Theory question 104
Branch Accounts(a) List three accounts prepared by the head office for the branch.
(b) Explain two methods of accounting for goods sent to branch.
(c) State four reasons for preparing departmental accounts.
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(a) Any three: goods sent to branch account; branch stock account; branch debtors account; branch expenses account; branch adjustment (stock adjustment) account; branch profit and loss account; branch current account.
(b) Any two: goods sent at cost – the branch stock is recorded at cost and profit found in a branch trading account; goods sent at selling price (or cost plus mark-up) – branch stock is kept at selling price and the loading is removed through a branch adjustment account; (or) dependent branch where head office keeps all records, versus independent branch that keeps its own books and sends returns to head office.
(c) Any four: to find the profit of each department; to compare departments' performance; to identify and correct unprofitable departments; to reward departmental managers; to control costs and stock; to help decisions on pricing, expansion or closure.
Name head-office branch accounts, two ways of recording goods sent, then reasons for departmental accounts.