中六級
會計學原理科
Principles of
Accounts
Branch Accounts
Branch a/c
Head office
keeps all the records
Goods Sent to Branch
at Cost
Each Branch keeps
separate records
Goods sent to Branch
at Selling price
Memorandum Column
Branch Adjustment a/c
Goods sent to
Branch at Cost
Goods sent to Branch
at Selling price
Head Office maintains all the
accounting records
The accounts are used for three main purposes:
(1) to record transactions showing changes
in assets, liabilities and capital;
(2) to ascertain the profitability of each branch:
(3) to check whether anyone at the branches is
stealing goods or cash.
Internal Control
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(1) Inventory control
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Head Office does all buying. Goods are
transferred to the Branch by Head office.
Spot inspections of stock in Branch.
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(2) Cash control
All branches should bank their full cash
takings everyday. Cash payments made
by the branch will be kept on a basis
similar to the petty cash imprest system.
The Head Office will keep the
following accounts for each
Branch
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(1) Branch Stock A/C
l (2) Branch Total Debtors A/C
l (3) Branch Cash A/C
l (4) Branch Expenses A/C
l (5) Goods Sent to Branch
Goods sent to Branch at cost
Branch Stock
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Beginning stock b/d
Goods sent to Branch
Cash/Branch debtors: Goods
returned to Branch by customers
Branch Debtors: profit loading on
goods returned to
Head Office by
Customers
Branch Gross Profit (Cr.-Dr.)_____
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Cash: Cash sales
Branch Debtors: credit sales
Goods sent to Branch: Good returned to
Head Office
Branch Profit & Loss: wastage;Loss
Closing stock c/d (given)
______
=====
Goods sent to Branch
Branch stock: goods returned from
Branch Stock
Branch to Head Office
Branch Debtors: goods returned by
Branch customers
Head Office Trading a/c
_____
====
_____
====
Goods sent to branch at
selling price
(I) Memorandum Column Method
Branch Stock
Selling Cost
price
Bal. b/d
Goods sent to branch
Branch Gross Profit
$
$
Selling Cost
price
Branch
debtors -sales
Cash: sales
Goods sent to branch
-goods returned to H.O.
Branch P/L
-goods stolen
Branch P/L
-normal wastage
Branch P/L
-excess deficiency
$
$
Branch Debtors
$
Bal. b/d
Branch stock -sales
$
Branch P/L -bad debts
Cash
Branch P/L -discounts allowed
Bal. c/d
Goods sent to Branch
$
Branch stock -goods returned
to H.O
Head office Trading A/C
$
Branch stock -goods
sent to branch
Notes :
1. Goods sent to Branch : use the COST value
2. Values of sales : no need to change into
cost value in Cost column
3. Returns to H.O. : use the COST value
4. Unknown loss
5. Gross profit = Cr. side - Dr.side
( Only in COST column )
＊The selling price column of Branch Stock is not
part of the double-entries while the Cost column is.
Selling Price Column
- to find out the closing stock ( Dr.side - Cr.side )
- the closing stock figure in the A/C should be
compared with the stock figure found out by
physical stock taking.
If there is a difference
stock discrepancy / deficiency
Cost Column
- to calculate the gross profit of the branch
Advantages of including a
selling price column
(1) The branch manager is not able to calculate the
amount of profit the branch is making. Head office
is able to preserve the secrecy of certain key
information.
(2) It highlights stock discrepancies. Separate
adjustment is not required in the double entry
column for these discrepancies as they are
automatically included in the gross profit.
Goods sent to branch at Selling Price
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Branch Stock a/c - at selling price
to control upon stock deficiency
l Branch Adjustment a/c - to calculate the gross profit
earned by each branch
Example of Branch Adjustment
Branch Adjustment (Profit loading)
Unrealized Profit on beginning stock b/d
Branch Stock: Goods Returned to
Head Office by branch Goods sent to branch: Profit loading
Branch Stock: Reduction in selling price
Branch Stock: Normal loss/wastage of
goods
Branch Stock: Deficiency of stock
Gross Profit of branch (Cr.-Dr.)
Unrealized Profit on closing stock c/d
Journal Entries
1. Profit element on opening stock
2.Goods sent to branch
Dr. Branch Stock
Cr.
Goods sent to branch
Branch Adjustment
at selling price
at cost
profit loading
3.Goods Returned to Head Office
Dr. Branch Adjustment
Goods sent to branch
Cr.
Branch Stock
4.Reduction in selling price
To be
Dr. Branch Adjustment
continue...
Cr.
Branch Stock
5.Normal loss/wastage of goods (at selling price)
Dr. Branch Adjustment
Cr.
Branch Stock
6.Deficiency of stock (at selling price)
Dr. Branch Adjustment
Cr.
Branch Stock
7.Gross Profit on branch
Dr. Branch Adjustment
Cr.
Branch Profit and loss
8.Profit element on closing stock
Profit and Loss Account
Head office Branch Combined
Gross Profit
Less: Expenses
Distribution expenses
Administrative expenses
Depreciation
Provision for bad debts
Net Profit
xxx
xx
xx
xx
xx
xxx
xx
xx
xx
xx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
(b) Goods sent to branch at selling price
Trading Account
Sales
Goods Sent to Branch
Head office Branch Combined
xx
xx
xxx
xx
-----xx
xx
xxx
Less:Cost of goods sold
Opening stock
Add: Purchases
Goods received
xx
xx
xx
---
xxx
xxx
---
xx
----
xx
xx
xxx
xx
xx
xxx
from Head office
Less: closing stock
Gross Profit
xx
xx
xx
xx
xxx
xxx
Example:
Peter & Sally
Trading and Profit and Loss account for the year ended 31 October,20X1
Head Office
$
Sales
Less: Cost of goods sold
Opening Stock
Add: Purchases
Goods sent to branch
Less: Closing Stock
Cost of goods sold
Gross Profit
Less: Expenses
Administrative Expenses
Distribution Expenses
Depreciation
Provision for bad debts
Manager’s Commission
Net Profit
$
XXX
XX
XX
XX
XX
XX
Branch
$
$
XXX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
$
$
XXX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XXX
======
Combined
XX
XX
XX
XX
XX
XX
XX
XXX
=======
XXX
======
Net Profit
Less: commission to Peter
Less: Interest on Capital:--Peter
--Sally
Balance of Profit shared:--Peter ¾
--Sally ¼
XXXXX
XXX
XXX
XXX
XXXX
XXXXX
XXXXX
XXX
XXX
XXXXX
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THE END