Accounting for BranchesStock and Debtors Method

Mahesh Chandra SharmaAssociate Professor

Department of CommerceShaheed Bhagat Singh Eve. College

(University of Delhi) India

Important TermsBranch Stock

It is unsold goods at a Branch at the beginning/end of the year.

Branch DebtorsThese are debtors of the branch.

Goods Sent or supplied to BranchIt is the goods supplied by the Head Office to its Branch for sale. It may be recorded at Cost or Invoice Price.

Important Terms (Contd.)Cost Price

It is cost of goods to the Head OfficeInvoice Price

It is the price at which the HO invoices goods to the Branch. It includes Cost plus a fixed margin. Usually Branch is expected to sell the goods at Invoice Price.

LoadingIt is the difference between Invoice Price and Cost Price.

Ledger Accounts to be preparedBranch Stock A/cBranch Debtors A/cBranch Expenses A/cBranch Adjustment and Profit and Loss

A/cBranch Petty Expenses A/c

Branch Stock A/cBranch Stock A/c (At Invoice Price)

Dr. Cr.Particulars Amt

.Particulars Amt

.To Balance b/d (Op.

)By Branch Cash A/c (Cash Sales)

To Goods Sent to Branch A/c

By Br Debtors A/c (Credit Sales)

To Sales Return By Goods Sent to Branch A/c (Return by Branch)

To Br Adjustment A/c(Surplus)*

B/F By Br Adjustment A/c (Normal Loss of Goods)By Br Profit & Loss A/c (Abnormal Loss of Goods - cost)By Br Adjustment A/c (Abnormal Loss of Goods – loading only)By Shortage of Goods* B/FBy Balance c/d (Clo.

)

Notes to Branch Stock A/c

If out of the abovementioned items (other than Surplus and Shortage), only one item is missing, then it will be balancing figure.

If all the abovementioned items are given, then balancing figure on the Debit side will be assumed “Surplus” and balancing figure on the Credit side will be assumed “Shortage of Goods.”

Normal Loss of goods is transferred to Branch Adjustment A/cAbnormal Loss of Goods (cost part) is transferred to Branch P

& L A/c and loading part is transferred to Br. Adjustment A/c.Shortage of Goods may be treated as Normal Loss or Abnormal

Loss and it will be treated accordingly.Surplus (assuming as normal gain or overcharging of price) is

transferred to Branch Adjustment A/c.

Branch Debtors A/cWe may also find any information relating ‘Branch Debtors, Credit Sales, ‘Cash Received from Debtors’ if missing from Branch Debtors A/c .

Branch Debtors A/c Dr. Cr.Particulars Amou

ntParticulars Amt.

To Balance b/d (Op.) By Cash ReceivedTo Br Stock A/c (Credit Sales)

By Sales Return

By Bad DebtsBy AllowancesBy Discount AllowedBy Balance c/d (Clo.)

XXX XXX

Branch Expenses A/cParticulars Amt. Particulars Amt.To Bank A/c – expenses paid

x x x By Branch Adjustment A/c (Gross Profit)

x x x

To Bad Debts x x x By Insurance Claim x x x

To Discount Allowed x x x By Profit and Loss A/c x x x

To Allowances x x xTo Depreciation x x x

X X X X X X

Branch Adjustments A/cParticulars Amt. Particulars Amt.Stock Reserve A/c (Loading on Closing Br. Stock)

x x x Stock Reserve A/c(Loading on Opening Br. Stock)

x x x

Br. Stock A/c(Normal Loss of Goods)

Inv. Price

Goods Sent to Branch A/c (Loading on goods sent to Branch)

x x x

Br. Stock A/c(Abnormal Loss of Goods)

Loading

Surplus (Assuming normal gain)

Inv. Price

Shortage (Abnormal Loss)

Loading

Br. Profit and Loss A/c (Gross Profit)

x x x Br. Profit and Loss A/c (Gross Loss)

x x x

X X X X X X

Branch Profit and Loss A/cParticulars Amt. Particulars Amt.To Branch Adjustment A/c (Gross Loss

x x x By Branch Adjustment A/c (Gross Profit)

x x x

To Br. Expenses A/c By Insurance Claim x x x

To Abnormal Loss of Goods

Cost part

By Gen. Profit and Loss A/c (Loss)

x x x

To Shortage (Abnormal Loss)

Cost part

To General Profit and Loss A/c (Profit)

x x x

X X X X X X

Stock Reserve A/c

Date Particulars Amt.

Date Particulars Amt.

31.3.20x2

Br. Adjustments A/c ( transfer of Loading on Opening Stock)

x x x 1.4.20x1

Balance b/d(Loading on Opening tock)

x x x

31.3.20x2

Balance b/d(Loading on Closing Stock)

x x x 31.3.20x2

Br. Adjustments A/c (Creation of Loading on Closing Stock)

x x x

XXX XXX

• This account is prepared for recording loading on Opening and Closing HP Stock.

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