CA NITIN GOEL BRANCH ACCOUNTING

BRANCH ACCOUNTING

“To succeed in your mission, you must have single-minded devotion to your goal.”

MEANING

A Branch can be described as any establishment carrying on either the same or

substantially same activity as that carried on by Head Office.
Branch offices are of a great utility in the sense that they allow business to be expanded
closer to the clients and hence they facilitate face to face interaction with customers.

Difference between Branch and Department

Branch: Establishment at location different from Head Office to carry either same or
substantially same activity as carried on by Head Office
Department: Division of a large organization dealing with a various kind of activity at the
same location.
Let’s take an example of a CA Firm working in the field of Auditing, Taxation & Finance
having office at Mumbai, Chennai and Delhi practicing such fields. The CA firm has various
branches in different cities, i.e., Delhi, Mumbai and Chennai, also it has various
department of Auditing, Taxation and Finance at one particular branch (location).

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DISTINCTION B/W BRANCH & DEPARTMENTAL ACCOUNTS

BASIS BRANCH ACCOUNTS DEPARTMENTAL ACCOUNTS

Maintenance of Branch accounts may be maintained Departmental accounts are
Accounts either at branch or at head office. maintained at one place only.
Allocation of No allocation problem arises since Common expenses are
common the expenses in respect of each distributed among departments
expenses branch can be identified. concerned on some equitable
basis considered suitable in the
case.
Reconciliation Reconciliation of head office and No such problem arises.
branch accounts is necessary in
case of independent branches at the
end of the accounting year.
Conversion of At the time of finalization of No such problem arises in
foreign accounts, conversion of figures of departmental accounts.
currency foreign branch is necessary.
figures

DEPENDENT BRANCH

DEBTORS METHOD
BRANCH ACCOUNT
Particulars Amount Particulars Amount
To Balance b/d By Balance b/d
Stock (At Invoice Price) xx Creditors xx
Debtors xx O/s Expenses xx
Cash in hand xx By Stock Reserve xx
(on Opening stock)
Fixed Assets xx By Goods sent to branch (Loading) xx
Prepaid expenses xx By Goods Returned to H.O. (At I.P.) xx
To Goods sent to branch (At I.P.) xx By Bank (Remittances to H.O.)
To Goods ret. to H.O. (Loading) xx • Cash Sales xx
To Bank (Cash sent by H.O. to xx • Collection from Debtors xx
branch for expenses/Purchase • Recovery from Insurance Co. xx
of fixed assets) • Expenses paid by branch (xx) xx
To Stock Reserve xx By Balance c/d
(on Closing stock)
To Balance c/d Stock (At I.P.) xx
Creditors xx Debtors xx
O/s Expenses xx Cash in hand xx
To Net Profit (Bal. Fig.)* xx Fixed Assets xx
Prepaid expenses xx
By Net Loss (Bal. Fig.)* xx
XXX XXX
*Any one of these

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FINAL ACCOUNTS METHOD

BRANCH TRADING AND P&L A/C
Particulars Amount Particulars Amount
To Opening stock (at cost) xx By Sales
To Goods sent to branch xx Cash xx
(-) Returns (xx) xx Credit xx
To Direct Expenses xx ( - ) Sales Return (xx) xx
To Gross Profit (Bal. Fig.) xx By Abnormal Loss xx
By Closing stock (at cost) xx
XXX XXX
To Indirect expenses xx By Gross Profit xx
To Abnormal Loss xx By Discount received xx
To Net Profit (Bal. Fig.) xx
XXX XXX

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STOCK & DEBTORS METHOD

Branch Stock Account (At Invoice Price)
Particulars Amount Particulars Amount
To Balance b/d xx By Goods sent to branch xx
(returns)
To Goods sent to branch xx By Bank (Cash Sales) xx
To Branch Debtors A/c xx By Branch Debtors A/c xx
(Returns) (Credit Sale)
To Surplus transferred to xx By Shortage/Abnormal Loss xx
Branch adjustment [SP > IP]
By Branch Adjustment xx
(Normal loss)
By Balance c/d xx
XXX XXX
Note In case of Branch Stock Account, if Balance figure is on credit side then:
Case 1: Closing stock not given → then balance figure will be considered as Closing Stock.
Case 2: Closing stock is given → then consider balance figure to be shortage/abnormal
loss and separate the same accordingly in Branch adjustment & Branch P&L account.

Branch Adjustment Account

Particulars Amount Particulars Amount
To Goods sent to branch- xx By Stock Reserve (Opening xx
Returns (Loading) stock)
To Stock Reserve (Closing xx By Goods sent to branch xx
stock) (Loading)
To Abnormal Loss (Loading) xx By Surplus transferred from xx
Branch Stock A/c
To Branch Stock (Normal loss) xx
To Branch P&L {Gross Profit} xx
XXX XXX

Branch Expenses Account

Particulars Amount Particulars Amount
To Bank A/c (expenses) xx By Branch P & L A/c xx
[like printing & stationery,
salaries, rent & rates, etc.)
XXX XXX

Branch P & L Account

Particulars Amount Particulars Amount
To Branch Expenses A/c xx By Branch Adjustment (G.P.) xx
To Branch Debtors A/c By Branch Cash a/c
Discount (Claim received from xx
Bad Debts xx insurance Co.)
To Abnormal Loss (Cost) xx
To Net Profit (Bal. Fig.) xx
XXX XXX

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Goods Sent to Branch Account

Particulars Amount Particulars Amount
To Branch stock A/c xx By Branch stock A/c xx
To Branch Adjustment A/c xx By Branch Adjustment A/c xx
To Purchases/Trading A/c xx
(Bal. Fig.)
XXX XXX

Branch Debtors Account

Particulars Amount Particulars Amount
To Balance b/d xx By Branch stock A/c (Returns) xx
To Branch stock A/c (Credit xx By Branch P&L A/c (Discount, xx
Sales) Bad Debts, etc.)
By Bank A/c (Collection) xx
By Balance c/d xx
XXX XXX

Reasons/Objectives for sending goods on invoice price by Head Office

to the Branch
a) To keep secret from the branch manager, cost price of the goods & profit made, so that
branch manager may not start a rival and competitive business with the concern;
b) To have effective control on stock i.e stock at any time must be equal to opening stock
plus goods received from head office minus sales made at branch.
c) To dictate pricing policy to its branches, as well as save work at branch because prices
have already been decided.

WHOLESALE PRICE METHOD

TRADING AND P&L A/C

Particulars Head Office Branch Particulars Head Office Branch
By Goods sent
To Opening stock    
to Branch
To Purchases   By Sales  
To Goods Received By Closing
   
from Head Office Stock
To Gross Profit   
XXX XXX XXX XXX
To Indirect
  By Gross Profit  
expenses
To Stock Reserve  
To Net Profit  
XXX XXX XXX XXX

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INDEPENDENT BRANCH
Features of Accounting System
1. Branch maintains its entire book of accounts under double entry system.
2. Branch opens in its books a Head Office Account to record all the transactions that
takes place between Head Office & Branch.
3. Head Office maintains a Branch account to record these transactions.
4. Branch prepares its trial balance, Trading & P & L a/c at the end of accounting period
& sends copy of these statements to Head Office for incorporation.
5. After receiving final statement from branch, Head Office reconciles between the two –
Branch A/c in Head Office Books & Head Office A/c in Branch Books.
6. Head Office prepares necessary entries to incorporate Branch trial balance in its
books.
JOURNAL ENTRIES
S.No. Transaction Books of H.O. Books of Branch
Goods Dispatched by Head
1
Office

Remittance by Branch to Head

2
Office

Head Office sending cash to

3
Branch

4 Direct purchases by Branch

Purchases by Branch but

5
payment by Head Office

6 Sales by Branch

Collection from Debtors by

7
branch

Collection from Debtors

8
directly by Head Office

9 Expenses incurred at Branch

Expenses of Branch paid by

10
Head Office
Head Office expenses charged
11 to Branch (Allocation to
Branch)

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Transfer of goods from one

12
branch to another

Fixed Assets maintained at

13
Branch

Fixed Asset purchased by

a)
Branch

Fixed Asset purchased by

b)
Branch paid by Head Office

c) Depreciation on the above

Fixed Asset A/c maintained at

14
HO
Fixed asset purchased at
a) Branch & recorded at Head
Office Books
Branch Fixed Asset recorded
b)
in HO books & payment by HO

c) Depreciation on the above

15 Goods in Transit

16 Cash in Transit

Question
Particulars Head Office Branch
Dr. Cr. Dr. Cr.
Goods sent to Branch 1,50,000
Goods Received from Branch 1,40,000
Branch Account 1,12,000
Head Office Account 78,500

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CA NITIN GOEL BRANCH ACCOUNTING

Reasons for Disagreement:

On analysis, the following were revealed:
1. ₹ 15,000 remitted by branch has not been received, hence not recorded in H.O books
2. Direct collection of ₹ 10,500 from branch customer by H.O not informed to branch.
Hence not recorded by branch.
3. ₹ 14,500 paid by branch to H.O suppliers not recorded at H.O
4. H.O expenditure allocation to the branch ₹ 12,000 not recorded in the branch.
5. ₹7,500 being interest on F.D of H.O received by branch not recorded in H.O books.

Question
Mumbai Branch incurred an expenditure on advertisement of 10,000 on account of
Chennai Branch.

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FOREIGN OPERATIONS

AS-11

IFO NIFO

Integral foreign Non-Integral foreign

Operations Operations

IFO It is a foreign operation, the activities of which are integral part of those of the
reporting enterprise. The business of IFO is carried on as if it were an extension
of the reporting enterprises operations.

NIFO It is a foreign operation that is not an integral foreign operation. The business of
NIFO is carried on in substantially independent way by accumulating cash &
other monetary items, incurring expenses, generating income & arranging
borrowing in its own local currency.

INDICATORS OF NON-INTEGRAL FOREIGN OPERATIONS

❖ Control by reporting enterprises - While the reporting enterprise may control the
foreign operation, the activities of foreign operation are carried independently without
much dependence on reporting enterprise.
❖ Transactions with the reporting enterprises are not a high proportion of the foreign
operation’s activities.
❖ Activities of foreign operation are mainly financed by its operations or from local
borrowings. In other words, it raises finance independently and is in no way dependent
on reporting enterprises.
❖ Foreign operation sales are mainly in currencies other than reporting currency.
❖ All expenses by foreign operations are primarily paid in local currency, not in the
reporting currency.
❖ Day-to-day cash flow of the reporting enterprises is independent of the foreign
enterprises cash flows.
❖ Sales prices of the foreign enterprises are not affected by the day-to-day changes in
exchange rate of the reporting currency of the foreign operation.
❖ There is an active sales market for the foreign operation product.

Monetary Items and Non-monetary Items:

Monetary items are money held and assets and liabilities to be received or paid in fixed
or determinable amounts of money. Cash, receivables and payables are examples of
monetary items.
Non-monetary items are assets and liabilities other than monetary items. Fixed assets,
investments in equity shares, inventories are examples of non-monetary assets.

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Conversion Rates
Particulars IFO NIFO
1. Opening Stock

2. Expenses & Incomes

3. Monetary Items (Cash, Bank,

Debtors, Creditors, Loan, B/R, B/P)

4. Closing Stock

5. Non-Monetary Items
(Fixed Assets & Depreciation on it)

Goods received from Head Office

6. /Remittance to HO and Head Office
account balance
Difference in Trial Balance
7.
(Exchange Difference)

CHANGE IN CLASSIFICATION
Integral to Non-Integral
(i) Translation procedure applicable to non-integral shall be followed from the date of
change.
(ii) Exchange difference arising on the translation of non-monetary assets at the date of
re-classification is accumulated in foreign currency translation reserve.

Non-Integral to Integral
(i) Translation procedure as applicable to integral should be applied from the date of
change.
(ii) Translated amount of non-monetary items at the date of change is treated as
historical cost.
(iii) Exchange difference lying in foreign currency translation reserve is not to be
recognized as income or expense till the disposal of the operation even if the foreign
operation becomes integral.

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ASSIGNMENT QUESTIONS

TOPIC 1: DEPENDENT BRANCH: DEBTORS METHOD & FINAL ACCOUNTS METHOD

Question 1 Pg no._____
Ronaldo opened in 2020 a branch at Nagpur. It invoiced goods to branch at cost plus 25%
Amount (₹)
Goods sent to branch (Invoice Price) 50,000
Cash sent to the Branch for expenses 8,000
Sales- Cash 22,000
- Credit 23,000
Cash received from debtors 20,000
Bad Debts written off 600
Stock on 31st December (invoice price) 4,800
Prepare Branch Account in the books of Head Office.

Question 2 Pg no._____
Pawan, of Delhi has a branch at Jaipur. Goods are invoiced to the branch at cost plus
25%. The branch is instructed to deposit the receipts everyday in the head office account
with the bank. All the expenses are paid through cheque by the head office except petty
cash expenses which are paid by the Branch. From the following information, you are
required to prepare Branch Account in books of Head office:
Stock at invoice price on 1.4.2020 1,64,000
Stock at invoice price on 31.3.2021 1,92,000
Debtors as on 1.4.2020 63,400
Debtors as on 31.3.2021 84,300
Furniture & fixtures as on 1.4.2020 46,800
Cash sales 8,02,600
Credit sales 7,44,200
Goods invoiced to branch by head office 12,56,000
Expenses paid by head office 2,64,000
Petty expenses paid by the branch 20,900
Furniture acquired by the branch on 1.10.2020 (payment was 5,000
made by the branch from cash sales & collection from debtors)
Depreciation to be provided on branch furniture & fixtures @ 10% p.a. on WDV basis.

Question 3 Pg no._____
Fanna Cloth Mills opened a branch at Mumbai on 1st April, 2020. The goods were invoiced
to the branch at selling price which was 125% of the cost to the head office. The following
are the particulars of transactions relating to branch during the year ended 31st March,21
₹ ₹
Goods sent to branch at cost to head office 42,12,600
Sales: Cash 18,76,050
Credit 26,61,450 45,37,500
Cash collected from debtors 23,55,000
Discount allowed to debtors 23,550
Returns from debtors 15,000

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Spoiled cloth in bales written off at invoice price 7,500

Cheques sent to branch for: Rent 1,08,000
Salaries 2,70,000
Other Expenses 52,500 4,30,500
Prepare Branch Account based on invoice price under Debtors method for ascertaining
profit.

Question 4 (RTP Nov 2019) Pg no._____

From the following particulars relating to Pune branch for the year ending December 31,
2021, prepare Branch Account in the books of Head office.
₹
Stock at Branch on January1, 2021 10,000
Branch Debtors on January 1, 2021 4,000
Branch Debtors on Dec. 31, 2021 4,900
Petty cash at branch on January 1, 2021 500
Furniture at branch on January 1, 2021 2,000
Prepaid fire insurance premium on January 1, 2021 150
Salaries outstanding at branch on January 1, 2021 100
Good sent to Branch during the year 80,000
Cash Sales during the year 1,30,000
Credit Sales during the year 40,000
Cash received form debtors 35,000
Cash paid by the branch debtors directly to the Head 2,000
Office
Discount allowed to debtors 100
Cash sent to branch for Expenses:
Rent 2,000
Salaries 2,400
Petty Cash 1,000
Insurance up to March 31, 2022 600 6,000
Goods returned by the Branch 1,000
Goods returned by the debtors 2,000
Stock on December 31,2021 5,000
Petty Cash spent by branch 850
Provide depreciation on furniture 10% p.a.
Goods costing ₹ 1,200 were destroyed on account of fire and a sum of ₹ 1,000 was
received from the Insurance Company.

Question 5 (ICAI Study Material) Pg no._____

Widespread invoices goods to its branch at cost plus 20%. The branch sells goods for
cash as well as on credit. The branch meets its expenses out of cash collected from its
debtors and cash sales and remits the balance of cash to head office after withholding ₹
10,000 necessary for meeting immediate requirements of cash. On 31st March, 2020 the
assets at the branch were as follows:
₹ (‘000)
Cash in Hand 10
Trade Debtors 384
Stock, at Invoice Price 1,080
Furniture and Fittings 500

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During the accounting year ended 31st March, 2021 the invoice price of goods dispatched
by the head office to the branch amounted to ₹ 1 crore 32 lakhs. Out of the goods received
by it, branch sent back to head office goods invoiced at ₹ 72,000. Other transactions at
branch during the year were as follows:
₹ (‘000)
Cash Sales 9,700
Credit Sales 3,140
Cash collected by Branch from Credit 2,842
Customers
Cash Discount allowed to Debtors 58
Returns by Customers 102
Bad Debts written off 37
Expenses paid by Branch 842
On 1st January, 2021 the branch purchased new furniture for ₹ 1 lakh for which payment
was made by head office through a cheque.
On 31st March, 2021 branch expenses amounting to ₹ 6,000 were outstanding and cash in
hand was again ₹ 10,000. Furniture is subject to depreciation @ 16% per annum on
diminishing balance method.
Prepare Branch Account in the books of head office for the year ended 31st March, 2021.
Question 6 (ICAI Study Material) Pg no._____
Buckingham Bros, Bombay have a branch at Nagpur. They send goods at cost to their
branch at Nagpur. However, direct purchases are also made by the branch for which
payments are made at head office. All the daily collections are transferred from the
branch to the head office. From the following, prepare Nagpur branch account in the
books of head office by Debtors method & prepare Branch Trading and P&L Account in
the books of Head Office.
₹ ₹
Opening balance (1-1-2021) Bad Debts 1,000
Imprest Cash 2,000 Discount to Customers 2,000
Sundry Debtors 25,000 Remittances to H.O. 1,65,000
Stock: Transferred from H.O. 24,000 (recd. By HO)
Direct Purchases 16,000
Cash Sales 45,000 Remittances to H.O.
(not recd. by H.O. so far) 5,000
Credit Sales 1,30,000 Branch Exp. directly paid by HO 30,000
Direct Purchases 45,000 Closing Balance (31-12-2021)
Returns from Customers 3,000 Stock: Direct Purchase 10,000
Goods sent to branch from H.O 60,000 Transfer from H.O 15,000
Transfer from H.O. for Petty 4,000 Debtors ?
Cash Exp. Imprest Cash ?
Petty cash expenses 4,000

Question 7 (ICAI Study Material) Pg no._____

Sell Well who carried on a retail business opened a branch X on January 1st, 2021 where
all sales were on credit basis. All goods required by the branch were supplied from the
Head Office and were invoiced to the branch at 10% above cost. The following were the
transactions:

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Jan 2021 Feb 2021 March 2021

Goods sent to Branch (Purchase Price) 40,000 50,000 60,000
Sales as shown by the branch monthly report 38,000 42,000 55,000
Cash received from Debtors and remitted to H.O. 20,000 51,000 35,000
Returns to H.O. (Invoice price to Branch) 1,200 600 2,400
The stock of goods held by the branch on March 31, 2021 amounted to ₹ 53,400 at invoice
to branch. Record these transactions in the Head Office books, showing balances as on
31st March, 2021 and the branch gross profit for the three months ended on that date.

Question 8 (ICAI Study Material) Pg no._____

Arnold of Delhi, trades in Ghee and Oil. It has a branch at Lucknow. He dispatches 25
tins of Oil @ ₹ 1,000 per tin and 15 tins of Ghee @ ₹ 1,500 per tin on 1st of every month.
The branch incurs some expenditure which is met out of its collections; this is in addition
to expenditure directly paid by Head Office. Following are the other details:
Delhi Lucknow
₹ ₹
Purchases Ghee 14,75,000 -
Oil 29,32,000 -
Direct expenses 3,83,275 -
Expenses paid by H.O. - 14,250
Sales Ghee 18,46,350 3,42,750
Oil 27,41,250 3,15,730
Collection during the year (including Cash Sales) - 6,47,330
Remittance by Branch to Head Office - 6,13,250

(Delhi)
Balance as on: 01-01-2021 31-12-2021
Stock : Ghee 1,50,000 3,12,500
: Oil 3,50,000 4,17,250
Debtors 7,32,750 -
Cash on Hand 70,520 55,250
Furniture & Fittings 21,500 19,350
Plant/Machinery 3,07,250 7,73,500

(Lucknow)
Balance as on: 01-01-2021 31-12-2021
Stock : Ghee 17,000 13,250
: Oil 27,000 44,750
Debtors 75,750 -
Cash on Hand 7,540 12,350
Furniture & Fittings 6,250 5,625
Plant/Machinery -
Addition to Plant/Machinery on 1-1-2021 ₹ 6,02,750.
Rate of Depreciation: Furniture / Fittings @ 10% and Plant / Machinery @ 15% (already
adjusted in the above figures).
The Branch Manager is entitled to 10% commission after charging such commission
whereas, the General Manager is entitled to 10% commission on overall company profits
after charging such commission. General Manager is also entitled to a salary of ₹ 2,000
p.m. General expenses incurred by H.O. ₹ 24,000.

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Prepare Branch Account in the head office books and also prepare the Arnold’s Trading
and Profit and Loss A/c (excluding branch transactions)

Question 9 (RTP May 2018 / RTP May 2021) Pg no._____

Alpha Ltd. has a retail shop under the supervision of a manager. The ratio of gross profit
to selling price is constant at 25 per cent throughout the year to 31st March, 2021. Branch
manager is entitled to a commission of 10 per cent of the profit earned by his branch,
calculated before charging his commission but subject to a deduction from such
commission equal in 25 per cent of any ascertained deficiency of branch stock. All goods
were supplied to the branch in head office. From the under mentioned figures, calculate
the commission due to manager for the year end 31st March, 2021.
₹ ₹
Opening Stock (at cost) 74,736 Chargeable expenses 49,120
Goods sent to branch (at 2,89,680 Closing Stock (Selling 1,23,328
cost) Price)
Sales 3,61,280
Manager’s commission paid 2,400
on account

TOPIC 2: DEPENDENT BRANCH: STOCK & DEBTORS METHOD

Question 10 (ICAI Study Material) Pg no._____
Hindustan Industries Mumbai has a branch in Cochin to which office goods are invoiced
at cost plus 25%. The branch sells both for cash and on credit. Branch Expenses are paid
direct from head office, and the Branch has to remit all cash received into the Head Office
Bank Account. Following details relates to calendar year 2021. Branch does not maintain
any books of account, but sends weekly returns to the Head Office:
₹
Goods received from Head Office at invoice price 6,00,000
Returns to Head Office at invoice price 12,000
Stock at Cochin as on 1st Jan., 2021 60,000
Sales in the year – Cash 2,00,000
– Credit 3,60,000
Sundry Debtors at Cochin as on 1st Jan. 2021 72,000
Cash received from Debtors 3,20,000
Discount allowed to Debtors 6,000
Bad debts in the year 4,000
Sales returns at Cochin Branch 8,000
Rent, Rates, Taxes at Branch 18,000
Salaries, Wages, Bonus at Branch 60,000
Office Expenses 6,000
Stock at Branch on 31st Dec. 2021 at invoice price 1,20,000
Prepare Branch accounts in the books of Head Office by Stock & Debtors method.

Question 11 Pg no._____
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, 2021:

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₹
Goods sent to Branch (Invoice price) 4,80,000
Stock at Branch on 1.4.2020 (Invoice price) 24,000
Cash sales 1,80,000
Return of goods by customers to the Branch 6,000
Branch expenses (paid in cash) 53,500
Branch debtors balance on 1.4.2020 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 31.3.2021 (Invoice price) 48,000
Branch debtors balance on 31.3.2021 36,500
Prepare, under Stock & Debtors system, the following Ledger Accounts in the books of
the Head Office:
(i) Nagpur Branch Stock Account
(ii) Nagpur Branch Debtors Account
(iii) Nagpur Branch Adjustment Account.
Also compute shortage of Stock at Branch, if any
Pg no._____
Question 12
Yuvraj Singh, a cloth trader of Kolkata opened a Branch at Kanpur on 1–4–2020. The goods
were sent by Head Office to the Branch and invoiced at selling price to the Branch, which
is 125% of the cost price of Head Office.
The following are the particulars relating to the transactions of the Kanpur Branch
₹ ₹
Goods sent to Branch (at cost to H.O.) 4,50,000
Sales—Cash 2,10,000
—Credit 3,20,000
Cash collected from Debtors 2,85,000
Return from Debtors 10,000
Discount Allowed 8,500
Cash sent to Branch for Freight 30,000
for Salaries 8,000
for other expenses 12,000 50,000
Spoiled clothes written off at invoice price 10,000
Normal loss estimated at 15,000
Prepare Branch Stock Account, Branch Debtors Account and Branch Adjustment Account
showing the net profit of the Branch.

Question 13 (ICAI Study Material) Pg no._____

Harrison of Chennai has a branch at New Delhi to which goods are sent @ 20% above
cost. The branch makes both cash and credit sales. Branch expenses are met partly from
H.O. and partly by the branch. The statement of expenses incurred by the branch every
month is sent to head office for recording. Following further details are given for the year
ended 31st December, 2021:
₹
Cost of goods sent to Branch at cost 2,00,000
Goods received by Branch till 31-12-2021 at invoice price 2,20,000

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Credit Sales for the year @ invoice price 1,65,000

Cash Sales for the year @ invoice price 59,000
Cash Remitted to head office 2,22,500
Expenses paid by H.O. 12,000
Bad Debts written off 750

Balances as on 01-01-2021 31-12-2021

₹ ₹
Stock 25,000 (Cost) 28,000 (Invoice Price)
Debtors 32,750 26,000
Cash in Hand 5,000 2,500
Show necessary ledger accounts in the books of head office and determine the Profit and
Loss of the Branch for the year ended 31st December, 2021 by Stock & Debtors method.

Question 14 Pg no._____
Red and White of Mumbai started a branch at Bangalore on 1.4.2020 to which goods were
sent at 20% above cost. The branch makes both cash sales and credit sales. Branch
expenses are met from branch cash and balance money remitted to H.O. The branch
does not maintain double entry books of account and necessary accounts relating to
branch are maintained in H.O. Following further details are given for the year ending on
31.3.2021:
₹
Cost of goods sent to branch 1,00,000
Goods received by branch till 31.3.2021 at Invoice price 1,08,000
Credit sales for the year 1,16,000
Closing debtors on 31.3.2021 41,600
Bad debts written off during the year 400
Cash remitted to H.O. 86,000
Closing cash on hand at branch on 31.3.2021 4,000
Cash remitted by H.O. to branch during the year 6,000
Closing stock in hand at branch at invoice price 12,000
Expenses incurred at branch 24,000
Draw up the necessary Ledger Accounts like Branch Debtors Account, Branch Stock
Account, Goods sent to Branch Account, Branch Cash Account, Branch Expenses Account
and Branch Adjustment A/c for ascertaining gross profit and Branch Profit and Loss A/c
for ascertaining Branch profit.

Question 15 (Inter Nov 2022) (10 Marks) Pg no._____

Modern Stores of Delhi operates a branch at Nagpur. The Head office affects all
purchases and the branch is charged at cost plus 60%. All the cash received by Nagpur
Branch is remitted to Delhi. The Branch expenses are met by the Branch out of an Imprest
Account which is reimbursed by the Delhi Head Office every month. The Branch maintains
a Sales Ledger and certain essential subsidiary records, but otherwise all branch
transactions are recorded at Delhi.
The following branch transactions took place during the year ended 31st March, 2022:
₹
Goods received from Delhi at Selling Price 1,50,000
Cash Sales 69,000
Goods returned to Delhi at Selling Price 3,000

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Credit Sales (Net of returns) 63,000

Authorized Reduction in Selling Price of Goods Sold 1,500
Cash Received from Debtors 48,000
Debtors written off as irrecoverable 2,000
Cash Discount allowed to Debtors 1,500
i. On 1st April, 2021 the Stock in trade at the Branch at Selling Price amounted to ₹ 60,000
and the Debtors were ₹ 40,000.
ii. A consignment of goods sent to the Branch on 27th March,2022 with a Selling Price of
₹ 1,800 was not received until 5th April,2022 and had not been accounted for in stock.
iii. The Closing Stock at Selling Price was ₹ 72,900.
iv. The expenses relating to the Branch for the year ended 31st March,2022 amounted to ₹
18,000
You are required to prepare the Branch Stock Account, Branch Debtors Account, Branch
Adjustment Account and Branch Profit and Loss Account maintained at Delhi under Stock
and Debtors method. Any stock unaccounted for is to be regarded as normal wastage.

TOPIC 3: DEPENDENT BRANCH: WHOLESALE PRICE METHOD

Question 16 (ICAI Study Material) Pg no._____

Beta, having head office at Mumbai has a branch at Nagpur. The head office does
wholesale trade only at cost plus 80%. The goods are sent to branch at the wholesale
price viz., cost plus 80%. The branch at Nagpur is wholly engaged in retail trade and the
goods are sold at cost to H.O. plus 100%.
Following details are furnished for the year ended 31st March, 2021:
Head Office (₹) Branch (₹)
Opening stock (as on 1.4.2020) 2,25,000 -
Purchases 25,50,000 -
Goods sent to branch (Cost to 9,54,000 -
H.O. plus 80%)
Sales 27,81,000 9,50,000
Office expenses 90,000 8,500
Selling expenses 72,000 6,300
Staff salary 65,000 12,000
You are required to prepare Trading and Profit and Loss Account of the head office and
branch for the year ended 31st March, 2021.

Question 17 Pg no._____
Jhaveri Sons have their Head Office at Calcutta and a branch at Agra. The goods are sent
to Branch at 20% less than the list price which is cost plus 100%
From the following particulars ascertain the profit made by the branch as well as the
Head Office on wholesale basis:
Head Office (₹) Branch (₹)
Opening Stock (Cost/Invoice Price) 40,000 20,000
Purchases 4,00,000 -
Expenses 60,000 12,000
Goods destroyed by accident at invoice price - 2,000
Sales at list Price 3,40,000 1,60,000
Goods sent to branch at invoice price 1,60,000 1,60,000

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Question 18 (ICAI Study Material) Pg no._____

M/s Rahul operates a number of retail outlets to which goods are invoiced at wholesale
price which is cost plus 25%. These outlets sell the goods at the retail price which is
wholesale price plus 20%.
Following is the information regarding one of the outlets for the year ended 31.3.2021:
₹
Stock at the outlet 1.4.20 30,000
Goods invoiced to the outlet during the year 3,24,000
Gross profit made by the outlet 60,000
Goods lost by fire ?
Expenses of the outlet for the year 20,000
Stock at the outlet 31.3.21 36,000
Prepare following accounts in the books of Rahul Limited for the year ended 31.3.21
(a) Outlet Stock Account.
(b) Outlet Profit & Loss Account.
(c) Stock Reserve Account

TOPIC 4: INDEPENDENT BRANCH

Question 19 (ICAI Study Material) Pg no._____

Goods worth ₹ 50,000 sent by head office but branch has received till closing date goods
for worth ₹ 40,000 only. Pass journal entry in books of H.O. & branch for goods in transit.

Question 20 (ICAI Study Material) Pg no._____

Give Journal Entries in the books of Branch A to rectify or adjust the following:
(i) Head Office expenses ₹ 3,500 allocated to the Branch, but not recorded in the Branch
Books.
(ii) Depreciation of branch assets, whose accounts are kept by the Head Office not
provided earlier for ₹ 1,500.
(iii) Branch paid ₹ 2,000 as salary to a H.O. Inspector, but the amount paid has been
debited by the Branch to Salaries account.
(iv) H.O. collected ₹ 10,000 directly from a customer on behalf of the Branch, but no
intimation to this effect has been received by the Branch.
(v) A remittance of ₹ 15,000 sent by the Branch has not yet been received by the Head
Office.
(vi) Branch A incurred advertisement expenses of ₹ 3,000 on behalf of Branch B.

Question 21 Pg no._____
Show what journal entries would be passed by the Jaipur Head Office to record the
following transactions in their Books on 31st March, 2021, the closing date:
(a) A remittance of ₹ 35,000 made by Sikar Branch to Head Office on 29thMarch, 2021 and
received by the Head Office on 5th April, 2021.
(b) Goods of ₹ 63,000 sent by the Head Office to the Bikaner Branch on 28th March, 2021
and received by the later on 4th April, 2021.
(c) Sikar Branch paid ₹ 30,000 as salary to a visiting Head Office Official.

Question 22 (ICAI Study Material) Pg no._____

Pass necessary Journal entries in the books of an independent Branch of a Company,
wherever required, to rectify or adjust the following:

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(i) Income of ₹2,800 allocated to Branch by HeadOffice but not recorded in Branch books
(ii) Branch paid ₹ 3,000 as salary to a Head Office Manager, but the amount paid has
been debited by the Branch to Salaries Account.
(iii) Branch incurred travelling expenses of ₹ 5,000 on behalf of other Branches, but not
recorded in the books of Branch.
(iv) A remittance of ₹ 1,50,000 sent by the Branch has not received by Head Office on the
date of reconciliation of Accounts.
(v) Head Office allocates ₹ 75,000 to the Branch as Head Office expenses, which has not
yet been recorded by the Branch.
(vi) Head Office collected ₹ 30,000 directly from a Branch Customer. The intimation of the
fact has been received by the Branch only now.
(vii) Goods dispatched by the Head office amounting to ₹ 10,000, but not received by the
Branch till date of reconciliation. The Goods have been received subsequently.

Question 23 (ICAI Study Material) Pg no._____

Show adjustment Journal entry in the books of Head Office at the end of April, 2021 for
incorporation of inter-branch transactions assuming that only Head Office maintains
different branch a/cs in its books.
A. Delhi Branch:
(1) Received goods from Mumbai – ₹ 35,000 and ₹ 15,000 from Kolkata.
(2) Sent goods to Chennai – ₹ 25,000, Kolkata – ₹ 20,000.
(3) Bill Receivable received – ₹ 20,000 from Chennai.
(4) Acceptances sent to Mumbai – ₹ 25,000, Kolkata – ₹ 10,000.
B. Mumbai Branch (apart from the above):
(5) Received goods from Kolkata – ₹ 15,000, Delhi – ₹ 20,000.
(6) Cash sent to Delhi – ₹ 15,000, Kolkata – ₹ 7,000.
C. Chennai Branch (apart from the above):
(7) Received goods from Kolkata – ₹ 30,000.
(8) Acceptances and Cash sent to Kolkata – ₹ 20,000 and ₹10,000 respectively.
D. Kolkata Branch (apart from the above):
(9) Sent goods to Chennai – ₹ 35,000.
(10) Paid cash to Chennai – ₹15,000.
(11) Acceptances sent to Chennai – ₹15,000.

Question 24 Pg no._____
L Ltd. has its head office at Mumbai and two branches at Pune and Goa. The branches
purchase goods independently. The Pune branch makes a profit of 33-1/3% on cost which
the Goa branch makes a profit of 20% on sales. Goods are also supplied by one branch to
another at the respective sales price. From the following particulars, prepare the Trading
and Profit and Loss Account of each of the branches and find out the profit or loss made
by each of them after taking into account the reserve for unrealised profits:
Particulars Pune Branch Goa Branch
Opening Stock 40,000 30,000
Purchases (Including Inter Branch transfers) 2,00,000 2,50,000
Sales 2,80,000 2,95,625
Chargeable Expenses 15,000 27,500
Closing Stock 30,000 43,500
Office and Adm. Expenses 13,250 7,000
Selling and Distribution Expenses 15,000 10,000

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Information:
a. Opening stock at Pune Branch includes goods of ₹ 10,000 taken from Goa Branch,
b. Opening stock at Goa Branch includes goods of ₹ 17,000 taken from Pune Branch at
cost to receiving branch,
c. The Pune Branch sales includes transfer of goods to Goa Branch at selling price ₹
20,000
d. The sales of Goa Branch include transfer of goods to Pune Branch at selling price ₹
15,000.
e. Closing stock at Pune Branch includes goods received from Goa Branch ₹ 5,000.
f. Closing stock at Goa Branch includes goods of ₹ 4,000 received from Pune Branch.

Question 25 (ICAI Study Material) Pg no._____

KP manufactures a range of goods which it sells to wholesale customers only from its
head office. In addition, the H.O. transfers goods to a newly opened branch at factory cost
plus 15%. The branch then sells these goods to the general public on only cash basis.
The selling price to wholesale customers is designed to give a factory profit which
amounts to 30% of the sales value. The selling price to the general public is designed to
give a gross margin (i.e., selling price less cost of goods from H.O.) of 30% of the sales
value.
KP operates from rented premises and leases all other types of fixed assets. The rent
and hire charges for these are included in the overhead costs shown in the trial balances.
From the information given below, you are required to prepare for the year ended 31st
Dec., 2021 in columnar form.
(a) A Profit & Loss account for (i) H.O. (ii) the branch (iii) the entire business.
(b) Balance Sheet as on 31st Dec., 2021 for the entire business
H.O. Branch
₹ ₹ ₹ ₹
Raw materials purchased 35,000
Direct wages 1,08,500
Factory overheads 39,000
Stock on 1-1-2021
Raw materials 1,800
Finished goods 13,000 9,200
Debtors 37,000
Cash 22,000 1,000
Administrative Salaries 13,900 4,000
Salesmen’s Salaries 22,500 6,200
Other administrative & 12,500 2,300
selling overheads
Inter-unit accounts 5,000 2,000
Capital 50,000
Sundry Creditors 13,000
Provision for unrealized profit 1,200
in stock
Sales 2,00,000 65,200
Goods sent to Branch 46,000
Goods received from H.O. 44,500
3,10,200 3,10,200 67,200 67,200

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(1) On 28th Dec., 2021 the branch remitted ₹ 1,500 to the H.O. and this has not yet been
recorded in the H.O. books. Also on the same date, the H.O. dispatched goods to the
branch invoiced at ₹ 1,500 and these too have not yet been entered into the branch
books. It is the company’s policy to adjust items in transit in the books of the recipient.
(2) The stock of raw materials held at the H.O. on 31st Dec., 2021 was valued at ₹ 2,300.
(3) You are advised that:
a. there were no stock losses incurred at the H.O. or at the branch.
b. it is KP’s practice to value finished goods stock at the H.O. at factory cost.
c. there were no opening or closing stock of work-in-progress.
(4) Branch employees are entitled to a bonus of ₹ 156 under a bilateral agreement.

Question 26 (ICAI Study Material) Pg no._____

The following Trial balances as at 31st December, 2021 have been extracted from the
books of Major & Co. and its branch at a stage where the only adjustments requiring to
be made prior to the preparation of a Balance Sheet for the undertaking as a whole.
Head Office Branch
Dr. Cr. Dr. Cr.
Capital 1,50,000
Fixed Assets 75,125 18,901
Current Assets 1,21,809 23,715 (Note 3)
Current Liabilities 34,567 9,721
Stock Reserve, 1st 693
Jan., 2021 (Note 2)
Revenue Account 43,210 10,250
Branch Account 31,536
Head Office Account 22,645
2,28,470 2,28,470 42,616 42,616
1. Goods transferred from Head Office to the Branch are invoiced at cost plus 10% and
both Revenue Accounts have been prepared on the basis of the prices charged.
2. Relating to the Head Office goods held by the Branch on 1st January, 2021.
3. Includes goods received from Head Office at invoice price ₹ 4,565.
4. Goods invoiced by Head Office to Branch at ₹ 3,641 were in transit at 31st December,
2021, as was also a remittance of ₹ 3,500 from the Branch.
5. At 31st December, 2021, the following transactions were reflected in the Head Office
books but unrecorded in the Branch books.
The purchase price of lorry, ₹ 2,500, which reached the Branch on December 25th; a sum
received on December 30, 2021 from one of the Branch debtors, ₹ 750.
You are required:
(i) to record the foregoing in the appropriate ledger accounts in both sets of books;
(ii) to prepare a Balance Sheet as at 31st December, 2021 for the undertaking as a whole.

Question 27 (ICAI Study Material) Pg no._____

Ring Bell Ltd. Delhi has a Branch at Bombay where a separate set of books is used. The
following is the trial balance extracted on 31st December, 2021.
Head Office Trial Balance
₹ ₹
Share Capital
(Authorised: 10,000 Equity Shares of ₹ 100 each):
Issued: 8,000 Equity Shares 8,00,000

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Profit & Loss Account - 1-1-2021 25,310

General Reserve 1,00,000
Fixed Assets 5,30,000
Stock 2,22,470
Debtors and Creditors 50,500 21,900
Profit for 2021 52,200
Cash Balance 62,730
Branch Current Account 1,33,710
9,99,410 9,99,410
Branch Trial Balance
₹ ₹
Fixed Assets 95,000
Profit for 2021 31,700
Stock 50,460
Debtors and Creditors 19,100 10,400
Cash Balance 6,550
Head Office Current Account 1,29,010
1,71,110 1,71,110
The difference between the balances of Current Account in two sets of books is accounted
for as follows:
Cash remitted by the Branch on 31st December, 2021, but received by the Head Office on
1st January 2022 - ₹ 3,000.
Stock stolen in transit from Head Office and charged to Branch by the Head Office, but
not credited to Head Office in the Branch books as the Branch Manager declined to admit
any liability (not covered by insurance) - ₹ 1,700.
Give the Branch Current Account in Head Office books after incorporating Branch Trial
Balance through journal.

Question 28 (RTP May 2020 / ICAI Study Material) Pg no._____

On 31st March, 2021 Kanpur Branch submits the following Trial Balance to its Head Office
at Lucknow
₹ In Lacs
Debit Balances
Furniture and Equipment 18
Depreciation on furniture 2
Salaries 25
Rent 10
Advertising 6
Telephone, Postage and Stationery 3
Sundry Office Expenses 1
Stock on 1st April, 2020 60
Goods Received from Head Office 288
Debtors 20
Cash at bank and in hand 8
Carriage Inwards 7
448
Credit Balances
Outstanding Expenses 3
Goods Returned to Head Office 5

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Sales 360
Head Office 80
448
Additional Information:
Stock on 31st March, 2021 was valued at ₹ 62 lacs. On 29th March, 2021 the Head Office
dispatched goods costing ₹ 10 lacs to its branch. Branch did not receive these goods
before 1st April, 2021. Hence, the figure of goods received from Head Office does not
include these goods. Also the head office has charged the branch ₹ 1 lac for centralised
services for which the branch has not passed the entry.
You are required to:
(i) Pass Journal Entries in the books of the Branch to make the necessary adjustments
(ii) Prepare Final Accounts of the Branch including Balance Sheet, and
(iii) Pass Journal Entries in the books of Head Office to incorporate whole of the Branch
Trial Balance

Question 29 (ICAI Study Material) Pg no._____

AFFIX of Kolkata has a branch at Delhi to which the goods are supplied from Kolkata but
cost thereof is not recorded in the Head Office books. On 31st March, 2021 Branch Balance
Sheet was as follows:
Liabilities ₹ Assets ₹
Creditors Balance 40,000 Debtors Balance 2,00,000
Head Office 1,68,000 Building Extension A/c closed
by transfer to H.O. A/c -
Cash at Bank 8,000
2,08,000 2,08,000
During the six months ending on 30-9-2021, the following transactions took place at Delhi.
₹ ₹
Sales 2,40,000 Manager’s Salary 4,800
Purchases 48,000 Collections from Debtors 1,60,000
Wages paid 20,000 Discounts allowed 8,000
Salaries (inclusive of advance 6,400 Building Account (further 4,000
of ₹ 2,000) payment)
General Expenses 1,600 Discount earned 1,200
Fire Insurance (paid for 1 year) 3,200 Cash paid to Creditors 60,000
Remittance to H.O. 38,400 Cash in Hand 1,600
Cash at Bank 28,000
Set out the Head Office Account in Delhi books and the Branch Balance Sheet as on 30-
9-2021. Also give journal entries in the Delhi books.

Question 30 (ICAI Study Material) Pg no._____

Messrs Ramchand & Co., Hyderabad have a branch in Delhi. The Delhi Branch deals not
only in the goods from Head Office but also buys some auxiliary goods and deals in them.
They, however, do not prepare any Profit & Loss Account but close all accounts to the
Head Office at the end of the year and open them afresh on the basis of advice from their
Head Office. The fixed assets accounts are also maintained at the Head Office.
The goods from the Head Office are invoiced at selling prices to give a profit of 20 per
cent on the sale price. The goods sent from the branch to Head Office are at cost. From
the following prepare Branch Trading and Profit & Loss Account and Branch Assets
Account in the Head Office Books.

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 CA NITIN GOEL BRANCH ACCOUNTING

Trial Balance of the Delhi Branch as on 31-12-2021

Debit ₹ Credit ₹
Head office opening balance on 15,000 Sales 1,00,000
1-1-21
Goods from H.O. 50,000 Goods to H.O. 3,000
Purchases 20,000 Head Office Current A/c 15,000
Opening Stock Sundry Creditors 3,000
(H.O. goods at invoice prices) 4,000
Opening Stock of other goods 500
Salaries 7,000
Rent 3,000
Office expenditure 2,000
Cash on Hand 500
Cash at Bank 4,000
Sundry Debtors 15,000
1,21,000 1,21,000
The Branch balances as on 1st January, 2021, were as under: Furniture ₹ 5,000; Sundry
Debtors ₹ 9,500; Cash ₹ 1,000, Creditors ₹ 30,000. The closing stock at branch of the head
office goods at invoice price is ₹ 3,000 and that of purchased goods at cost is ₹ 1,000.
Depreciation is to be provided at 10 per cent on branch assets

TOPIC 5: FOREIGN BRANCH

Question 31 Pg no._____
ABC Ltd. has head office at Delhi (India) and branch at New York (U.S.A). New York branch
is an integral foreign operation of ABC Ltd. New York branch furnishes you with its trial
balance as on 31st March, 2021 and the additional information given thereafter:
Dr. ($) Cr. ($)
Stock on 1st April, 2020 150
Purchases and sales 400 750
Sundry Debtors and creditors 200 150
Bills of exchange 60 120
Sundry expenses 540
Bank balance 210
Delhi head office A/c 540
1,560 1,560
The rates of exchange may be taken as follows:
➢ on 1.4.2020 @ ₹ 40 per US $
➢ on 31.3.2021 @ ₹ 42 per US $
➢ average exchange rate for the year @ ₹ 41 per US $.
New York branch account showed a debit balance of ₹ 22,190 on 31.3.2021 in Delhi books
and there were no items pending reconciliation.
You are asked to prepare trial balance of New York branch in ₹ in the books of ABC Ltd.

Question 32 (ICAI Study Material) Pg no._____

A business having the Head Office in Kolkata has a branch in UK. The following is the
trial balance of Head Office and Branch as at 31.03.2022:

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Account Name Dr. Cr.

Fixed Assets (Purchased on 01.04.2019) 5,000
Debtors 1,600
Opening Stock 400
Goods received from Head Office Account 6,100
(Recorded in HO books as ₹ 4,02,000)
Sales 20,000
Purchases 10,000
Wages 1,000
Salaries 1,200
Cash 3,200
Remittances to Head Office (Recorded in HO books as ₹ 2,900
1,91,000)
Head Office Account (Recorded in HO books as ₹ 4,90,000) 7,400
Creditors 4,000
• Closing stock at branch is £ 700 on 31.03.2022.
• Depreciation @ 10% p.a. is to be charged on fixed assets.
• Prepare the trial balance after been converted in Indian Rupees.
• Exchange rates of Pounds on different dates are as follow:
01.04.2019– ₹ 61; 01.04.2021– ₹ 63 31.03.2022 – ₹ 67

Question 33 Pg no._____
DM Delhi has a branch in London which is an integral foreign operation of DM. At the end
of year 31st March, 2021, the branch furnishes the following trial balance in U.K. Pound:
Dr. (Pound) Cr. (Pound)
Fixed assets (Acquired on 1st April, 2017) 24,000
Stock as on 1st April, 2020 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
₹ ₹
To Balance b/d 20,10,000 By Bank 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 are given:
(a) Fixed assets are to be depreciated @ 10% p.a.
(b) On 31st March, 2021 :
a. Expenses outstanding - £ 400
b. Prepaid expenses - £ 200
c. Closing stock - £ 8,000

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(c) Rate of Exchange :

a. 1st April, 2017 - ₹ 70 to £ 1
b. 1st April, 2020 - ₹ 76 to £ 1
c. 31st March, 2021 - ₹ 77 to £ 1
d. Average - ₹ 75 to £ 1
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, 2021 and the
Balance Sheet as on that date of London branch as would appear in the books of Delhi
head office of DM.

Question 34 Pg no._____
Moon Star has a branch at Verginia (USA). The Branch is a non-integral foreign operation
of the Moon Star. The trial balance of the Branch as at 31st March, 2021 is as follows:
Particulars Dr. (US $) Cr. (US $)
Office equipments 48,000
Furniture and Fixtures 3,200
Stock (April 1, 2020) 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, 2021 -$21,500.
(6) There were no transit items either at the start or at the end of the year.
(7) On April 1, 2019 when the fixed assets were purchased the rate of exchange was ₹ 43
to one $. On April 1, 2020, the rate was 47 per $. On March 31, 2021 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, 2021 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

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Question 35 (RTP May 2023) Pg no._____

PQR has a branch at Houston (USA). Business of the Branch is carried out substantially
independent by way of accumulating cash and other monetary items, incurring expenses,
generating income and arranging borrowing in its local currency. The trial balance of the
Branch as at 31st March, 2021 is as follows:
Particulars Dr. (US $) Cr. (US $)
Office equipment (Cost) 56,400
Opening Accumulated Depreciation 5,400
(Office equipment)
Furniture and Fixtures (Cost) 36,000
Opening Accumulated Depreciation 6,840
(Furniture and Fixtures)
Opening Stock as on 1st April, 2020 24,500
Purchases 96,500
Sales 1,76,250
Salaries 4,250
Carriage Inward 256
Rent, Rates & Taxes 956
Sundry debtors 12,560
Sundry creditors 8,650
Cash at bank 2,540
Cash in Hand 500
Head office Account 37,322
2,34,462 2,34,462
Following further information are given:
(i) Salaries outstanding as on 31st March, 2021 is US$ 600.
(ii) Depreciate office equipment and furniture & fixtures @ 10% at written down value.
(iii) Closing stock as on 31st March, 2021 is US $, 24,650.
(iv) You are informed that the Head office is showing receivable from the Branch as ₹
23,75,614 as on 31st March, 2021. No transaction in respect of the Branch is pending
in Head office.
(v) Office equipment (cost) includes one office equipment of US $ 2,400 purchased on
1/04/2020.
(vi) One furniture of carrying value of US $ 450 as on 01/04/2020 (cost: US $ 500 and
Accumulated depreciation: US $ 50) has been sold for US $ 405 on 31/03/2021 to Mr.
M at no profit no loss. Mr. M has not paid the amount till the finalization of branch
account. No entry has been passed for this sale of furniture in the above trial balance.

The rate of exchange on different dates are:

Date 1 US $ is equivalent to
1st April, 2020 64
31st December, 2020 70
31st March, 2021 75
Average for the year 72
You are required to prepare the trial Balance after incorporating adjustments given and
converting US $ into rupees.

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Question 36 (ICAI Study Material) Pg no._____

On 31st December, 2021 the following balances appeared in the books of Chennai Branch
of an English firm having its HO office in New York:
Amount (In ₹) Amount (In ₹)
Stock on 1st Jan., 2021 2,34,000
Purchases and Sales 15,62,500 23,43,750
Debtors and Creditors 7,65,000 5,10,000
Bills Receivable and Payable 2,04,000 1,78,500
Salaries and Wages 1,00,000 -
Rent, Rates and Taxes 1,06,250 -
Furniture 91,000 -
Bank A/c 5,68,650 -
New York Account - 5,99,150
36,31,400 36,31,400
Stock on 31st December, 2021 was ₹ 6,37,500.
Branch account in New York books showed a debit balance of $ 13,400 on 31st December,
2021 and Furniture appeared in the Head Office books at $ 1,750.
The rate of exchange for 1 $ on 31st December, 2020 was ₹ 52 and on 31st December, 2021
was ₹ 51. The average rate for the year was ₹ 50.
Prepare in the Head Office books the Profit and Loss a/c and the Balance Sheet of the
Branch assuming integral foreign operation.

Question 37 (ICAI Study Material) Pg no._____

M/s Carlin has head office at New York (U.S.A.) and branch at Mumbai (India). Mumbai
branch is an integral foreign operation of Carlin & Co.
Mumbai branch furnishes you with its trial balance as on 31st March, 2021 and the
additional information given thereafter:
Dr. Cr.
Rupees in thousands
Stock on 1st April, 2020 300 -
Purchases and sales 800 1,200
Sundry Debtors and creditors 400 300
Bills of exchange 120 240
Wages and salaries 560 -
Rent, rates and taxes 360 -
Sundry charges 160 -
Computers 240 -
Bank balance 420 -
New York office a/c - 1,620
3,360 3,360
Additional information:
(a) Computers were acquired from a remittance of US $ 6,000 received from New York
head office and paid to the suppliers. Depreciate Computers at 60% for the year.
(b) Unsold stock of Mumbai branch was worth ₹ 4,20,000 on 31st March, 2021.
(c) The rates of exchange may be taken as follows:
a. on 1.4.2020 @ ₹ 40 per US $
b. on 31.3.2021 @ ₹ 42 per US $
c. Average exchange rate for the year @ ₹ 41 per US $

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d. Conversion in $ shall be made upto two decimal accuracy.

You are asked to prepare in US dollars the revenue statement for the year ended 31st
March, 2021 and the balance sheet as on that date of Mumbai branch as would appear in
the books of New York head office of Carlin & Co.
You are informed that Mumbai branch account showed a debit balance of US $ 39609.18
on 31.3.2021 in New York books and there were no items pending reconciliation.

Question 38 Pg no._____
ABCD Ltd., Delhi has a branch in New York, USA, which is an integral foreign operation
of the company. At the end of 31st March, 2021, the following ledger balances have been
extracted from the books of the Delhi office and the New York Branch:
Particulars Delhi (₹ ‘000) New York ($ ‘000)
Debit Credit Debit Credit
Share Capital 1,250
Reserves and Surplus 940
Land 475
Building (cost) 1,000
Buildings Depreciation Reserve 200
Plant & Machinery (cost) 2,000 100
Plant & Mach. Depreciation Reserve 500 20
Trade receivables/payables 500 270 60 20
Stock (01-04-2020) 250 25
Branch Stock Reserve 65
Cash & Bank Balances 125 4
Purchases/Sales 275 600 25 125
Goods sent to Branch 1,500 30
Managing Director’s salary 50
Wages & Salaries 100 18
Rent 6
Office Expenses 25 12
Commission receipts 275 100
Branch/H.O. Current A/c 800 15
Total 5,600 5,600 280 280

The following information is also available:

(1) Stock as at 31-03-2021
a. Delhi - ₹ 2,00,000
b. New York - $ 10 (all stock received from Delhi)
(2) Head Office always sent goods to the Branch at cost plus 25%.
(3) Provision is to be made for doubtful debts at 5%.
(4) Depreciation is to be provided on Buildings at 10% and on Plant and Machinery at 20%
on written down values.

You are required:

(a) To convert the branch Trial Balance into rupees, using following rates of exchange:
Opening rate 1 $ = ₹ 50 Closing rate 1 $ = ₹ 55
Average rate 1 $ = ₹ 52 For Fixed assets 1 $ = ₹ 45
(b) To prepare the Trading and Profit & Loss Account for the year ended 31st March,
2021, showing to the extent possible, Head Office and Branch results separately

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Question 39 (ICAI Study Material) Pg no._____

Washington branch of XYZ Mumbai sent following trial balance as on 31st December, 2021:
$ $
Head office A/c - 22,800
Sales - 84,000
Debtors and creditors 4,800 3,400
Machinery 24,000 -
Cash at bank 1,200 -
Stock, 1 January, 2021 11,200 -
Goods from H.O. 64,000
Expenses 5,000 -
1,10,200 1,10,200
In the books of head office, the Branch A/c stood as follows:
Washington Branch A/c
₹ ₹
To Balance b/d 8,10,000 By Cash 28,76,000
To Goods sent to branch 29,26,000 By Balance c/d 8,60,000
37,36,000 37,36,000
Goods are sent to branch at cost plus 10% & branch sells goods at invoice price plus 25%.
Machinery was acquired on 31st Jan., 2017, when $ 1.00 = ₹ 40. Rates of exchange were:
1st January, 2021 $ 1.00 = ₹ 46
31st December, 2021 $ 1.00 = ₹ 48
Average $ 1.00 = ₹ 47
Machinery is depreciated @ 10% and the branch manager is entitled to a commission of
5% on the profits of the branch.
You are required to:
(i) Prepare the Branch Trading & Profit & Loss A/c in dollars.
(ii) Convert the Trial Balance of branch into Indian currency and prepare Branch Trading
& Profit and Loss A/c and the Branch A/c in the books of head office.

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PRACTICE QUESTIONS

TOPIC 1: DEPENDENT BRANCH: DEBTORS METHOD & FINAL ACCOUNTS METHOD

Question 1 (ICAI Study Material) Pg no._____

The Bombay Traders invoiced goods to its Delhi branch at cost. Head Office paid all the
branch expenses from its bank account, except petty cash expenses which were met by
the Branch. All the cash collected by the branch was banked on the same day to the
credit of the Head Office. The following is a summary of the transactions entered into at
the branch during the year ended December 31, 2021.
₹ ₹
Balances as on 1.1.2021: Bad Debts 600
Stock 7,000 Goods returned by customers 500
Debtors 12,600 Salaries & Wages 6,200
Petty Cash, 200 Rent & Rates 1,200
Goods sent from H.O. 26,000 Sundry Expenses 800
Goods returned to H.O 1,000 Cash received from Debtors 28,500
Cash Sales 17,500 Balances as on 31.12.2021:
Credit Sales 28,400 Stock 6,500
Allowances to customers 200 Debtors 9,800
Discount to customers 1,400 Petty Cash 100
Prepare:
(a) Branch Account (Debtors Method),
(b) Memorandum Branch Trading and Profit & Loss Account and
(c) Branch Stock Account, Branch Debtors Account, Branch Expenses Account & Branch
P&L Account as per Stock & Debtors Method.
(Ans: Net Profit 9,400)
Question 2 Pg no._____
LMN is having branch at Mumbai. Goods are invoiced to the branch at 25% profit on sale.
All expenses are paid by head office except petty expenses, which are met by the
Branch. Prepare branch account in the books of head office:
₹
Stock as on 1st April, 2020 (Invoice price) 40,000
Sundry Debtors as on 1st April, 2020 25,000
Cash in hand as on 1st April, 2020 1,000
Office furniture as on 1st April, 2020 4,000
Goods invoiced from the head office (invoice price) 1,80,000
Goods return to head office 6,000
Goods return by debtors 1,250
Cash received from Debtors 65,000
Cash sales 1,20,000
Credit sales 70,000
Discount allowed to debtors 300
Expenses paid by Head Office
Salary 4,000
Staff Welfare 750

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Telephone Expenses 1,200

Other Misc. Expenses paid by branch 700
Stock as on 31st March, 2021 (at invoice price) 35,000
Depreciation to be provided on branch furniture 10% p.a.
(Ans: Net Profit 47,150)
Question 3 Pg no._____
XYZ is having its Branch at Kolkata. Goods are invoiced to the branch at 20% profit on
sale. Branch has been instructed to send all cash daily to head office. All expenses are
paid by head office except petty expenses which are met by the Branch Manager. From
the following particulars prepare branch account in the books of Head Office.
₹ ₹
Stock on 1 April 2020 (invoice
st
30,000 Expenses paid by head office:
price) 18,000 Rent 1,800
Sundry Debtors on 1st April, 2020 800 Salary 3,200
Cash in hand as on 1st April, 2020 3,000 Stationery & Printing 800
Office furniture on 1st April, 2020
Goods invoiced from the head 1,60,000 Petty expenses paid by the 600
office (invoice price) branch
Goods return to Head Office 2,000 Discount allowed to debtors 160
Goods return by debtors 960 Credit sales 60,000
Cash received from debtors 60,000 Depreciation to be provided
on branch furniture at 10% p.a
Cash Sales 1,00,000 Stock on 31st March, 2021 ( at 28,000
invoice price)
(Ans: Net Profit 24,180)
Question 4 Pg no._____
M/s X has a branch at Delhi and the goods are invoiced to branch at a profit of 20% on
invoice price. Head Office paid all the branch expenses from its bank account, except
petty cash expenses which were met by the branch. Branch expenses directly paid by
M/s X on behalf of Delhi branch amounted to ₹ 20,000. Following information is
available of the transactions at Delhi branch for the year ended 31st December, 2021:
As on As on
01-01-2021 31-12-2021
Stock, at invoice price 80,000 1,00,000
Debtors 24,000 22,000
Petty cash 3,000 5,000
Transactions during the year ended 31st December, 2021:
₹
Goods sent to branch, at invoice price 8,40,000
Goods returned by branch to head office, at invoice price 30,000
Cash sales 3,10,000
Credit sales 3,60,000
Cash sent for petty expenses 12,000
Bad debts at Delhi branch 2,000
Goods returned by debtors 2,000
Prepare Delhi Branch A/c (on cost basis) in the books of M/s X under Debtors System
(Ans: Net Profit 4,000)

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Question 5 (RTP May 2022) Pg no._____

Mr. Chena Swami of Chennai trades in Refined Oil and Ghee. It has a branch at Salem. He
despatches 30 tins of Refined Oil @ ₹ 1,500 per tin and 20 tins of Ghee ₹ 5,000 per tin on
1st of every month. The Branch has incurred expenditure of ₹ 45,890 which is met out of
its collections; this is in addition to expenditure directly paid by Head Office.
Following are the other details:
Chennai HO Salem B.O.
Purchases Refined Oil 27,50,000 -
Ghee 48,28,000 -
Direct expenses 6,35,800 -
Expenses paid by H.O. - 76,800
Sales Refined Oil 24,10,000 5,95,000
Ghee 38,40,500 14,50,000
Collection during the year - 20,15,000
Remittance by Branch to Head Office - 19,50,000

(Chennai HO)
Balance as on: 01-04-2020 31-03-2021
Stock : Refined Oil 44,000 8,90,000
: Ghee 10,65,000 15,70,000
Building 5,10,800 7,14,780
Furniture & Fixtures 88,600 79,740

(Salem Branch Office)

Balance as on: 01-04-2020 31-03-2021
Stock : Refined Oil 22,500 19,500
: Ghee 40,000 90,000
Debtors 1,80,000 ?
Cash on Hand 25,690 ?
Furniture & Fixtures 23,800 21,420
Additional information:
a) Addition to Building on 01-04-2020 ₹ 2,41,600 by H.O.
b) Rate of depreciation: Furniture & Fixtures @ 10% & Building @ 5% (already adjusted in
above figure)
c) The Branch Manager is entitled to 10% commission on Branch profits after charging his
commission.
d) The General Manager is entitled to a salary of ₹ 20,000 per month.
e) General expenses incurred by Head Office is ₹ 1,86,000.
You are requested to prepare Branch Account in the Head Office books and also prepare
Chena Swami’s Trading and Profit & loss Account (excluding branch transactions) for the
year ended 31st March, 2021.
(Ans: Branch Profit 2,06,300 & Total Profit 8,61,520)
Question 6 (ICAI Study Material) Pg no._____
Harrison of Chennai has a branch at New Delhi to which goods are sent @ 20% above
cost. The branch makes both cash and credit sales. Branch expenses are met partly from
H.O. and partly by the branch. The statement of expenses incurred by the branch every

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month is sent to head office for recording. Following further details are given for the year
ended 31st December, 2021:
₹
Cost of goods sent to Branch at cost 2,00,000
Goods received by Branch till 31-12-2021 at invoice price 2,20,000
Credit Sales for the year @ invoice price 1,65,000
Cash Sales for the year @ invoice price 59,000
Cash Remitted to head office 2,22,500
Expenses paid by H.O. 12,000
Bad Debts written off 750
Balances as on 01-01-2021 31-12-2021
Stock 25,000 (Cost) 28,000 (Invoice Price)
Debtors 32,750 26,000
Cash in Hand 5,000 2,500
Prepare Branch Account in the books of the head office and determine the Profit and
Loss of the Branch for the year ended 31st December, 2021 by Debtors method.
(Ans: Net Profit 16,250)

TOPIC 2: DEPENDENT BRANCH: STOCK & DEBTORS METHOD

Question 7 (ICAI Study Material) Pg no._____

M/s Marena, Delhi has a branch at Bangalore to which office goods are invoiced at cost
plus 25%. The branch sells both for cash and on credit. Branch Expenses are paid direct
from head office and the Branch has to remit all cash received into the Head Office Bank
Account. From the following details, relating to calendar year 2021, prepare the accounts
in the Head Office Ledger and ascertain the Branch Profit. Branch does not maintain any
books of account but sends weekly returns to the Head Office.
Goods received from Head Office at invoice price 45,00,000
Returns to Heads Office at invoice price 90,000
Stock at Bangalore as on 1st January, 2021 4,50,000
Sales during the year – Cash 15,00,000
Credit 27,00,000
Sundry Debtors at Bangalore as on 1st January, 2021 5,40,000
Cash received from Debtors 24,00,000
Discount allowed to Debtors 45,000
Bad Debts in the year 30,000
Sales returns at Bangalore Branch 60,000
Rent, Rates and Taxes at Branch 1,35,000
Salaries, Wages and Bonus at Branch 4,50,000
Office Expenses 45,000
Stock at Branch on 31st December, 2021 at invoice price 9,00,000
(Ans: Net Profit 2,67,000)
Question 8 (Inter Nov 2020) (10 Marks) / (RTP Nov 2021) (Similar) Pg no._____
Vijay & Co. of Jaipur has a branch in Patna to which goods are sent @ 20% above cost.
The branch makes both cash & credit sales. Branch expenses are paid direct from Head

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office and the branch has to remit all cash received into the bank account of Head office.
Branch doesn't maintain any books of accounts but sends monthly returns to head office.
Following further details are given for the year ended 31st March, 2021:
Amount (₹)
Goods received from Head office at Invoice Price 8,40,000
Goods returned to Head office at Invoice Price 60,000
Cash sales for the year 2020-21 1,85,000
Credit Sales for the year 2020-21 6,25,000
Stock at Branch as on 01-04-2020 at Invoice price 72,000
S. Debtors at Patna branch as on 01-04-2020 96,000
Cash received from Debtors 4,38,000
Discount allowed to Debtors 7,500
Goods returned by customers at Patna Branch 14,000
Bad debts written off 5,500
Amount recovered from Bad debts previously written 1,000
off as Bad
Rent Rates & Taxes at Branch 24,000
Salaries & wages at Branch 72,000
Office Expenses (at Branch) 9,200
Stock at Branch as on 31-03-2021 at cost price 1,25,000

Prepare necessary ledger accounts in the books of Head office by following Stock and
Debtors method and ascertain Branch profit.
(Ans: Net Profit 93,800)
Question 9 Pg no._____
Using the Stock and Debtors system, find out the profit or loss made at the Kolkata
Branch in 2021.
₹
Stock (1st January) invoice price 24,000
Debtors (1st January) 12,400
Goods sent to the Branch (invoice price) 70,000
Goods returned by the Branch (invoice price) 2,000
Sales:
Credit 42,000
Cash 40,000
Goods returned by customers 1,200
Cash received from debtors 39,600
Discount allowed to them 600
Cash sent for expenses at the Branch 12,200
Shortage of goods at the Branch (invoice price) 800
Goods are invoiced to the Branch at the selling price so as to show a profit of 30% on
invoice price.
(Ans: Net Profit 10,880)
Question 10 (Inter May 2018) (10 Marks) Pg no._____
Ayan Ltd. invoices goods to its branch at cost plus 33 1/3%. From the following particulars
prepare Branch Stock Account, Branch Stock Adjustment Account and Branch Profit and
Loss Account as they would appear in the books of head office.

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 CA NITIN GOEL BRANCH ACCOUNTING

Stock at commencement at Branch at invoice Price 3,60,000

Stock at close at Branch at Invoice Price 2,88,000
Goods sent to Branch during the year at invoice price 24,00,000
(including goods invoiced at ₹ 48,000 to Branch on 31.03.2021
but not received by Branch before close of the year).
Return of goods to head office (invoice Price) 1,20,000
Credit Sales at Branch 1,20,000
Invoice value of goods pilfered 24,000
Normal loss at Branch due to wastage and deterioration of stock 36,000
(at invoice price)
Cash Sales at Branch 21,60,000
Ayan closes its books on 31st March, 2021
(Ans: Net Profit 5,52,000)
Question 11 (Inter Dec 2021) (10 Marks) Pg no._____
Delta Ltd. has branch at Kanpur. Goods are invoiced from the Head office to the Branch
at cost plus 50%. Branch remits all cash received to Head office and all the expenses are
met by Head office. Prepare necessary ledger accounts in the books of Delta Ltd. under
Stock and Debtors system to show profit earned at the Branch for the year ending 31st
March, 2021. Following information related to branch is given:
Particulars ₹ Particulars ₹
Stock on 1st April 2020 31,200 Surplus in stock 600
(Invoice price) (Invoice price)
Debtors on 1st April 2020 17,400 Goods returned by Debtors 3,000
Goods invoiced at cost 72,000 Expenses at Branch 13,400
Sales at Branch: Discount allowed to Debtors 700
Cash sales 20,000
Credit sales 68,200 Debtors on 31st March 2021 14,300
(Ans: Net Profit 14,700)

Question 12 (Inter May 2022) (10 Marks) Pg no._____

Walkaway Footwears has its head office at Nagpur and Branch at Patna. It invoiced
goods to its branch at 20% less than the list price which is cost plus 100%, with
instruction that cash sales were to be made at invoice price and credit sales at
catalogue price (i.e. list price). The following information was available at the branch for
the year ended 31st March,2022.
Particular Amount ₹
Stock on 1st April,2021 (invoice price) 12,000
Debtors on 1st April, 2021 10,000
Goods received from head office (invoice price) 1,32,000
Sales:
Cash 46,000
Credit 1,00,000 1,46,000
Cash received from debtors 85,000
Expenses at branch 17,500
Debtors on 31st March, 2022 25,000
Stock on 31st March,2022 (invoice price) 17,600
Remittances to head office 1,20,000

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 CA NITIN GOEL BRANCH ACCOUNTING

You are required to prepare Branch Stock Account, Branch Adjustment Account, Branch
Profit & Loss Account and Branch Debtors Account for the year ended 31st March,2022.
(Ans: Net Profit 49,500)

TOPIC 3: DEPENDENT BRANCH: WHOLESALE PRICE METHOD

Question 13 Pg no._____
N Limited has retail branch at Noida. Goods are sold to customers at cost plus 100%. The
wholesale price is cost plus 80%. Goods are invoiced to Noida at wholesale price.
From the following particulars, find out the profit made by the Head Office and Noida
Branch for the year ended 31st March, 2021 using invoice method.
Head Office (₹) Noida (₹)
Opening stock (as on 1.4.2020) 50,000 -
Purchases 3,00,000 -
Goods sent to branch (invoice value) 1,08,000 -
Sales 3,06,000 1,00,000
Expenses 90,000 4,000
Sales at Head Office are made only on wholesale basis and sales at branch are made
only to customers. Stock at branch is valued at invoice price.
(Ans: Net Profit 86,000 & 6,000)
Question 14 Pg no._____
M/s. Sandeep having Head Office at Delhi has a Branch at Kolkata. The Head Office does
wholesale trade only at cost plus 80%. The Goods are sent to Branch at the wholesale
price viz. cost plus 80%.
The Branch at Kolkata wholly engaged in retail trade and the goods are sold at cost to
Head Office plus 100%.
Following details are furnished for the year ended 31st March, 2021:
Head Office Kolkata Branch
Opening Stock (As on 01.04.2020) 1,25,000
Purchases 21,50,000
Goods sent to Branch (cost to H.O. plus 80%) 7,38,000
Sales 23,79,600 7,30,000
Office Expenses 50,000 4,500
Selling Expenses 32,000 3,300
Staff Salary 45,000 8,000
You are required to prepare Trading and Profit & Loss Account of the Head Office and
Branch for the Year ended 31st March, 2021.
(Ans: Net Profit 12,22,600 & 57,200)
Question 15 Pg no._____
From the following details of Western Branch Office of M/s. XYZ Corp. for the year ending
31st March, 2021, ascertain branch stock reserve in respect of unrealized profit in opening
stock and closing stock:
(i) Goods are sent to the branch at invoice price and branch also maintains stock at the
same price.
(ii) Sale price is cost plus 40%.
(iii) Invoice price is cost plus 15%.

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 CA NITIN GOEL BRANCH ACCOUNTING

(iv) Other information from accounts of branch:

Opening Stock as on 01-04-2020 3,45,000
Goods sent during the year by HO to BO 16,10,000
Sales during the year 21,00,000
Expenses incurred at the branch 45,000
(Ans: Closing Stock 2,30,000; Stock reserve 45,000 & 30,000)
Question 16 (ICAI Study Material) Pg no._____
Following is the information of the Jammu branch of Best New Delhi for the year ending
31st March, 2021 from the following:
(1) Goods are invoiced to the branch at cost plus 20%.
(2) The sale price is cost plus 50%.
(3) Other information:
a. Stock as on 01.04.2020 (invoice price) 2,20,000
b. Goods sent during the year (invoice price) 11,00,000
c. Sales during the year 12,00,000
d. Expenses incurred at the branch 45,000
Ascertain
(i) the profit earned by the branch during the year
(ii) branch stock reserve in respect of unrealized profit.
(Ans: Net Profit 1,95,000)

TOPIC 4: INDEPENDENT BRANCH

Question 17 (ICAI Study Material) Pg no._____
Alphs having head office in Mumbai has a branch in Nagpur. The branch at Nagpur is an
independent branch maintaining separate books of account. On 31.3.2021, it was found
that the goods dispatched by head office for ₹ 2,00,000 was received by the branch only
to the extent of ₹ 1,50,000. The balance goods are in transit. What is the accounting entry
to be passed by the branch for recording the goods in transit, in its books?

Question 18 Pg no._____
Global Limited has a branch which closes its books of account every year on 31stMarch.
This is an independent branch which maintains books of account for recording their
transactions.
You are required to show journal entries in the books of branch on 31stMarch, 2021 to
rectify or adjust the following:
(a) Head Office allocates ₹ 1,35,000 to the branch as head office expenses, which have
not yet been recorded by branch.
(b) Depreciation of branch fixed assets, whose accounts are kept by head office in its
books, not yet recorded in the branch books, ₹ 1,15,000.
(c) Branch paid ₹ 1,40,000 as salary to an official from head office on visit to branch and
debited the amount to its Salaries Account.
(d) Head Office collected ₹ 1,30,000 directly from a branch customer on behalf of the
branch, but no intimation was received earlier by the branch. Now the branch learns
about it.
(e) It is learnt that a remittance of ₹ 1,50,000 sent by the branch has not been received
by head office till date.

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Question 19 Pg no._____
Give Journal Entries in the books of Head Office to rectify or adjust the following:
(i) Goods sent to Branch ₹12,000 stolen during transit. Branch manager refused to
accept any liability
(ii) Branch paid ₹ 15,000 as salary to the officer of Head Office on his visit to the branch.
(iii) On 28th March, 2021, the H.O. dispatched goods to the Branch invoiced at ₹ 25,000
which was not received by Branch till 31st March, 2021.
(iv) A remittance of ₹ 10,000 sent by the branch on 30th March, 2021, received by the Head
Office on 1st April, 2021.
(v) Head Office made payment of ₹ 25,000 for purchase of goods by Branch and wrongly
debited its own purchase account.
(vi) Depreciation ₹ 11,250 in respect of Branch Shop whose account is kept in HO Books.
(vii) Expenses ₹ 5,600 to be charged to the Branch for work done on its behalf by the
Head Office.
Question 20
Question 19 (RTP Nov 2018) Pg Pg no._____
no._____
a)
Pass necessary Journal entries in the books of an independent Branch of M/s TPL Sons,
wherever required, to rectify or adjust the following transactions:
(i) Branch paid ₹ 5,000 as salary to a Head Office Manager, but the amount paid has
been debited by the Branch to Salaries Account.
(ii) A remittance of ₹ 1,50,000 sent by the Branch has not received by Head Office on the
date of reconciliation of Accounts.
(iii) Branch assets accounts retained at head office, depreciation charged for the year ₹
15,000 not recorded by Branch.
(iv) Head Office expenses ₹ 75,000 allocated to the Branch, but not yet been recorded
by the Branch.
(v) Head Office collected ₹ 60,000 directly from a Branch Customer. The intimation of
the fact has not been received by the Branch.
(vi) Goods dispatched by the Head office amounting to ₹ 50,000, but not received by the
Branch till date of reconciliation.
(vii) Branch incurred advertisement expenses of ₹ 10,000 on behalf of other Branches,
but not recorded in the books of Branch.
(viii) Head office made payment of ₹ 16,000 for purchase of goods by branch, but not
recorded in branch books.

Question 21 (Inter Jan 2021) (5 Marks) / (ICAI Study Material) Pg no._____

Give Journal Entries in the books of Branch to rectify or adjust the following:
a) Branch paid ₹ 5,000 as salary to H.O supervisor, but the amount paid by branch has
been debited to salary account in the books of branch.
b) Asset Purchased by branch for ₹ 25,000, but the Asset was retained in H.O. Books.
c) A remittance of ₹ 8,000 sent by the branch has not been received by H.O.
d) H.O. collected ₹ 25,000 directly from the customer of Branch but fails to give the
intimation to branch.
e) Remittance of funds by H.O. to branch ₹ 5,000 not entered in branch books.

Question 22 Pg no._____
Head Office passes adjustment entry at the end of each month to adjust the position
arising out of inter branch transactions during the month. From the following inter branch
transactions in January, 2021 make entry in the books of Head Office:

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a) Bombay Branch
(i) Received goods ₹ 6,000 from Calcutta Branch, ₹ 4,000 from Patna Branch
(ii) Sent Goods to ₹ 10,000 to Patna, ₹ 8,000 to Calcutta
(iii) Received B/R ₹ 6,000 from Patna
(iv) Sent Acceptance ₹ 4,000 to Calcutta, ₹ 2,000 to Patna
b) Madras Branch (Apart from the above)
(v) Received goods ₹ 10,000 from Calcutta, ₹ 4,000 from Bombay
(vi) Cash Sent ₹ 2,000 to Calcutta, ₹ 6,000 to Bombay
c) Calcutta Branch (Apart from the above)
(vii) Sent Goods to Patna ₹ 6,000
(viii) Paid B/P ₹ 4,000 to Patna, ₹ 4,000 cash to Patna

Question 23 Pg no._____
Show adjustment Journal entry along with working notes in the books of Head Office at
the end of April, 2021 for incorporation of inter-branch transactions assuming that only
Head Office maintains different branch account in its books.
A. Delhi Branch:
(1) Received goods from Mumbai – ₹ 1,40,000 and ₹ 60,000 from Kolkata.
(2) Sent goods to Chennai – ₹ 1,00,000, Kolkata – ₹ 80,000.
(3) Bill Receivable received – ₹ 80,000 from Chennai.
(4) Acceptances sent to Mumbai – ₹ 1,00,000, Kolkata – ₹ 40,000.
B. Mumbai Branch (apart from the above):
(5) Received goods from Kolkata – ₹ 60,000, Delhi – ₹ 80,000.
(6) Cash sent to Delhi – ₹ 60,000, Kolkata – ₹ 28,000.
C. Chennai Branch (apart from the above):
(7) Received goods from Kolkata – ₹ 1,20,000.
(8) Acceptances and Cash sent to Kolkata – ₹ 80,000 and ₹40,000 respectively.
D. Kolkata Branch (apart from the above):
(9) Sent goods to Chennai – ₹ 1,40,000.
(10) Paid cash to Chennai – ₹ 60,000.
(11) Acceptances sent to Chennai – ₹ 60,000.

Question 24 (Inter July 2021) (10 Marks) Pg no._____

Manohar of Mohali has a branch at Noida to which the goods are supplied from Mohali
but the cost thereof is not recorded in Head Office books. On 31st March, 2020 Branch
Balance Sheet was as follows:
Liabilities ₹ Assets ₹
Creditors Balance 62,000 Debtors Balance 2,24,000
Head Office 1,88,000 Building Extension A/c
Closed by transfer to H.O. A/c -
Cash at Bank 26,000
2,50,000 2,50,000
During the 6 months ending on 30-09-2020, following transactions took place at Noida:
₹ ₹
Sales 2,78,000 Manager's salary 16,400
Purchases 64,500 Collections from debtors 2,57,000
Wages Paid 24,000 Discounts allowed 16,000
Salaries (inclusive of 15,600 Discount earned 4,600
advance of 5,000)

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General Expenses 7,800 Cash paid to creditors 88,500

Fire Insurance (Paid for 11,200 Building Account (further 14,000
one year) payment)
Remittance to H.O. 52,900 Cash in Hand 5,600
Cash at Bank 47,000
Set out the Head Office Account in Noida Books and the Branch Balance Sheet as on
30.09.2020. Also give journal entries in the Noida books.
(Ans: Head Office balance 2,58,800)

TOPIC 5: FOREIGN BRANCH

Question 25 Pg no._____
Ganesh Ltd. has head office at Delhi (India) and branch at New York (U.S.A). New York
branch is an integral foreign operation of Ganesh Ltd. New York branch furnishes you
with its trial balance as on 31st March, 2021 & the additional information given thereafter:
Dr. ($) Cr. ($)
Stock on 1st April, 2020 300
Purchases and sales 800 1,500
Sundry Debtors and creditors 400 300
Bills of exchange 120 240
Sundry expenses 1,080
Bank balance 420
Delhi head office A/c 1,080
3,120 3,120
The rates of exchange may be taken as follows:
➢ on 1.4.2020 @ ₹ 40 per US $
➢ on 31.3.2021 @ ₹ 42 per US $
➢ average exchange rate for the year @ ₹ 41 per US $.
New York branch account showed debit balance of ₹ 44,380 on 31.3.2021 in Delhi books &
there were no items pending reconciliation. Prepare trial balance of New York in ₹ in
books of Ganesh Ltd

Question 26 (Inter Nov 2019) (5 Marks) Pg no._____

Karan Enterprises having its Head Office in Mangalore, Karnataka has a branch in
Greenville, USA. Following is the trial balance of Branch as at 31-3-2021:
Particulars Amount ($) Dr. Amount ($) Cr.
Fixed assets 8,000
Opening inventory 800
Cash 700
Goods received from Head Office 2,800
Sales 24,050
Purchases 11,800
Expenses 1,800
Remittance to head office 2,450
Head office account 4,300
28,350 28,350
(i) Fixed assets were purchased on 1st April, 2017.
(ii) Depreciation at 10% p.a. is to be charged on fixed assets on straight line method. ·

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(iii) Closing inventory at branch is $ 700 as on 31-3-2021.

(iv) Goods received from Head Office (HO) were recorded at ₹1,85,500 in HO books.
(v) Remittances to HO were recorded at ₹1,62,000 in HO books.
(vi) HO account is recorded in HO books at ₹2,84,500.
(vii) Exchange rates of US Dollar at different dates can be taken as
1-4-2017 ₹63 1-4-2020 ₹65 and 31-3-2021 ₹67
Prepare trial balance after been converted into Indian rupees in accordance with AS-11.
(Ans: Exchange Loss 23,800)
Question 27 Pg no._____
Omega has a branch at Washington. Its Trial Balance as at 30th Sep., 2021 is as follows:
Dr. (US $) Cr. (US $)
Plant and machinery 1,20,000 -
Furniture and fixtures 8,000 -
Stock, Oct. 1, 2020 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, 2021 – $ 52,000.
(6) There were no in transit items either at the start or at the end of the year.
(7) On September 1, 2019, when fixed assets were purchased, the rate of exchange was ₹
38 to one $.
On October 1, 2020, the rate was ₹ 39 to one $.
On September 30, 2021, 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.
(b) Trading and Profit and Loss Account for the year ended 30th September, 2021 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.
(Ans: Exchange Gain 7,00,000 & Net Profit 27,01,600)

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Question 28 Pg no._____

Omega Ltd., an Indian company has a branch at New York (USA). The trial balance of the
Branch as at 31st March, 2021 is as follows:
Particulars Dr. (US $) Cr. (US $)
Fixed Assets 51,200
Opening Stock 22,400
Purchases/Sales 96,000 1,66,400
Goods sent from H.O 32,000
Carriage inward 400
Branch Expenses 4,800
Head Office Account 45,600
Sundry Debtors/Creditors 9,600 6,800
Cash at Bank 2,400
2,18,800 2,18,800
The following further information is given below:
1) Expenses outstanding $ 400.
2) Depreciate Fixed Assets @ 10% p.a. at written down value.
3) The Head Office sent goods to Branch for ₹ 15,80,000.
4) The head office shown an amount of ₹ 20,50,000 due from Branch.
5) Closing Stock $ 21,500.
6) There were no transit items either at the start or at the end of the year.
7) On April 1, 2019 when the fixed assets were purchased the rate of exchange was ₹ 43
to one $. On April 1, 2020, the rate was ₹ 47 per $. On March 31, 2021, the rate was ₹
50 per $. Average Rate during the year was ₹ 45 to one $.
Convert the USA Branch trial balance in ₹ assuming that Branch is an Integral Foreign
Operation of the Company. Calculate Foreign Exchange gains/loss & show its Accounting
Treatment as per AS11.
(Ans: Exchange Gain 1,08,400)
Question 29 (RTP May 2019) Pg no._____
M/s ABC & Co. has head office at New York (U.S.A.) and branch in Bangalore (India).
Bangalore branch is an integral foreign operation of ABC & Co. Bangalore branch
furnishes you with its trial balance as on 31st March, 2021 and the additional information
given thereafter:
Dr. Cr.
Rupees in thousands
Stock on 1st April, 2020 300 -
Purchases and sales 800 1,200
Sundry Debtors and Creditors 400 300
Bills of Exchange 120 240
Wages and Salaries 560 -
Rent, rates and taxes 360 -
Sundry charges 160 -
Computers 240 -
Bank balance 420 -
New York office a/c - 1,620
3,360 3,360

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Additional information:
(a) Computers were acquired from a remittance of US $ 6,000 received from New York
head office and paid to the suppliers. Depreciate computers at 60% for the year.
(b) Unsold stock of Bangalore branch was worth ₹ 4,20,000 on 31st March, 2021.
(c) The rates of exchange may be taken as follows:
- On 01.04.2020 @ ₹ 55 per US $
- On 31.03.2021 @ ₹ 60 per US $
- Average exchange rate for the year @ ₹ 58 per US $
- Conversion in $ shall be made up to two decimal accuracy.
You are asked to prepare in US dollars the revenue statement for the year ended 31st
March, 2021 and the balance sheet as on that date of Bangalore branch as would appear
in the books of New York head office of ABC & Co. You are informed that Bangalore branch
account showed a debit balance of US $ 29845.35 on 31.3.2021 in New York books and
there were no items pending reconciliation.
(Ans: Net Loss 13,778.68)
Question 30 (Inter May 2019) (8 Marks) Pg no._____
M/s Ravi & Co. has head office at New York and branch at Delhi (India). Delhi branch is
an integral foreign operation of M/s Ravi & Co. Delhi branch furnishes you with its Trial
Balance as on 31st March, 2021 and the additional information thereafter:
Dr. Cr.
Rupees in thousands
Stock on 1st April, 2020 600 -
Purchases and Sales 1,600 2,400
Sundry Debtors and Creditors 800 600
Bills of Exchange 240 480
Wages 1,120 -
Rent, rates and taxes 720 -
Sundry Expenses 320 -
Computers 600 -
Bank Balance 520 -
Singapore Office a/c - 3,040
Total 6,520 6,520
Additional information:
(a) Computers were acquired from remittance of US dollar 12,000 received from US
Head Office & paid to suppliers. Depreciate Computers at the rate of 40% for the year.
(b) Closing Stock of Delhi branch was ₹ 15,60,000 on 31st March, 2021.
(c) The Rates of Exchange may be taken as follows:
(i) on 1.4.2020 @ ₹ 50 per US Dollar
(ii) on 31.3.2021 @ ₹ 52 per US Dollar
(iii) average Exchange Rate for the year @ ₹ 51 per US Dollar
(iv) conversion in US Dollar shall be made upto two decimal accuracy.
(d) Delhi Branch Account showed a debit balance of US Dollar 59,897.43 on 31.3.2021 in
the Head Office books and there were no items pending for reconciliation.
In the books of Head office, you are required to prepare:
(1) Revenue statement for the year ended 31st March, 2021 (in US Dollar)
(2) Balance Sheet as on that date (in US Dollar)
(Ans: Net Loss 13,466.67)

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Question 31 (RTP Nov 2020) (Similar)/ (RTP Nov 2022) Pg no._____

M & S Co. of Lucknow has a branch in Canberra, Australia. At the end of 31st March 2021,
the following ledger balances have been extracted from the books of the Lucknow office
and the Canberra.
Particulars (₹ ‘000) (Aust. Dollars in ‘000)
Debit Credit Debit Credit
Capital 2,000
Reserves and Surplus 1,000
Land 500
Building (cost) 1,000
Buildings Depreciation Reserve 200
Plant & Machinery (cost) 2,500 200
Plant & Machinery Depreciation Reserve 600 130
Trade receivables/payables 280 200 60 30
Stock (01-04-2020) 100 20
Branch Stock Reserve 4
Cash & Bank Balances 10 10
Purchases/Sales 240 520 20 123
Goods sent to Branch 100 5
Managing Director’s salary 30
Wages & Salaries 75 45
Rent 12
Office Expenses 25 18
Commission receipts 256 100
Branch/H.O. Current A/c 120 7
Total 4,880 4,880 390 390
The following information is also available:
(i) Stock as at 31st March, 2021
Lucknow ₹ 1,50,000 Canberra A$ 3125 (all stock are out of purchases made at Abroad)
(ii) Head Office always sent goods to the Branch at cost plus 25%
(iii) Provision is to be made for doubtful debts at 5%
(iv) Depreciation is to be provided on Buildings at 10% and on Plant and Machinery at 20%
on written down value.

You are required to:

(1) Convert the Branch Trial Balance into rupees by using the following exchange rates:
Opening rate 1 A $ = ₹ 50
Closing rate 1 A $ = ₹ 53
Average rate 1 A $ = ₹ 51.00
For Fixed Assets 1 A $ = ₹ 46.00
(2) Prepare Trading and Profit and Loss Account for the year ended 31st March 2021
showing to the extent possible H.O. results and Branch results separately
(Ans: Exchange Loss 208 & Net Profit Combined 4,668.625)
Question 32 (ICAI Study Material) Pg no._____
S & M Ltd., Bombay, have a branch in Sydney, Australia. Sydney branch is an integral
foreign operation of S & M Ltd. At the end of 31st March, 2021, the following ledger
balances have been extracted from the books of the Bombay Office and the Sydney Office:

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Bombay Sydney
( ₹thousands) (Australian dollars
thousands
Debit Credit Debit Credit
Share Capital - 2,000 - -
Reserves & Surplus - 1,000 - -
Land 500 - - -
Buildings (Cost) 1,000 - - -
Buildings Dep. Reserve - 200 - -
Plant & Machinery (Cost) 2,500 - 200 -
Plant & Machinery Dep. Reserve - 600 - 130
Debtors / Creditors 280 200 60 30
Stock (1.4.2020) 100 - 20 -
Branch Stock Reserve - 4 - -
Cash & Bank Balances 10 - 10 -
Purchases / Sales 240 520 20 123
Goods sent to Branch - 100 5 -
Managing Director’s salary 30 - - -
Wages & Salaries 75 - 45 -
Rent - - 12 -
Office Expenses 25 - 18 -
Commission Receipts - 256 - 100
Branch / H.O. Current A/c 120 - - 7
4,880 4,880 390 390
The following information is also available:
(1) Stock as at 31.3.2021:
a. Bombay ₹ 1,50,000
b. Sydney A $ 3,125
You are required to convert the Sydney Branch Trial Balance into rupees;
(use the following rates of exchange :
Opening rate A $ = ₹ 20
Closing rate A $ = ₹ 24
Average rate A $ = ₹ 22
For Fixed Assets A $ = ₹ 18
(Ans: Exchange Loss 216) Pg no._____
Question 33
The Washington branch of ABC India sent the following trial balance as on 31st
December, 2021.
Particulars $ $
Head office A/c - 13,680
Sales - 50,400
Debtors and creditors 2,880 2,040
Machinery 14,400 -
Cash at bank 720 -
Stock, 1 January, 2021 6,720 -
Goods from H.O. 38,400 -
Expenses 3,000 -
66,120 66,120

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In the books of head office, the Branch A/c stood as follows:

Washington Branch A/c
Particular ₹ Particular ₹
To Balance b/d 4,86,000 By Cash 23,25,600
To Goods sent to branch 23,55,600 By Balance c/d 5,16,000
28,41,600 28,41,600
Goods are sent to the branch at cost plus 10% and the branch sells goods at invoice price
plus 25%. Machinery was acquired on 31st January, 2016, when $ 1.00 = ₹ 46.
Exchange rate per US$ were:
1st January, 2021 ₹ 64
31st December, 2021 ₹ 66
Average Rate ₹ 65
Machinery is depreciated @ 10% on written down value basis. The branch manager is
entitled to a commission of 5% on the profits of the branch.

You are required to prepare in the books of Head Office:

a) Branch Trading & Profit & Loss A/c in dollars.
b) Convert the Trial Balance of branch into Indian currency.
c) Branch Trading & Profit and Loss Account in Rupees
d) Branch Account
(Ans: Exchange Loss 45,960 & Net Profit 4,81,308)

Question 34 (RTP May 2020) / (ICAI Study Material) Pg no._____

“Assets and liabilities and income and expenditure items in respect of dependent foreign
branches (integral foreign operations) are translated into Indian rupees at the prevailing
rate of exchange at the end of the year. The resultant exchange differences in the case
of profit, is carried to other Liabilities Account and the Loss, if any, is charged to
statement of Profit and Loss.” Comment.

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