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WAEC Financial Accounting 1997 Question 22

Question 22

Branch Accounts

A company charges out goods to a branch at cost plus 25 percent. It invoiced N12,000 worth of goods.
The double entry required for the mark-up is debit Branch

  1. A.Sales Account, credit Branch Adjustment Account
  2. B.Adjustment Account, credit Branch Stock Account
  3. C.Stock Account, credit Branch Adjustment Account
  4. D.Adjustment Account, credit Branch Profit and Loss Account
  5. E.Profit and Loss Account, credit Branch Stock Account.
Show the answer and explanation

Answer: C (Stock Account, credit Branch Adjustment Account)

Explanation

Goods sent are recorded in branch stock at selling price, so the mark-up is debited to branch stock and credited to branch (stock) adjustment.