HOME OFFICE AND BRANCH ACCOUNTING
Companies may increase their volume of sales by establishing sales outlets in various
areas. These sales outlets may be a branch or an agency.
When a company operates a branch, the branch must maintain accounting records to
facilitate its reporting responsibility to the home office.
Problems dealing with Home Office and Branch Accounting appear in almost every
CPA examination. Candidates should be familiar with the problems involving the
following:
1.
2.
3.
4.
Uses of the reciprocal accounts.
Preparation of a Reconciliation Statement.
Billing of Merchandise by Home Office to Branch above cost.
Preparation of Combined Financial Statements.
Uses of the Reciprocal Accounts
In recording inter-office transactions, two reciprocal accounts are used, namely, the
Investment in Branch (Branch Current) account used by the home office which is
classified as an asset; and the Home Office (HO Current account) used by the branch
which is classified as a liability.
The reciprocal nature of the Investment in Branch and the Home Office accounts and
the way in which they are affected by various inter-office transactions are shown below:
(Home Office Books)
xx
xx
xx
xx
(Branch Books)
Investment in Branch
Home Office
Assets transfer to branch
Assets transfer from branch
xx
Branch profit
xx
Branch loss
Where
reported
Financial Statement
Presentation
Investment in branch
Home office
books
Asset on the Statement of
Financial Position of the
home office
Home office current
Branch books
Equity on the Statement of
Financial Position of the
Branch
Account Title
xx
xx
HOME OFFICE AND BRANCH ACCOUNTING
Shipment to branch
Home office
books
Deduction from the goods
available for sale on the
Income Statement of the
home office
Shipment from home
office
Branch books
Addition to the goods
available for sale on the
Income Statement of the
Branch
Illustrative Entries
ABC Company of Makati City established a branch in Surigao City. The following are
transactions of the Company and its branch together with the entries:
1. Establishment of a Branch
“Home office transfers to the Surigao branch P50,000 in cash, new office equipment
that costs P25,000, and new store equipment with a cost of P125,000”
Home office: Investment in Surigao branch 200,000
Cash
50,000
Office equipment
25,000
Store equipment
125,000
Branch:
Cash
Office equipment
Store equipment
Home office current
50,000
25,000
125,000
200,000
When a company establishes a branch, the transfer of assets to the branch is
recorded by the home office in the Investment in Surigao branch account. Likewise,
the branch records the transfer with an entry to the Home office account. Note that
after both the home office and the branch have recorded the transfer, the
Investment in Surigao branch account on the home office books and the Home
office account on the branch books have reciprocal balances of P 200,000.
2. Merchandise Shipments to a Branch at Cost
“Home office transfers merchandise at cost of P 175,000 to its Surigao branch paying
freight cost of P7,500. Home office uses periodic inventory system”
Home office: Investment in Surigao branch 182,500
Shipment to Surigao branch
175,000
Cash
7,500
Branch:
Shipment from home office
175,000
HOME OFFICE AND BRANCH ACCOUNTING
Freight – in
Home office current
7,500
182,500
Both the home office and the branch treat the transfer of merchandise in the same
way as the transfer of any other asset. The balance of the Shipments to Branch
account is subtracted from the total of beginning inventory and purchases in the
computation of the home office’s cost of goods sold for the period. This reduces the
total goods available for sale and avoids overstatement of cost of goods sold.
The Shipments from home office account on the branch books is included in the
computation of the branch’s cost of goods sold as an addition to purchases; it
increases the branch’s total goods available for sale.
The home office’s Shipments to branch account and the branch’s Shipments from
home office account are nominal accounts and therefore closed at the end of the
period to the Income Summary account together with the other revenue and
expense accounts. Freight costs incurred in shipping merchandise from the home
office to a branch become part of the cost of the branch inventory.
3. Accounting for Branch Property, Plant and Equipment
“Home office purchases P75,000 of office equipment for its Surigao branch. The assets
are recorded in the books of the branch.”
Home office: Investment in Surigao branch 75,000
Cash
Branch:
Equipment
Home office current
75,000
75,000
75,000
The procedures to be used in accounting for branch property, plant and equipment
will depend on whether branch Property, Plant and Equipment are recorded in the
branch or in the home office books.
If branch assets are recorded in the books of the branch, and property, plant and
equipment are purchased by the home office for the branch, an entry is required on
the books of both the home office and the branch.
If branch assets are recorded in the books of the home office rather than on the
books of the branch, the home office records the purchase as follows:
Home office:
Branch:
Equipment
Cash
No entry
75,000
75,000
HOME OFFICE AND BRANCH ACCOUNTING
On the other hand, no entry is necessary in the book of the home office if the branch
purchases property, plant and equipment that are recorded on the books of the
branch. As an example, assume that Surigao branch purchased the office
equipment to be used by the branch. The following entries are made:
Home office:
No entry
Branch:
Equipment
Cash
62,500
62,500
If the branch purchases property, plant and equipment that are recorded on the
books of the home office, entries are needed by both the home office and the
branch.
Home office: Equipment
Investment in Surigao branch
62,500
Branch:
62,500
Home office current
Cash
62,500
62,500
When the branch purchases an asset that is carried on the home office books, the
balance of both the reciprocal accounts is reduced. The transaction is treated as if
the branch had purchased equipment for the home office.
4. Apportionment of Expenses
Branch expenses incurred and paid by the branch are recorded directly on the
books of the branch in the usual manner. However, the home office may allocate
expenses to a branch. These allocated expenses might be of several types:
a. Expenses incurred by the branch but paid by the home office.
b. Expenses incurred by the home office on behalf of the branch, for
example, depreciation on branch equipment carried on the home office
books.
c. Allocation of expenses incurred by the home office; for example, a portion
of the cost of general advertising.
“Utilities expenses incurred by Surigao branch and billed to home office master
account, P30,000; Depreciation expense on Surigao branch fixed assets carried on
home office books, P8,750; Advertising expense allocated to Surigao branch,
P18,750.”
The home office already has recorded these expenses in the usual manner, as if they
are related to the home office. Periodically, the home office notifies the branch of
HOME OFFICE AND BRANCH ACCOUNTING
the allocated expenses. The home office records the following entry upon notifying
the branch of the P57,500 of allocated expenses:
Home office: Investment in Surigao branch 57,500
Utilities expense
Depreciation expense
Advertising expense
Branch:
Utilities expense
Depreciation expense
Advertising expense
Home office current
30,000
8,750
18,750
30,000
8,750
18,750
57,500
Without these entries, the home office income would be understated and the branch
income would be overstated.
5. Collection of Accounts Receivable
In some cases, the Branch may collect accounts receivable of the home office or
the home office may collect account receivable of the branch. In both cases, the
office whose accounts receivable was collected must be notified in order to make
the necessary adjusting entry.
“Surigao branch’s receivable was collected by the home office, P45,000.”
Home office:
Branch:
Cash
Investment in Surigao branch
45,000
Home office current
Account receivable
45,000
45,000
45,000
On the other hand, if the branch collected accounts receivable of the home office,
the branch should notify the home office of such collection. The following entry
should be made:
Home office: Investment in Surigao branch 45,000
Accounts receivable
45,000
Branch:
Cash
Home office current
45,000
45,000
6. Cash Remittance
“Surigao branch cash remittances amounting to P227,500 deposited to the credit of
the home office.”
HOME OFFICE AND BRANCH ACCOUNTING
Home office: Cash
227,500
Investment in Surigao branch
227,500
Branch:
Home office current
Cash
227,500
227,500
7. Recognition of Branch Income or Loss
Income for each branch is computed periodically in the normal manner. Branches
seldom compute income taxes on individual income or record income tax expense
on their books. Because the home office and its branches are separate legal entities,
income taxes are computed for the company as a whole. All of the branch’s
revenue and expense accounts are closed to its Income Summary account in the
usual manner.
“Surigao branch’s income summary account has a credit balance of P132,500.”
Branch:
Income Summary
132,500
Home office current
132,500
The balance of the Income summary account represents the branch’s income or
loss, and is closed to the Home office account. The Home office account serves in
place of accumulated profits and other owner’s equity accounts on the books of
the branch.
When the branch income or loss is reported to the home office, the following entry
is made on the home office books to recognize the income or loss of the branch.
Home office: Investment in Surigao branch 132,500
Surigao branch income
132,500
Billing of Merchandise by Home office to Branch above Cost
Merchandise shipped to branch by the home office may be billed at an amount above
cost. Under this method of billing, the profit recognized by the branch will be less that its
actual profit, because its cost of goods sold is overstated insofar as the home office is
concerned.
The problems involving billing of merchandise to branch above cost are the following
1. Computation of branch at inventory at cost.
2. Computation of the actual or true branch profit insofar as the home office is
concerned.
HOME OFFICE AND BRANCH ACCOUNTING
Computation of Branch Inventory at Cost
Candidates should use the following formula:
a.If branch are all acquired from the home office, the formula is:
Branch inventory acquired from home office at billed price
Divide by billing percentage of cost
Branch inventory at cost
Pxx
%
Pxx
b.If branch inventory includes merchandise acquired from outsiders, the formula
is:
Branch inventory acquired from home office at cost:
Merchandise at billed price
Pxx
Divide by billing percentage of cost
%
Pxx
Add: inventory acquired from outsiders
xx
Branch inventory at cost
xx
Computation of Actual Branch Profit insofar as Home Office is Concerned
The actual or true branch insofar as the home office is concerned is computed as follows:
Branch profit (loss) as reported
Pxx
Add: Overvaluation of branch cost of goods sold (Schedule 1)
xx
Actual branch profit insofar as home office is concerned
Pxx
Schedule 1
Allowance
Billed
Percent
Price ÷ of Cost =
for OverCost
valuation
Branch inventory, beg. (acquired from HO)
Pxx
Pxx
Pxx
Pxx
Add: Shipments during the period
xx
xx
xx
xx
xx
xx
xx
xx
Total before adjustment
Less: Branch inventory, end (acquired from HO)
Overvaluation of branch COGS (Realized Profit)
Pxx
HOME OFFICE AND BRANCH ACCOUNTING
The home office normally charges the branch for the amount of inventory send to it.
The merchandise may be billed by the home office either at cost or with a certain markup which is usually based on cost. In the following case, the home office uses special
account called “Allowance for overvaluation of branch inventory” every time
intercompany shipments are sent to branch at above cost.
The home office may prefer to bill merchandise to branches at cost plus any arbitrary
percentage, otherwise known as billed price. Reasons commonly cited for internal
transfers of merchandise above cost include equitable allocation of income between
the various units of the enterprise and efficiency in pricing inventories. Under this
method, the branch manager is not given complete information concerning the actual
cost of merchandise shipped. Hence, upon receipt of merchandise from the home
office, the branch records the charges that are listed on the invoice accompanying the
goods.
When billings to the branch exceed cost, the profits determined by the branch will be
less than the actual profits. The inventories reported by the branch are overstated in as
much as they were valued based on the billed price, not at their cost. Such must be
considered by the home office in summarizing the branch operations.
Accounting for Shipment of Merchandise at Billed Price
The entries to record the transactions for the home office and branch is the same as
those earlier presented, except for the entries showing shipments of merchandise from
the home office to the branch.
Entries to record transfers of merchandise at prices in excess of cost do not change the
relationship between the home office and branch accounts but they affect the
relationship between the Shipment to Branch and Shipment from Home Office accounts.
The Shipment to branch account is credited by the home office at cost while the
Shipment from home office account is debited by the branch at billed price. The
difference represents the markup that is credited by the home office in an account
called “Allowance for mark-up in branch inventory”, “Allowance for overvaluation of
branch inventory”, “Deferred profit”, “Unrealized branch inventory profit” or “Unrealized
intercompany inventory profit”. This allows the home office to defer recognition of profits
on intercompany sales until the inventory is sold to external parties by the branch.
Illustrative Entries
Assume the same transactions during 2018 of ABC Company, except that the home
office bills merchandise shipments to the branch at 20% above cost or 120% of cost.
Assume further that from the ending inventory of the branch, P69,000 came from the
HOME OFFICE AND BRANCH ACCOUNTING
home office. The shipment worth P279,000 (P232,500 + 20% mark-up) is recorded as
follows:
Home office books:
Investment in Surigao Branch (billed price)
279,000
Shipment to branch (cost)
232,500
Allow. for overvaluation of branch inventory
To record Shipments to branch at 20% above cost.
Branch books:
Shipment from home office
Home office current
To record shipments from home office.
46,500
279,000
279,000
If the transfer of merchandise from home office to branch is billed at cost, the Shipment
to branch account in the home office books is equal to Shipment from office account
in the branch books.
If the transfer of merchandise from home office to branch is billed above cost, the
Shipment from home office account in the branch books is equal to Shipment to branch
account plus the allowance for overvaluation in branch inventory account before
adjustment for realized profit on branch inventory. The cost of the merchandise as far
as the home office is concern is P232,500 but the cost of the merchandise as far as the
branch is concern is P279,000. The difference represents allowance for overvaluation of
branch inventory.
The branch does not maintain any allowance account. The result is an overstatement
in the balance of shipments account and overstatement in the cost of ending and
beginning inventories. It will also result to overstatement in the branch cost of sales and
an understatement in the reported branch net income. At the end of the period, the
home office prepares an adjusting entry to correct the net income reported by branch
and to adjust the allowance for overvaluation of branch inventory.
The adjusting entry on the books of the home office and the branch on December 31
are shown below:
Home office books:
Allowance for overvaluation of branch inventory 35,000
Branch net income
To record the realization of the 20% mark-up
merchandise sold by branch.
35,000
on
The adjustment to correct the understatement on the reported branch net income is
called realized mark-up. After the entries have been recorded, the allowance will have
HOME OFFICE AND BRANCH ACCOUNTING
an ending balance of P11,500 representing the unrealized profit in the ending inventory
of the branch.
The allowance for mark-up in branch inventory is considered realized upon sale by the
branch of the merchandise shipment from the home office. Home office shipment to
branch, therefore, that remain in the branch ending inventory require a balance in the
allowance account at the end of the period for the unrealized mark-up. The balance
of the allowance for overvaluation of branch inventory account is deducted from the
Investment in branch account in the home office statement of financial position and it
is eliminated in the combined statement of financial position.
A review of the entries and the T-account for Allowance for overvaluation of branch
inventory reveals the following:
Allowance for Overvaluation of branch inventory
Realization of 20%
mark-up on P 35,000
merchandise sold by branch
Adjusted Balance
(Ending)
Mark-up on
merchandise
shipped to branch
P 46,500
11,500
P 46,500
P 46,500
In the entry to record the merchandise shipped at above cost, the branch records its
shipments from the home office at the billed price. The branch manager is usually not
aware of the home office’s cost; therefore, the only figure available is the billed price.
However, the home office records the shipment at its cost and sets up an allowance for
overvaluation of Branch inventory. The Allowance for overvaluation of branch inventory
account, also called Unrealized profit in branch inventory, is the peso amount above the
home office’s cost that is billed to the branch. The amount remains in this account until
the shipment is reshipped or sold by the branch to outsiders.
In addition to the amount of net income reported by branch, the home office recognizes
the realized profit on sales made by the branch of merchandise billed above cost. This
is recorded with adjusting entry. With the assumption that the branch inventory consists
entirely of merchandise acquired from home office, the computation of the realized
profit may be computed using two approaches:
HOME OFFICE AND BRANCH ACCOUNTING
Cost of goods sold by branch
Realized Profit =
Mark-up rate
X
(at billed price)
Billed price rate
or
Cost of goods sold by
branch
Realized
=
Profit
Allowance for
overvaluation
x
Goods available for
of branch inventory
sale
The realized profit can also be computed using the following method:
Balance of Allow. for Overvaluation of Branch Inventory
Less: Overvaluation of branch ending inventory
Billed Price
P 69,000
Cost (P 69,000 / 120%)
( 57,500)
Realized Profit
P 46, 500
11,500
P 35,000
After closing entry, the Allowance for Overvaluation of Branch Inventory account will
have a remaining credit balance of P11,500 as shown in the T-account of the said
account. The balance can be verified by determining the overvaluation in branch
ending inventory.
Working Paper when Billings to Branch are in Excess of Cost – First Year
The working papers to facilitate the preparation of combined financial statements when
billings to the branch are in excess of cost differs from the previously illustrated working
papers because of the inclusion of elimination entries to bring the ending inventory of
the branch to its cost. Note that the amounts in the combined Income Statement and
combined Statement of Financial Position columns of the combined financial statements
worksheet are exactly the same as those in the combined financial statements
worksheet prepared when the shipments to the branch were billed at cost. Therefore,
the financial statements would be identical with those presented in the previous pages.
A review of the working paper reveals the following elimination entries:
HOME OFFICE AND BRANCH ACCOUNTING
Working Paper Elimination Journal Entries
1. Home office Current
230,000
Investment in Surigao Branch
230,000
To eliminate Home office account against Investment in
branch account.
2. Shipment to Surigao branch
232,500
Allow. for overvaluation of branch inventory
46,500
Shipment from home office
279,000
To eliminate Shipments to branch and Shipments
from
home office accounts.
3. Merchandise Inventory, December 31(I/S)
11,500
Merchandise Inventory, December 31(B/S)
To adjust branch ending inventory from the home
to its actual cost.
11,500
office
On the first year of operations, the elimination of the intercompany shipments requires
the complete elimination of the Allowance for Overvaluation of Branch Inventory
account because there is no beginning inventory. The branch ending inventory, which
is carried at billed price in the statement of financial position and in the Income
Statement, is reduced by P11,500 to bring it to its actual cost.
These entries that appear in the combined financial statements worksheet as
elimination entries neither appear on the set of books nor are they ever recorded on
the books. They are adjustments made only for purposes of preparing financial
statements for external users.
Preparation of Reconciliation Statement
The balances of the two reciprocal accounts should at all times equal. If the balances
of the reciprocal accounts are not equal before the preparation of separate statement
of financial position, a reconciliation statement is to be prepared. This is done to
determine the causes of the inequality between the two accounts. The accounts are
then adjusted to determine their adjusted balances. The following are the usual causes
that the candidate should take note:
1. Transactions have been recorded by the branch but not by the home office.
2. Transactions have been recorded by the home office but not by the branch.
3. Errors in recording have occurred in one or both books.
4. Transactions have not yet been recorded on either set of books.
As an illustration of the procedures for reconciling account balances at year-end, the
home office and the branch accounting records of the ABC Company should make the
following adjusting entries:
HOME OFFICE AND BRANCH ACCOUNTING
The home office failed to record the shipment of merchandise to the branch in the
amount of P25,000; therefore, no entry for the shipments appears on its books. The
required adjustment at year-end for this type of reconciling item will be an entry on the
branch books as follows:
a. Home office: Investment in Surigao branch
Shipment to branch
25,000
25,000
An accounts receivable of the branch was collected by the home office from a branch
customer. The collection was recorded by the home office by a debit to Cash and a
credit to Investment in branch account. No entry has been made by the branch;
therefore, the following entry is required on the branch books:
b. Surigao branch:
Home office current
Accounts receivable
8,200
8,200
Marketing expense of the home office amounting to P10,000 was erroneously charged
by home office to Surigao branch. The entry made by the home office for the
payment was a debit to Investment in branch and a credit to Cash. To correct this
entry, the following adjusting entry should be made in the home office books:
c. Home office: Operating expenses
Investment in Surigao branch
10,000
10,000
The branch recorded a shipment twice, if no adjusting entry is made, the home office
account and shipment from office including cost of good available for sale of the
branch will be overstated, therefore, it is necessary to make the following entry:
d. Surigao branch:
Home office current
Shipment from home office
35,000
35,000
The entry made by the home office for the cash remittance was a debit to Cash and a
credit to Accounts receivable. The entry should be a debit to Cash and credit to
Investment in Surigao branch. The following adjusting entry should be made in the
home office books:
e. Home office: Accounts receivable
Investment in Surigao branch
65,200
65,200
The error in recording the advertising expense resulted to overstatement of operating
expenses. The following entry is required on the books of the branch:
f. Surigao branch:
Home office current
450
Operating expenses
450
HOME OFFICE AND BRANCH ACCOUNTING
Preparation of Combined Financial Statements
The balance sheets and the income statements of the home office and the branch must
be combined for external reporting purposes. Working papers are usually prepared to
eliminate accounts affected in recording inter-office transactions before financial
statements are prepared.
Candidates should remember the following working paper elimination procedures:
1.
2.
a.
b.
3.
4.
Eliminate reciprocal accounts.
Eliminate inter-company transfer accounts.
Shipment to Branch and Shipment from Home Office accounts.
Allowance for Overvaluation of Branch Inventory.
Eliminate the overvaluation in branch beginning inventory.
Eliminate the overvaluation in branch ending inventory.
Combined Statement of Financial Position. The reciprocal accounts “Investment in
Branch” and “Home Office” accounts are not presented as well as the Allowance for
Overvaluation account.
Combined Statement of Comprehensive Income. The merchandise inventories,
beginning and ending inventories are presented at cost. The Shipment to Branch and
Shipment from Home Office accounts are not presented.
Transactions between Branches
Occasionally, branch operations require that merchandise or other assets be transferred
from one branch to another. A branch does not maintain a reciprocal account with
another branch but records the transfer in the Home Office account. For example, if Bicol
Branch ships merchandise to Laguna Branch, Bicol Branch debits Home Office account
and credits Inventories (assuming that the perpetual inventory system is used). Upon
receipt of the merchandise, Laguna Branch debits Inventories and credits Home Office
account. The home office records the transfer between branches by a debit to
Investment in Laguna Branch and a credit to Investment in Bicol Branch.
The transfer of merchandise from one branch to another does not increase the cost of
inventories by the freight costs incurred because of the indirect routing. The amount of
freight costs properly included in inventories at a branch is limited to the cost of shipping
the merchandise directly from the home office to its present location. Excess freight costs
are recognized as expenses of the home office.
Illustrative entries
The home office of ABC Company shipped merchandise costing P18,000 to Baler branch
and paid freight of P900. Shortly afterward, the home office instructed Baler branch to
HOME OFFICE AND BRANCH ACCOUNTING
transfer this merchandise to Surigao Branch. Freight costs of P600 were paid by Baler
branch to carry out the order. If the merchandise had been shipped directly from the
home office to Surigao branch, the freight cost could have been P1,000. The entries to
be made on the books of the Home office, Baler branch and Surigao branch to record
the inter-branch transfers of merchandise are:
Home office books:
Investment in Baler branch
Cash
To record shipment of merchandise.
Shipment to Baler branch
Shipment to Surigao branch
To record transfer of merchandise.
Investment in Surigao branch
Excess freight on inter-branch transfer of mdse.
Investment in Baler branch
To record transfer of merchandise.
Baler branch books:
Shipment from home office
Freight-in
Home Office Current
To record receipt of merchandise.
Home Office Current
Shipment from home office
Freight-in
Cash
To record transfer of merchandise.
18,900
900
18,000
18,000
19,000
500
19,500
18,000
900
18,900
19,500
Surigao branch books:
Shipment from home office
18,000
Freight-in
1,000
Home Office Current
To record receipt of merchandise.
18,000
900
600
19,000
As manifestation of the accounting principle that losses should be given prompt
recognition, the excess freight cost on merchandise transferred from one branch to
another is recorded as an expense. The excess freight cost arising from such shipments
generally is a result of inefficient planning of original shipments and, therefore, should not
be included in the inventories.
HOME OFFICE AND BRANCH ACCOUNTING
Accounting System for Sales Agencies
An agency is simply an extension of the sales territories in which orders are received from
customers and then transmitted to the home office for shipping and billing. They do not
have merchandise available for sale, but they keep samples inventory.
A sales agency neither keeps a complete set of books nor uses a double-entry system of
accounts. Usually, a record of sales to customers and a list of cash payments supported
by vouchers are sufficient.
An imprest system is usually adopted by the home office for the working fund of the sales
agency.
Illustrative Entries
Lily T. Sunin Enterprises, a manufacturer of Lechon based in Manila, establishes a sales
agency in Surigao City. The revenues and expenses of the home office are recorded
separately from those of the sales agency. Moreover, operating results of the sales
agency and the home office are determined separately at the end of each accounting
period. The following are the journal entries on the home office books to record typical
sales agency transactions for the year 2018:
1. Rented space for sales facility, P75,000
Prepaid rent – Surigao City Agency
75,000
Cash
75,000
2. Transferred cash to agency for working fund of P8,750
Petty cash – Surigao City Agency
8,750
Cash
8,750
3. Transferred inventory to be used as samples, P12,500
Inventory – Surigao City Agency
12,500
Shipment of Merchandise - Sales Agency
12,500
4. Paid bills received by home office for expenses of the sales agency: utilities,
P2,750; advertising expenses, P2,000
Utilities expense – Surigao City Agency
2,750
Advertising expense – Surigao City Agency
2,000
Cash
4,750
5. Filled sales orders from sales agency, P137,500. Cost of sale identified with these
sales is P62,500
Accounts receivable
137,500
Sales – Surigao City Agency
137,500
Cost of goods sold – Surigao City Agency
Shipment of Merchandise - Agency
62,500
62,500
HOME OFFICE AND BRANCH ACCOUNTING
6. Disbursed payroll for sales agency, P18,750
Salaries expense – Surigao City Agency
18,750
Cash
18,750
7. Replenished sales agency petty cash; office expenses, P3,750; travel expenses,
P2,000
Office Expense – Surigao City Agency
3,750
Travel Expense – Surigao City Agency
2,000
Cash
5,750
8. End-of-period adjusting and closing entries
Rent Expense – Surigao City Agency
25,000
Depreciation expense – Surigao City
1,250
Agency
Prepaid rent – Surigao City Agency
25,000
Accumulated depreciation - Agency
1,250
To record year-end
adjustments.
Sales – Surigao City Agency
137,500
Cost of goods sold- Surigao City Agency
62,500
Utilities expense – Surigao City Agency
2,750
Advertising expense – Surigao City Agency
2,000
Salaries expense – Surigao City Agency
18,750
Office Expense – Surigao City Agency
3,750
Travel Expense – Surigao City Agency
2,000
Rent Expense – Surigao City Agency
25,000
Depreciation expense – Surigao City Agency 1,250
Agency
Income – Surigao City Agency
19,500
To close agency
revenue and expenses.
Agency Income – Surigao City Agency 19,500 Income Summary 19,500
To close agency income to Income Summary.
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