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JAMB Principles of Accounts 2001 Question 47

Question 47

Branch Accounts

To account for expenses paid by head office on behalf of the branch, the branch should

  1. A.debit head office account and credit cash
  2. B.debit profit and loss account and credit head office account
  3. C.credit cash and debit profit and loss account
  4. D.credit profit and loss account and debit head office account.
Show the answer and explanation

Answer: B (debit profit and loss account and credit head office account)

Explanation

The branch bears the expense (debit profit and loss) and owes head office for it (credit head office account).