & Fixtures 3,28,000
Transaction reserve 10,84,000 Less: Depreciation (32,800) 2,95,000
Trade creditors 6,97,000 Closing stock 21,32,000
Outstanding wages 41,000 Trade debtors 9,84,000
Cash in hand 41,000
Cash at bank 2,05,000
80,85,200 80,85,200
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Note:
1. Depreciation has been calculated at the given depreciation rate of 10% on WDV basis.
2. The above solution has been given assuming that the Washington branch is non-integral foreign
operation of the Omega.
PROBLEM NO – 8
In the Head Office Books
Dr. Branch Account for the year ended 31st March, 2013 Cr.
Particulars Amount Particulars Amount
To Balance b/d By Balance b/d
Cash in hand 10 Stock reserve ` 1,080 x 1/6 180
Trade debtors 384 By Goods sent to branch A/c
Stock 1,080 (Returns to H.O.) 72
Furniture and fittings 500 By Goods sent to branch A/c
To Goods sent to branch A/c 13,200 (Loading on net goods sent 2,188
To Bank A/c (Payment for furniture) 100 to branch – (13,128 x 1/6)
To Balance c/d Stock reserve 245 By Bank A/c (Remittance from
(1,470 x 1/6) Branch to H.O.)
To Outstanding expenses 6 By Balance c/d 11,700
To Profit and loss A/c (Net Profit) 1,096 Cash in hand
Trade debtors 10
Stock 485
Furniture and fittings 1,470
516
16,621 16,621
Working Notes:
1. Invoice price and cost
Let cost be 100
So, invoice price 120
Loading 20
Loading: Invoice price = 20 : 120 = 1 : 6

2. Invoice price of closing stock in branch

Dr. Branch Stock Account Cr.
Particulars Rs.‘000 Particulars Rs.‘000
To Balance b/d 1,080 By Goods sent to branch 72
To Goods sent to branch 13,200 By Branch Cash 9,700
To Branch debtors 102 By Branch debtors 3,140
By Balance c/d 1,470
14,382 14,382

3. Closing balance of branch debtors

Dr. Branch Debtors Account Cr.
Particulars Rs.‘000 Particulars Rs.‘000
To Balance b/d 384 By Branch cash 2,842
To Branch stock 3,140 By Branch expenses discount 58
By Branch stock (Returns) 102
By Branch expenses (Bad debts) 37
By Balance b/d 485
3,524 3,524

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3. Closing balance of furniture and fittings
Dr. Branch Furniture and Fittings Account Cr.
Particulars Rs.‘000 Particulars Rs.‘000
To Balance b/d 500 By Depreciation (80 + 4) 84
To Bank 100 By Balance c/d 516
600 600

Note: Since the new furniture was purchased on 1st Jan 2013 depreciation will be for 3 months.
5. Remittance by branch to head office
Dr. Branch Cash Account Cr.
Particulars Rs.‘000 Particulars Rs.‘000
To Balance b/d 10 By Branch expenses 842
To Branch stock 9,700 By Remittances to H.O. 11,700
To Branch debtors 2,842 By Balance b/d 10
12,552 12,552

Note:
The Branch Trading Account will show the following Profit: Rs.‘000
Net Profit as per Branch Account 1,096
Less: Cash Expenses 842
Less: Discount to Debtors 58
Less: Bad Debts 37
Net Profit Transferred to General Profit / Loss Account 159

PROBLEM NO – 9
Delhi Branch Trading and Profit & Loss Account
Dr. for the year ended 31st Dec., 2012 Cr.
Particulars Amount Particulars Amount
To Opening Stock:(4,000X80%) By Sales 1,00,000
Head office Goods 3,200 By Goods from Branch 3,000
Others 500 3,700 By Closing Stock :
To Goods to Branch (50,000 x 80%) 40,000 Head Office goods 2,400
To Purchases 20,000 Others 1,000 3,400
To Gross Profit c/d 42,700
1,06,400 1,06,400
To Salaries 7,000 By Gross Profit b/d 42,700
To Rent 3,000
To Office Expenses 2,000
To Dep. on furniture @ 10% 500
To Net profit 30,200
42,700 42,700
Dr. Branch (Fixed) Assets Account (In Head Office Books) Cr.
Date Particulars Amount Date Particulars Amount
2012 2012
Jan. 1 To Balance b/d 5,000 Dec. 31 By Delhi Branch A/c 500
(Depreciation)
By Balance c/d 4,500
5,000 5,000
2013
Jan. 1 To Balance b/d 4,500

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Working Notes:
Dr. Cash/Bank Account (Branch Books) Cr.
Particulars Amount Particulars Amount
To Balance b/d 1,000 By Salaries 7,000
To Sales Proceeds By Rent 3,000
Sales 1,00,000 By Office Exp. 2,000
Opening balance By Creditors* 47,000
of Debtors 9,500 By Head Office (Balancing fig.) 32,000
1,09,500 By Cash Balance 500
Less: Closing bal. (15,000) By Bank Balance 4,000
To Cash Received 94,500 94,500
95,500 95,500

*Opening Balance + credit purchases –Creditors Closing balance = Payment

` 30,000 + ` 20,000 – ` 3,000 = ` 47,000.

Trial Balance of Delhi Branch as on 1-1-2012

Particulars Amount Dr. (Rs.) Cr. (Rs.)
Debtors 9,500
Cash 1,000
Stock: H.O. Goods 4,000
Others 500 4,500
Creditors
Head Office Account 15,000 30,000
30,000 30,000

Dr. Head Office Account Cr.

Particulars Amount Particulars Amount
To Balance (transfer) 15,000 By Goods from Head Office 50,000
To Cash 32,000
To Goods sent 3,000
50,000 50,000

Credit balance in Head Office Account before this transfer will be ` 15,000 credit.

Note: Furniture A/c is maintained in Head office books; it is not a part of either opening or closing
balance.

THE END

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To MASTER MINDS, Guntur

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