8/27/2019 Explain Debtor System of accounting in branch accounts? - Owlgen.com
Search for questions at Owlgen Publish Article/QA
(https://www.owlgen.com) quality-guidelines)
Home (https://www.owlgen.com) / B.Com (https://www.owlgen.… / finance (https://www.owlgen.com/qa… financial accounting (https://www.o… /
Explain Debtor System of accounting in bra…
Answer in finance , financial accounting (https://www.owlgen.com/qa-tag/financial-accounting )
Course: B.Com (https://www.owlgen.com/question-category/bcom)
Answered
1 Answer ⇧ 285 ⇩
Debtor System: This system of accounting is suitable for the small-size branches. Under this, a
Branch Account is opened for each branch in the head office ledger. All transactions are recorded in this account. The Branch Account is prepared in such a way that it discloses the profit or loss of the branch. Branch Account is a Nominal Account in nature. Head office may send goods to branch either at “Cost price” or “Selling price”. Journal Entries Under Debtor Method:
1. For recording opening balances of Branch Assets Branch A/c Dr. To Branch Assets
(Individually)
2. For recording opening balances of Branch Liabilities Branch Liabilities (Individual) Dr. To
Branch A/c
3. When goods are supplied by the Head Office/another branch to branch Branch A/c Dr. To
Goods sent to Branch A/c
4. When goods are returned by the branch/branch customers directly to the Head
Office Goods Sent to Branch A/c Dr. To Branch A/c https://www.owlgen.com/question/explain-debtor-system-of-accounting-in-branch-accounts 1/8

8/27/2019 Explain Debtor System of accounting in branch accounts? - Owlgen.com
5. When goods are supplied by the branch to another branch under instructions of Head
Office Goods Sent to Branch A/c Dr. To Branch A/c
6. When goods are supplied by the head office but not received by the branch Goods-in
Transit A/c Dr.To Branch A/c
7. When the Head Office meets the branch expenses or sends cash to the branch for meeting its expenses Branch A/c Dr. To Cash/Bank A/c
8. When remittances are received by the Head Office from the Branch/ Branch Customers
Cash/Bank A/c Dr.To Branch A/c
9. When remittances are sent by the branch but not received by the Head Office Cash intransit A/c Dr. To Branch A/c
10. When the balance in goods sent to Branch Account is transferred Goods sent to Branch
A/c Dr. To Purchases A/c (in case of Trading concerns) or, To Trading A/c (in case of manufacturing concerns)
Home (https://www.owlgen.com/) Courses (https://www.owlgen.com/courses) Topics (https://www.owlgen.com/topics)
11. For recording the closing balances of Branch Assets Branch Assets A/c (individually) To
Branch A/c
12. For recording the closing balances of Branch Liabilities Branch A/c Dr. To Branch
Liabilities (Individually)
13. For recording Profit or Loss (i)If credit side exceeds the debit side.(ii)If debit side exceeds the credit side Branch A/c Dr. To General Profit & Loss A/c General Profit & Loss A/c
Dr. To Branch A/c https://www.owlgen.com/question/explain-debtor-system-of-accounting-in-branch-accounts 2/8

8/27/2019 Explain Debtor System of accounting in branch accounts? - Owlgen.com
Home (https://www.owlgen.com/) Courses (https://www.owlgen.com/courses) Topics (https://www.owlgen.com/topics)
(https://s3.amazonaws.com/www.owlgen.com/wp-content/uploads/2016/09/branch-account.png)
The following items are to be ignored while preparing Branch Account under this method :
1. Bad debts, discount allowed, credit sales, sales returns by customers to branch, cash received by Branch from Branch Debtors, since the debtors at the end appear at the adjusted figure.
2. Depreciation and Profit/Loss on sale of fixed assets since fixed assets at the end appear at the adjusted figure.
3. Abnormal Losses since stock at the end appears at the adjusted figure.
https://www.owlgen.com/question/explain-debtor-system-of-accounting-in-branch-accounts 3/8

8/27/2019 Explain Debtor System of accounting in branch accounts? - Owlgen.com
4. Expenses met by Branch out of cash, since either reduced cash balance at the end is decreased or the liability at the end is increased.
5. Purchase of Goods/Fixed Assets by Branch, since book value of Goods/Fixed assets at the end is increased and either the amount of remittances is reduced or the Creditors at the end are increased.
6. Sale of Goods/Fixed Assets by Branch since book value of Goods/ Fixed assets at the end is decreased and either the amount of remittances is increased or the Debtors at the end are increased.
7. Petty Cash Expenses paid by the Branch. The Branch Account is debited with the opening balance of Petty Cash and the amount of petty cash sent by the head office and is credited with the closing petty cash. For calculating closing petty cash, all expenses paid by the branch are taken into consideration. Therefore it should be ignored for preparation of Branch
Account.
be shown in the same manner as the branch expenses met by the Head Office. In such a case, petty cash balance at the end appears at the same amount at which it appears in the beginning.
Invoice Price. Sometimes, the consignor does not want to reveal the cost of the goods to the consignee and therefore, invoices goods at a price which is higher than the Cost Price (CP). Such price is known as ‘Invoice Price’ (IP). The difference between the Invoice Price UP) and the Cost
Price (CP) is called ‘Loading’. –
How to Eliminate/Remove Loading. When goods are sent at invoice price, for ascertaining correct profit/loss on Branch, the items recorded at invoice price should be brought down to cost price level. For this purpose, the loading including in the various items should be eliminated by passing the following adjusting entries
1. For loading on Opening Stock https://www.owlgen.com/question/explain-debtor-system-of-accounting-in-branch-accounts 4/8

8/27/2019
Stock Reserve A/c Dr.
Explain Debtor System of accounting in branch accounts? - Owlgen.com
To Branch A/c
2. For loading (Net) on goods sent to Branch (i.e., Goods sent to Branch less Returns by
Branch or Branch customers) to H.0.] :
Goods Sent to Branch A/c Dr.
To Branch A/c
3. For loading on closing stock
Branch A/c Dr.
To Stock Reserve A/c
Account as follows :
(https://s3.amazonaws.com/www.owlgen.com/wp-content/uploads/2016/09/extract-branch.png) https://www.owlgen.com/question/explain-debtor-system-of-accounting-in-branch-accounts 5/8

8/27/2019 Explain Debtor System of accounting in branch accounts? - Owlgen.com
See all related question in finance, financial accounting
(https://www.owlgen.com/qa-tag/financial-accounting ) .
See all related question in
B.Com (https://www.owlgen.com/questioncategory/bcom).
Share this answer.
(https://www.facebook.com/sharer/sharer.php?
u=https%3A%2F%2Fwww.owlgen.com%2Fanswer%2Fre-explain-debtorsystem-of-accounting-in-branch-accounts&t=RE: Explain Debtor System of accounting in branch accounts?)
(https://twitter.com/share?text=RE: Explain Debtor System of accounting in branch accounts?
&url=https%3A%2F%2Fwww.owlgen.com%2Fanswer%2Fre-explaindebtor-system-of-accounting-in-branch-accounts) mini=true&url=https%3A%2F%2Fwww.owlgen.com%2Fanswer%2Freexplain-debtor-system-of-accounting-in-branch-accounts&t=RE: Explain
Debtor System of accounting in branch accounts?)
(https://wa.me/?
text=https%3A%2F%2Fwww.owlgen.com%2Fanswer%2Fre-explaindebtor-system-of-accounting-in-branch-accounts&t=RE: Explain Debtor
System of accounting in branch accounts?)
LATEST QUESTIONS
What are the characteristics of Affective Learning? Give examples of the themes of Affective Learning.
https://www.owlgen.com/question/explain-debtor-system-of-accounting-in-branch-accounts 6/8

8/27/2019 Explain Debtor System of accounting in branch accounts? - Owlgen.com
(https://www.owlgen.com/question/what-are-the-characteristics-of-affective-learning-give-examples-of-the-themes-ofaffective-learning)
Characteristics of affective learning are: Realistic, relevant and stimulating. Presents new information.
More (https://www.owlgen.com/question/what-arethe-characteristics-of-affective-learning-give-examples-of-the-themes-of-affective-learning)
Answered
Write a note on Post-Independence planning and urban design in India.
(https://www.owlgen.com/question/write-a-short-note-on-post-independence-planning-and-urban-design-in-india)
Post-Independence planning and urban design throughout India has taken as its model the "surveyor's layout" and the transplanted European concept of the city be...
More (https://www.owlgen.com/question/write-a-short-note-on-post-independence-planning-and-urban-design-in-india)
Answered
Explain the Town Planning during the British period.
(https://www.owlgen.com/question/explain-the-town-planning-during-the-british-period)
It is only when one looks at the large numbers of historic urban spaces and complexes across the country that one becomes aware of the vast schism that exist...
More (https://www.owlgen.com/question/explain-the-town-planning-during-the-british-period)
Answered
Discuss the Importance of Urban Life.
(https://www.owlgen.com/question/discuss-the-importance-of-urban-life)
Three characteristics come to mind most readily: proximity, density and size. Proximity of one urban area to the next is both expressed on maps and felt on the ...
More (https://www.owlgen.com/question/discuss-the-importance-of-urban-life)
Answered
What is the concept of Urbanization?
(https://www.owlgen.com/question/what-is-the-concept-of-urbanization)
Urbanization is the movement of population from rural to urban-areas and the resulting increasing proportion of a population that resides in urban rather than r...
More (https://www.owlgen.com/question/what-is-the-concept-of-urbanization)
Answered https://www.owlgen.com/question/explain-debtor-system-of-accounting-in-branch-accounts 7/8

8/27/2019
Links
Explain Debtor System of accounting in branch accounts? - Owlgen.com
Home (https://www.owlgen.com/) | About (https://www.owlgen.com/about) | Contact Us (https://www.owlgen.com/contact) | Content Quality
Guidelines (https://www.owlgen.com/content-quality-guidelines) | Terms of Use (https://www.owlgen.com/term) | Privacy Policy
(https://www.owlgen.com/privacy) | Disclaimer (https://www.owlgen.com/disclaimer) | ©2019 www.owlgen.com
https://www.owlgen.com/question/explain-debtor-system-of-accounting-in-branch-accounts 8/8