Branch Accounts

Q.1. Atlantic Paper Products send goods to Bhopal Branch at cost plus 25%. You are given the
following particulars:
`
Opening stock at branch at its cost 5,000
Goods sent to branch at invoice price 20,000
Loss-in-transit at invoice price 2,500
Theft at invoice price 1,000
Loss-in-weight (normal) at invoice price 500
Sales 25,500
Expenses 8,000
Closing stock at branch at cost to branch 6,000
Claim received from the insurance company for loss in transit 2,000
You are required to prepare in the Head Office books:
(a) Branch Stock Account
(b) Branch Adjustment Account
(c) Branch Profit & Loss Account
Show Your Workings.

Q.2. Concept, with its Head Office at Mumbai has a branch at Nagpur. Goods are invoiced to the
Branch at cost plus 33-1/3%. The following information is given in respect of the branch for
the year ended 31st March, 2022:
`
Goods sent by Branch (invoice price) 4,80,000
Stock at Branch on 1.4.2021 (invoice price) 24,000
Cash sales 1,80,000
Return of goods by customers to Branch 6,000
Branch expenses (paid in cash) 53,500
Branch debtors balance on 1.4.2021 30,000
Discount allowed 1,000
Bad debts 1,500
Collection from Debtors 2,70,000
Branch debtors cheques returned dishonoured 5,000
Stock at Branch on 31.3.2022 (invoice price) 48,000
Branch debtors balance on 31.3.2022 36,500

Prepare, under the Stock and Debtors system, the following Ledger Accounts in the books of
the Head Office:
(i) Nagpur Branch Stock Account
(ii) Nagpur Branch Debtors Account
1 CREDENT PROFESSIONAL STUDIES
 (iii) Nagpur Branch Adjustment Account.
Also compute shortage of Stock at Branch, if any.

Solution:
In the books of head office
Nagpur Branch Stock Account
` `
1.4.2021 To Balance b/d 24,000 31.3.2022 By Bank A/c 1,80,000
31.3.2022To Goods sent to 4,80,000 (Cash Sales)
Branch A/c By Branch Debtors 2,80,000
To Branch Debtors 6,000 (Credit Sales)
By Stock shortage:
Branch P&L A/c 1,500
Branch Adjustm-
ent A/c 500 2,000
By Balance c/d 48,000
5,10,000 5,10,000

Nagpur Branch Debtor Account

` `
1.4.2021 To Balance b/d 30,000 31.3.2022 By Bank A/c 2,70,000
31.3.2022 To Bank A/c 5,000 (Collection)
(dishonour of cheques) By Branch Stock A/c 6,000
To To Branch Stock A/c 2,80,000 By Bad Debts 1,500
By Discount allowed 1,000
By Balance c/d 36,500
3,15,000 3,15,000

Nagpur Branch Adjustment Account

` `
To Branch Stock A/c (loading of loss) 500 By Stock Reserve A/c 6,000
To Stock Reserve 12,000 By Goods sent to Branch A/c 1,20,000
To Gross Profit c/d 1,13,500
1,26,000 1,26,000
To Branch Stock A/c (Cost of loss) 1,500 By Gross Profit b/d 1,13,500
To Branch Expenses 53,500
To B. D. 1,500
To Discount Allowed 1,000
To Net Profit 56,000
(Transferred to H. O. P&L A/c)
1,13,500 1,13,500
Working Notes:
1. Credit Sales have not been given in the problem. So, the balancing figure of Branch
Debtors Account is taken as credit sales.
2. Shortage of stock is the balancing figure in the Branch Stock Account and is at invoice
value of ` 2,000/-.
2 CREDENT PROFESSIONAL STUDIES
 3. Loading is 33.1/3% or Cost; i.e. 25% of invoice value
Loading on opening stock = ` 24,000 x 25% = ` 6,000.
5. Loading on goods sent = ` 4,80,000 x 25% = `1,20,000
6. Loading on Closing Stock = `48,000 x 25% = `12,000

Q.3. Martin & Co. is a retail organisation with a number of branch shops. All accounts are kept at
the head office, and goods sent to branches are recorded at cost plus the expected mark up of
33 1/3 %. The accounting system is designed to give the head office as much control as
possible over the branch stocks.
At the Calcutta branch at 1st April 2021, goods costing ` 1200 in stock, but some of these,
costing ` 150 had been reduced in selling price to ` 160. The balance of the Calcutta Debtors
accounts totalled ` 920 at the same date.
The following information relates to the Calcutta branch for the year to 31st March, 2022 at the
end of that year:
`
Goods sent to branch (cost) 18,600
Cash sales (including all the goods marked down at the beginning
Of the year and others costing `1,800 sold for half of
The normal selling price) 16,060
Cash received from debtors 6,280
Goods returned by branch debtors direct to head office (selling price) 80
Bad debts written off 30
Closing stock of goods at selling price 2,400
Closing total of debtors balances 830
You are required to prepare the relevant accounts for the Calcutta branch, and calculate the
branch profit for the year.

Q.4. M/s Triplex, Bombay has Branch at Poona to which goods are invoiced at cost plus 25 %. The
Branch also purchases goods locally.
The Trial Balance of the Head Office for the year ended 31 st March, 2022 was as follows.
Particulars Dr. (`) Cr. (`)
Capital 2,50,000
Sundry Fixed Assets 1,50,000
Stock 60,000
Sundry Debtors 58,000
Sundry Creditors 43,000
Cash at Bank 17,500
Goods sent to Branch (at invoice price) 1,50,000
Goods returned from Branch (invoice price) 5,000
Poona Branch Account 2,96,000
Purchase 10,50,000
Sales 12,50,000
Sundry Expenses 56,500
16,93,000 16,93,000

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 Closing Stock
Head office ` 50,000; Branch ` 1,25,000 at invoice price (exclusive of stock of ` 10,000 at
invoice value in transit H.O. to Branch)
The following are the balances in the books of the Poona Branch for the year 31st March, 2022.
Particulars (`)
Purchase (other than goods received from the H.O.) 5,80,000
Sales 6,50,000
Sundry Debtors 35,000
Sundry Creditors 21,000
Sundry Fixed Assets 1,00,000
General Expenses 41,000
Cash at Bank (not taking into account the cash in transit of ` 10,000 from H.O. 2,500
to Branch)
Opening Stock (all stocks from Purchase outside) 53,500
Provide depreciation at 10% on fixed assets.
From the foregoing information, prepare a Consolidated Trading and Profit and loss Account
(showing separately the figures of Profit/Loss for the head office and the Branch) and Balance
Sheet.

Q.5. M/s Shah commenced business on 01.04.2021 with Head Office at Mumbai and a Branch at
Chennai. Purchases were made exclusively by the Head Office, where the goods were
processed before sale. There was no loss or wastage in processing.
Only the processed goods received from Head Office were handled by the Branch. The goods
were sent to branch at processed cost plus 10%.
All sales, whether by Head Office or by the Branch, were at uniform gross profit of 25% on
their respective cost.
Following is the Trial Balance as on 31.3.2022.
Head office Branch
Dr. Cr. Dr. Cr.
` ` ` `
Capital 3,10,000
Drawings 55,000
Purchases 19,69,500
Cost of processing 50,500
Sales 12,80,000 8,20,000
Goods sent to Branch 9,24,000
Administrative expenses 1,39,000 15,000
Selling expense 50,000 6,200
Debtors 3,09,600 1,13,600
Branch Current account 3,89,800
Creditors 6,01,400 10,800
Bank Balance 1,52,000 77,500
Head Office Current account 2,61,500
Goods received from H.O. 8,80,000
31,15,400 31,15,400 10,92,300 10,92,300

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 Following further information is provided:
(i) Goods sent by Head Office to the Branch in March, 2022 of ` 44,000 were not received by
the Branch till 2.4.2022.
(ii) A remittance of ` 84,300 sent by the Branch to Head Office was also similarly not
received upto 31.3.2022.
(iii) Stock taking at the Branch disclosed a shortage of ` 20,000 (at selling price to the branch).
(iv) Cost of unprocessed goods at Head Office on 31.3.2022 was ` 1,00,000.
Prepare Trading and Profit and Loss account in columnar form and Balance Sheet of the
business as a whole as at 31.3.2022.

Solution:
In the books of Shah
Trading and P&L A/c for the year ended 31st March, 2022
Particulars H.O. Branch Total H.O. Branch Total
` ` ` ` ` `
To Purchases 19,69,500 - 19,69,500 By Sales 12,80,000 8,20,000 21,00,000
To Cost of 50,500 - 50,500 By Goods sent to
Processing Branch 9,24,000 - 9,24,000
To Goods By Stock shortage - 16,000 16,000
received By Closing Stock:
from H.O. - 9,24,000 9,24,000 (Incl. Stock in
To Gross transit)
Profit c/d 3,40,000 1,64,000 5,04,000 Processed 56,000 2,52,000 3,08,000
Goods
Unprocessed -
Goods 1,00,000 1,00,000
23,60,000 10,88,000 34,48,000 23,60,000 10,88,000 34,48,000

To Admn. 1,39,000 15,000 1,54,000 By Gross profit 3,40,000 1,64,000 5,04,000

Expenses b/d
To Selling 50,000 6,200 56,200
Expenses
To Stock - 16,000 16,000
shortage
To Stock 22,909 22,909
Reserve
To Net profit 1,28,091 1,26,800 2,54,891
3,40,000 1,64,000 5,04,000 3,40,000 1,64,000 5,04,000

Balance Sheet as at 31st March, 2022

Liabilities ` Assets `
Capital 3,10,000 Debtors
Add: Net profit 2,54,891 H.O. 3,09,600
5,64,891 Branch 1,13,600 4,23,200
Less: Drawings (55,000) 5,09,891 Closing Stock:
Creditors: H.O. 1,56,000
H.O. 6,01,400 Branch 2,08,000
Branch 10,800 6,12,200 In Transit 44,000
3,08,000
5 CREDENT PROFESSIONAL STUDIES
 Less: Stock reserve 22,909 2,85,091
Bank Balance
H.O.
Branch 1,52,000 2,29,500
Cash in transit 77,500 84,300
11,22,091 11,22,091

Working Notes:
1. Calculation of closing stock:
Stock at Head Office:
`
Cost of goods processed ` (19,69,500 + 50,500) 20,20,000
Less: Cost of goods sent to branch
9,24,000 x 100/110 8,40,000
Cost of goods sold 12,80,000 x 100/125 10,24,000 18,64,000
Stock of processed and unprocessed goods with H.O. 1,56,000
Out of stock of ` 1,56,000, value of unprocessed goods is ` 1,00,000. So
value of processed goods will be ` 56,000.

Stock at branch:
`
Goods received from H.O. incl. goods in transit (at invoice price) 9,24,000
Less: Invoice value of goods sold
8,20,000 x 100/125 6,56,000
Invoice value of stock shortage 20,000 x 100/125 16,000 (6,72,000)
Stock at Branch at invoice price incl. stock in transit 2,52,000

2. Stock Reserve:
`
Unrealized profit on Branch stock (2,52,000 x 10/110) 22,909

Q.6. Chandan commenced business on 1 st January, 2022 with head office at Calcutta and branch at
Lucknow. Purchases were made exclusively by head office where all goods were processed
before sale and there was no loss or wastage in processing. Only processed goods received
from head office were handled by the branch and these were charged thereto at processed cost
plus 10%.
All sales whether by head office or branch were at a uniform gross profit of 25% on cost.
Following are the trial balances as on 31st December, 2022:
Head Office Branch
Dr.(`) Cr.(`) Dr.(`) Cr.(`)
Chandan – Capital - 15,500 - -
– Drawing 2,750 - - -
Purchase 98,475 - - -
Cost of processing 2,525 - - -
Sales - 64,000 - 41,000
Goods sent to/received by branch - 46,200 44,000 -
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 Selling and general expenses 9,450 - 1,060 -
Debtors/Creditors 15,480 30,070 5,680 540
Head office/Branch-current account 19,490 - - 13,075
Balance at bank 7,600 - 3875 -
1,55,770 1,55,770 54,615 54,615
You ascertain that – (1) Goods charged by head office to the branch in December,2022, at `
2,200 were not received or recorded or ordered by the branch (2) Remittance of ` 4,215 from
the branch to the head office was also in-transit. (3) Stock taking at branch disclosed a shortage
of goods of ` 1,000 at selling price. (4) Cost of the stock of unprocessed goods at head office
on 31st December 2022 was ` 5,000.
For the purpose of separate trading account for the head office and the branch, stock at the
head office is valued at cost and that at branch at price charged by head office.
You are required to prepare (a) Trading and Profit and Loss account in columnar form and (b)
Consolidated Balance Sheet.

Q.7. DM Delhi has a branch in London which is an integral foreign operation of DM. At the end of
the year 31st March, 2022, the branch furnishes the following trial balance in U.K. Pound:
Dr. Cr.
£ £
st
Fixed assets (Acquired on 1 April, 2018) 24,000
Stock as on 1st April, 2021 11,200
Goods from head office 64,000
Expenses 4,800
Debtors 4,800
Creditors 3,200
Cash at bank 1,200
Head Office Account 22,800
Purchases 12,000
Sales 96,000
1,22,000 1,22,000

In head office books, the branch account stood as shown below:

London Branch A/c
Particulars Amount ` Particulars Amount `
To Balance b/d 20,10,000 By Bank A/c 52,16,000
To Goods sent to Branch 49,26,000 By Balance c/d 17,20,000
69,36,000 69,36,000
The following further information is given:
(a) Fixed assets are to be depreciated @ 10% p.a. on WDV.
st
(b) On 31 March, 2022:
Expenses outstanding - £ 400
Prepaid expenses - £ 200
Closing stock - £ 8,000
(c) Rate of Exchange:
1st April, 2018 - ` 70 to £ 1 31st March, 2022 - ` 77 to £ 1
1st April, 2021 - ` 76 to £ 1 Average - ` 75 to £ 1
7 CREDENT PROFESSIONAL STUDIES
 You are required to prepare:
(1) Trial balance, incorporating adjustments of outstanding and prepaid expenses, converting
U.K. pound into Indian rupees.
(2) Trading and profit and loss account for the year ended 31st March, 2022 and the Balance
Sheet as on that date of London branch as would appear in the books of Delhi head office
of DM.

Q.8. Omega has a branch at Washington. Its Trial Balance as at 30th September, 2022 is as follows:
Dr. Cr.
US $ US $

Plant and machinery 1,20,000 -

Furniture and fixtures 8,000 -
Stock, Oct.1, 2021 56,000 -
Purchases 2,40,000 -
Sales - 4,16,000
Goods from Omega (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) Wages outstanding – $ 1,000.
(2) Depreciate Plant and Machinery and Furniture and Fixtures @ 10 % p.a.
(3) The Head Office sent goods to Branch for ` 39,40,000.
(4) The Head Office shows an amount of ` 43,00,000 due from Branch.
(5) Stock on 30th September, 2022 – $ 52,000.
(6) There were no in transit items either at the start or at the end of the year.
(7) On September 1, 2020, when the fixed assets were purchased, the rate of exchange was
` 38 to one $.
On October 1, 2021, the rate was ` 39 to one $.
On September 30, 2022, the rate was ` 41 to one $.
Average rate during the year was ` 40 to one $.

You are asked to prepare:

(a) Trial balance incorporating adjustments given under 1 to 4 above, converting dollars into
rupees.

8 CREDENT PROFESSIONAL STUDIES

 (b) Trading and Profit and Loss Account for the year ended 30th September, 2022 and
Balance Sheet as on that date depicting the profitability and net position of the Branch as
would appear in India for the purpose of incorporating in the main Balance Sheet.

Q.9. Moon Star has a branch at Virginia (USA). The Branch is a non-integral foreign operation of
the Moon Star. The trial balance of the Branch as at 31st March, 2022 is as follows:
Particulars US $
Dr. Cr.
Office equipments 48,000
Furniture and fixtures 3,200
Stock (April 1, 2021) 22,400
Purchases 96,000
Sales -------- 1,66,400
Goods sent from H.O 32,000
Salaries 3,200
Carriage inward 400
Rent, Rates & Taxes 800
Insurance 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’s are given:
(1) Salaries outstanding $ 400.
(2) Depreciate office equipment and furniture & fixtures @10% p.a. at written down value.
(3) The Head Office sent goods to Branch for ` 15,80,000
(4) The Head Office shows an amount of ` 20,50,000 due from Branch.
(5) Stock on 31st March, 2022 - $ 21,500.
(6) There were no transit items either at the start or at the end of the year.
(7) On April 1, 2020 when the fixed assets were purchased the rate of exchange was ` 43 to
one $. On April 1, 2021, the rate was 47 per $. On March 31, 2022 the rate was ` 50 per $.
Average rate during the year was ` 45 to one $.
Prepare:
(a) Trial balance incorporating adjustments given converting dollars into rupees.
(b) Trading, Profit and Loss Account for the year ended 31st March, 2022 and Balance Sheet
as on date depicting the profitability and net position of the Branch as would appear in the
books of Moon Star for the purpose of incorporating in the main Balance Sheet.

9 CREDENT PROFESSIONAL STUDIES