F.Y.B.COM.

ACCOUNTING & FINANCE II SEMESTER

FOREIGN BRANCH AS 11

Exchange Rate to be used for Reporting as per AS 11

1) Monetary Itemsie. Current assets and current liabilities to be converted at closing exchange rate.

2) Opening stock to be converted at opening exchange rate.

3) Closing stock to be converted at closing exchange rate.

4) Non-monetary itemseg. Fixed assets to be taken at actual exchange rate as on the date of purchase
of assets.

5) Depreciation on assets to be taken at actual exchange rate as on the date of purchase of assets.

6) Other revenue itemseg. purchases, sales, expenses to be converted at average exchange rate.

7) Goods received from Head office, Balance in Head office Account, Remittances by branch to be
taken at amounts recorded in head office books.

(PROBLEMS COMPILED BY DR. ABIDA KHAN)

Problem 1:

Nion Enterprise had a branch at New York. Its trial balance as on 31 st December 2016 is as
follows.

Particulars Dr. US $ Cr. US $

Plant and Machinery 1,20,000
Furniture and Fixture 8,000
Stock 1st January 2016 56,000
Purchases 2,40,000
Sales 4,16,000
Goods from H.O. 80,000
Wages 2,000
Carriage Inward 1,000
Salaries 6,000
Rent, Rates and Taxes 2,000
Insurance 1,000
Trade Expenses 1,000
Head Office A/c 1,14,000
Trade Debtors 24,000
Trade Creditors 17,000
Cash at Bank 5,000
Cash in Hand 1,000
5,47,000 5,47,000
The following further information is given:

1. Depreciation plant and machinery and furniture and fixture @ 10 % p.a.

2. Wages outstanding $1,000.
3. The head office send goods to branch for ₹39,40,000.
4. Stock on 31st December 2016, $52,000.
5. Branch account in head office shows a debit balance of ₹ 43,00,000.
6. There were no in transit items at the start or at the end of the year.
7. Plant and machinery and furniture and fixture was acquired by the branch in 2015 when
rate of exchange was ₹ 38 to 1$.
8. On 1st January 2016 the rate was ₹ 39 to 1$.
On 31st December 2016 the rate was ₹ 41 to 1$.
Average rate during the year was ₹ 40 to 1$.

You are asked to prepare – assuming that the foreign operation is integral in nature.

1. Converted trial balance

2. Trading and Profit and Loss Account for the year ended 31 st December 2016
3. Balance sheet as on 31st December 2016

Problem 2:

Following balances appeared in the books of Worli branch of the firm in London on 31st
December 2016.

Particulars Dr. ₹ Cr. ₹

Stock on 1st January 2016 50,400
Purchases 3,00,000
Sales 4,50,000
Debtors 1,56,000
Creditors 1,04,000
Bills Receivable 41,600
Bills Payable 36,400
Wages and Salaries 19,200
Rent, Rates & Taxes 14,400
Miscellaneous Expenses 6,000
Furniture and Fittings 19,640
Cash at Bank 1,15,960
Head office Account 1,32,800
7,23,200 7,23,200
Stock on 31st December 2016 was ₹ 1,43,000. Worli branch account in the books of London head
office showed debit balance on £ 5,360 on 31st December 2016.
Furniture and fitting were purchased from a remittance of £ 700 received from London head
office which exactly covered the cost of item. Wages outstanding Rs. 2000.
The rates of exchange were 31st December 2015 ₹ 28 per £; 31st December 2016, ₹
26 per £. Average rate for the year may be taken at ₹ 24 per £.
Prepare Converted trail balance, Trading account, Profit and Loss Account and Balance sheet of
Worli branch in the books of London Head office assuming branch is an integral foreign
operation.

Problem 3:

An Indian Company Star Limited has a branch at Verginia (USA). The branch is a integral
foreign operation of the Indian Company. The trial balance of the branch as on 31st March 2016
as follows.
Particulars Dr.$ Cr. $
Office equipments 48,000
Furniture 32,000
Opening stock 22,400
Purchases 96,000
Sales 1,66,400
Goods from H.O. 3,200
Salaries 3,200
Carriage inward 400
Rent, Rates and Taxes 800
Insurances 400
Trade Expenses 400
Head office account 45,600
Sundry Debtors 9,600
Sundry Creditors 6,800
Cash at bank 2,000
Cash in hand 400
2,18,800 2,18,800
The following further information is given.
1) Salaries outstanding $ 400.
2) Depreciate Office Equipment and Furniture @ 10 %.
3) The head office sent goods to branch for Rs. 5,80,000.
4) Branch account in head office books shown an amount of Rs. 20,50,000.
5) Closing stock $ 21,500.
6) There were no transit items either at the start or at the end of the year.
7) Fixed assets were purchased in 2013 when the rate of exchange was Rs. 43 to one $.
8) On 1st April 2015, the rate of exchange was Rs. 47 per $. On 31st March 2016 the rate was
Rs. 50 per $. Average rate during the year was Rs. 45 to one $.
Prepare:
1) Converted trial balance
2) Trading and Profit & Loss account 31st March 2016
 3) Balance sheet as on that date.

Problem 4:

The Following balances appeared in the books of Pune Branch of a firm in U.K. on 31/12/2017

Particular Dr. Rs. Cr. Rs.

Stock as on 1/1/2017 37,800

Purchases 2,25,000
Sales 3,37,500
Debtors 1,17,000
Creditors 78,000
Bills Receivable 31,200
Bills Payable 27,300
Wages and Salaries 14,400
Rent, Rates and Taxes 10,800
Miscellaneous Expenses 4,500
Furniture 14,730
Cash at Bank 90,870
Head Office Account 1,03,500

5,46,300 5,46,300

Stock on 31/12/2017 was Rs.65,000. Pune Branch Account in the books of Head Office
Showed a debit balance £ 1,080 on 31/12/2017
Furniture and Fittings were purchased from a remittance of £ 125 received from Head Office.
The rates of exchange were:
31/12/2016 Rs. 67.50 per £
31/12/2017 Rs. 68.50 per £
The average rate of 2017 may be taken at Rs. 68 per £.
Prepare Trading and Profit and Loss Account and Balance Sheet of Pune Branch in the books
of Head Office.

Problem 5:

Sonal Computers Ltd. has head office at Mumbai and Branch at Boston, U.S.A. The branch
submits the following Trial Balance as on 31st March, 2018

Particular Dr. (US $) Cr. (US $)

Head Office Account 12,707

 Goods Received from Head Office 11,600
Purchases and sales 3,87,516 6,10,416
Stock as on 1st April 2017 14,316
Plant and Machinery 34,120
Furniture and Fixtures 16,316
Cash at Bank 3,816
Cash in Hand 1,314
Salaries 68,016
Office Rent 42,340
Taxes and Insurance 11,672
Debtors and creditors 1,25,430 1,27,977
Printing and stationery 12,148
Postage and Telegram 11,010
Courier charges 6,316
Internet Charges 2,718
Legal Expenses 2,452

7,51,100 7,51,100

Adjustment:

1. The Branch account in Head Office showed a debit balance of Rs. 5,84,222 and Goods
sent to Branch account showed a credit balance of Rs. 5,56,800.
2. Plant and Machinery was acquired by the branch as on 31st December, 2017, when one
US $ was equal to Rs. 45.
3. Furniture and Fixtures were acquired by the Boston Branch on 30th June 2017 when
Rs. 100 was equal to US $ 2.50.
4. Head Office provides depreciation on Plant and Machinery @ 25% p.a. and on
Furniture and Fixtures @ 10% p.a.

The Boston Branch reported closing stock of US $ 15,350 on 31st March 2018.

The exchange rates were as under:

1/4/2017 US $ 1 = Rs. 43.50,

31/3/2018 Rs. 100 = US $ 2.00

Average US $ = Rs. 45.50

Problem 6:

Software Ltd. has head office at Mumbai and branch at New York. The branch submits the
following trail balance as on 31st March, 2018
Particulars Dr. US $ Cr. US $
Head Office A/c - 15,300
Goods received from head office 27,140 -
Purchases and Sales 4,45,200 6,80,750
Stock on 1st April 2017 42,180 -
Plant and Machinery 72,500 -
Computer 1,15,200 -
Furniture and Fixture 27,300 -
Bank Balance 4,215 -
Cash Balance 1,760 -
Salaries 72,190 -
Office Rent 42,114 -
General Expenses 11,111 -
Debtors and Creditors 1,10,540 2,97,720
Printing and Stationary 12,114 -
Postage and Courier Expenses 1,236 -
Legal Expenses 2,350 -
Commission 2,777 -
Marketing Expenses 3,115 -
Finance Charges 728 -
Total 9,93,770 9,93,770
a. The Branch A/c in Head Office showed a debit balance of Rs. 6,73,200 and Goods sent to
Branch Account showed credit balance of Rs. 11,39,880.
b. New York branch reported closing stock of US $ 48,500 on 31 st March 2018.
c. Depreciation to be provided on Plant and Machinery @ 15% p.a., Computer @ 20% p.a. and
Furniture and Fixture @ 10% p.a.
d. The exchange rates were as under:
On 01-04-2017 US $1 = Rs. 41
On 31st March 2018 US $1 = Rs. 48
Average US $1 = Rs. 45
For Plant and Machinery US $1 = Rs. 41
For Computer US $1 = Rs. 40
For Furniture and Fixture US $1 = Rs. 46

You are required to convert the branch trial balance into rupees and also to prepare Trading and
Profit & Loss Account and Balance sheet as on 31 st March 2018.

Problem 7:

KFC Ltd. has head office at Mumbai and branch at California. The branch submits the following
Trial Balance as on 31st March 2018.
Particulars Dr. US $ Cr. US $
Head Office A/c - 11,606
Goods received from head office 12,725 -
Purchases and Sales 5,06,323 7,87,777
Stock on 1st April 2017 13,100 -
Plant and Machinery 27,650 -
Furniture and Fixture 18,220 -
Bank Balance 60,180 -
Cash Balance 3,233 -
Salaries 71,130 -
Office Rent 44,316 -
Taxes and Insurances 13,655 -
Debtors and Creditors 1,17,117 1,57,617
Printing and Stationary 37,119 -
Postage 16,303 -
Freight 14,784 -
Conveyance 1,145 -
Total 9,57,000 9,57,000
Additional Information:

a. The Branch Account in Head Office showed a debit balance of Rs. 5,11,100 and Goods sent
to Branch Account showed a credit balance of Rs. 5,66,600.
b. Plant and Machinery was acquired when US $ = Rs. 46 and Furniture and Fixture was
acquired when US $ = Rs. 40. Head office chares depreciation on Plant and Machinery @20%
p.a. and on Furniture and Fixture @10% p.a.
c. The closing stock as on 31st March 2018 at the branch was US $ 16,550.
d. The exchange rates were as under:
01-04-2017 US $ = Rs. 38.50
31-03-2018 US $ = Rs. 40
Average US $ = Rs. 44
Convert the Branch Trial Balance into Rupees and Prepare Branch Trading A/c , Profit &
Loss A/c and Balance sheet as on 31 st March 2018.

Problem no 8:
A company has a branch in London. At the end of the year 31 st march 2017, the branch
provides the following trial balance in U.K. Pound.

Particulars Dr. £ Cr. £

Fixed Assets (Acquired on 1 st 24,000

April 2015)

Stock on 1st April 2016 11,200

Goods from HO 64,000

Expenses 4,800

Debtors & Creditors 4,800 3,200

Cash at Bank 1,200

Head office A/c 22,800

Purchases & Sales 12,000 96,000

1,22,000 1,22,000

In head office books, the brancg account stood as shown below.

London Branch A/c

Particulars Rs. Particulars Rs.

To Balance B/d 20,10,000 By Bank 52,16,000

To Goods sent to 49,26,000 By Balance C/d 17,20,000

Branch

69,36,000 69,36,000

Additional Information:
1) Fixed assets to be depreciated at 10% on STM.
2) On 31st march 2017- Expenses Outstanding £400
3) Prepaid Expenses £200
4) Closing Stock £8,000
5) Rate of Exchange
1st April 2015 Rs. 70 to £1
1st April 2016 Rs. 76 to £ 1
31st March 2017 Rs. 77 ti £ 1
Average Rs. 75 to £1

Prepare Final Account of London Branch in the books of Head office.