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JAMB Principles of Accounts 1995 Question 46

Question 46

Branch Accounts

Which of the following statements is correct about the head office current account and the branch current account?

  1. A.both always have debit balances
  2. B.both always have credit balances
  3. C.the head office current account has a credit balance while the branch current account has a debit balance
  4. D.the head office current account has a debit balance while the branch current account has a credit balance.
Show the answer and explanation

Answer: C (the head office current account has a credit balance while the branch current account has a debit balance)

Explanation

In head office's books the branch current account is a debit balance (amount invested in the branch); in the branch's books the head office current account is the matching credit balance.