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JAMB Principles of Accounts 2011 Question 35

Question 35

Branch Accounts

The cost method of charging goods to branch is used where

  1. A.branch stock adjustment account is in use
  2. B.the retention of branch trading account is in addition to the cost of goods sold
  3. C.goods are sent without invoice or any source documents
  4. D.goods are of a perishable nature on which a pre-determined price is inapplicable.
Show the answer and explanation

Answer: D (goods are of a perishable nature on which a pre-determined price is inapplicable.)

Explanation

When goods are perishable their selling price cannot be fixed in advance, so head office charges them to the branch at cost.