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JAMB Principles of Accounts 2007 Question 11

Question 11

Branch Accounts

Goods worth ₦50 000 were sent at different times from head office to the branch during the year. By the end of the period, only ₦40 000 worth of goods had arrived at the branch. Which of the following is correct about the treatment of this transaction?

  1. A.Branch should debit goods received from head office with ₦50 000.
  2. B.Head office should debit goods sent to branch account with ₦10 000.
  3. C.Head office should debit goods sent to branch account with ₦50 000.
  4. D.Branch should debit goods received from head office with ₦10 000.
Show the answer and explanation

Answer: D (Branch should debit goods received from head office with ₦10 000.)

Explanation

The ₦10 000 still on the way is recorded by the branch so that its books agree with head office: debit goods received (in transit) ₦10 000, credit head office account.