Branch Account Short Question Answer Study Material Notes

BCOM 1st Year Branch Account Short Question Answer Study Material Notes :- In this post is very useful for BCOM Students you will get full information related to BCOM Branch account, Dependent branch, Debtors System, Stock and debtor system final accounts system, Wholesale branch, Independent branch Foreign branch All Topic Study Material Question Answer Notes Available.

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SHORT ANSWER QUESTIONS

Q.1. What do you mean by branch accounts?

Ans. Business is growing rapidly in the modern times ofliberalisation, privatisation and globalisation. sation Customers are scattered all over and cannot be tapped from one place. Therefore, business houses, instead of limiting their businesses at one place, try to extend their activities in various parts of a town, country or the world. For this purpose, a business house establish business units at various places and these units are called ‘Branches. The principal or the first business office is called ‘Head office.

The main objective of opening branches is to raise profits of the business by making goods available to the common people scattered here and there. The accounts concerning the branches are called Branch account. Branch accounts are related to recording of trading transaction of different branches in respect of their dealing with the head office, with the outsiders and other branches.

Q.2. Give classification of branches. (2016)

Or What are the various types of branches?

Ans. Though the classification of branches may be made in a number of ways. However from the accounting point of view, they may be classified into three categories:

1. Dependent Branches: The branches wholly dependent, are called dependent branches. Such branches act merely as selling agencies. Dependent branches do not keep any books of account; accounts are maintained only in the books of head office. These branches keep only a few essential records and furnish the necessary periodical information to the head office. Dependent branches are also known as ‘Branches not keeping full system of accounting.

2. Independent Branches: Independent branches mean such branches which have the rights to sell-purchase and other transaction by themselves. But it never means that it does not depend on the head office. The independence of a branch is referred to ‘Independence in accounting function’. Hence, a branch is called ‘Independent’ only when it is allowed to maintain full accounting system.

3. Foreign Branches: A branch, which is situated in a foreign country, is called foreign branch. All general bookkeeping of such branches will be similar like independent branches. The basic feature of a foreign branch is that it maintain its accounts in the currency of that country in which it is situated. Therefore, before any information by branch can be used by head office, it must be converted into currency of the head office.

Q.3. Explain the advantages of branch accounts.

Ans. The main advantages of preparing branch accounts can be summarised as below:

1. Knowledge of Profit or Loss: To know the profits/losses of the branches, branch aceounts are prepared. By the consolidation of the profits and losses of the branches and head office itself, the profit/ loss of the whole business can be ascertained.

2. Control over Branches: Branch accounts help in controlling the activities of the branches and are helpful in assessing whether a particular branch is progressing or going downwards. Efforts man be made to control such branches which are showing discouraging position.

3. Fulfilment of Branch Requirement: Goods and cash needed by branches can be ascertained by preparing branch accounts and necessary arrangements can be made for the fulfilment of the branch requirement.

4. Knowledge of Assets and Liabilities: Branch accounts provide necessary information about the assets and liabilities of various branches.

5. Legal Requirement: It is legal requirement to maintain branch accounts of various branches As per the provisions of Companies Act, a company is required to keep accounts for every branch and get them audited.

Q.4. Write a short note on ‘Stock and debtors method of maintaining branch accounts.

Ans. Stock and Debtors Method: In order to have a detailed information and exercise more control over the branch stock, debtors method is used because a number of accounts are prepared for different purposes under this method. Under this system, instead of opening one branch account as in debtors system, separate accounts are opened for various types of transactions at the branch. Under ‘Stock and debtors method’, the head office usually maintain the following accounts:

1. Branch stock account.

2. Goods supplied to branch account.

3. Branch expenses account.

4. Stock reserve account.

5. Branch adjustment account.

6. Branch profit & loss account.

7. Branch assets account (Debtors A/c, Petty cash A/c, Furniture A/c, etc.)

Branch stock account is prepared to have a control over stock and to ascertain any shortage or surplus of stock. The purpose of goods supplied to branch A/c is to ascertain the net cost of goods sent to branch. As is clear from the name itself, all expenses are recorded in branch expenses account to ascertain the total expenses incurred at the branch. When H.O. sends goods at invoice price to the branch, then in order to remove the profit element (loading) included in closing stock, a stock reserve is created equal to the profit element by Debiting Branch Adjustment A/c and Crediting Stock Reserve A/c. Branch adjustment account is prepared like a Trading A/c to find out gross profit or loss. To ascertain net profit or net loss of branches, branch profit & loss account is prepared. Under stock and debtors method, H.O.opens separate accounts for each current and fixed assets as-Branch Debtors A/C, Branch Cash A/C, Branch Furniture A/C. These accounts are prepared under the usual accounting principles.

Q.5. Explain a wholesale branch.

Ans. Wholesale Branch: The producers of the goods generally sell their products to the wholesalers which was later on sold to the retailers who sell them to the consumers. Instead of selling goods to the wholesalers, they may send goods to their branches at wholesale price and the branches may sell goods to the consumers at retail price. By doing so, two advantages can be taken:

1. The branches may sell goods to the consumers at reasonable price; and

2. The head office may earn profits which otherwise had to be given to wholesalers plus the profit which is earned through branches by selling goods to the consumers. A memorandum Trading and Profit & Loss Account of the branch on wholesale price basis prepared to calculate the profit/loss of the branch under this method.

Under the wholesale branch method, the profit is divided into two parts as under:

1. Wholesale price – Cost to H.O.= Profit of H.O.

2. Selling price – Wholesale price = Profit of the branch

For example; a producer manufactures an item at a cost of 100. While its wholesale price is 130 and retail price is 150. If the producer sells goods to the wholesaler, he earns only 30. If the oducer sells goods to the consumers through his own branches, he will earn 50 R 30 + 20). us 30 is recognised as profit of H.O. and 20 as profit of the branch.

Explain ‘Cash-in-transit’ and ‘Goods-in-transit’.

Ans. Cash-in-transit: If the amount sent by the branch to the head office, is not received by the head office till the end of the accounting year, then it is termed as ‘Cash-in-transit’. The adjustment of this transaction will be made in the books of branch as follows:

Cash-in-transit A/C

To Head office

(Being cash sent to H.O. in transit)

Goods-in-transit: If the goods supplied by the head office has not reached the branch till the end of the accounting year, then it is termed as ‘Goods-in-transit’. The adjustment entry of such transaction will be made in the books of head office as follows:

Goods-in-transit A/c

To Branch A/C

(Being goods supplied by H.0. in transit)

Q.7. Show what entries would be passed by the head office on 31st March, 2015 to record the following transactions:

1. Goods amounting 5,000 transferred from Kolkata branch to Kanpur branch under instructions

from head office.

2. Depreciation of branch fixed assets when such accounts are opened in the head office books.

3. A consignment of 3,000 made by the Kanpur branch to head office on 26th March and received by the head office on 4th April, 2015.

4. Goods worth 5,000 sent by the head office to the Kanpur branch on 20th March, 2015 and

received later on April 15, 2015.

Sol. Journal Entries in the Book of Head Office

Date	Particulars	L.F.	Dr. Amount (Rs.)	Cr. Amount (Rs.)
31-3-2015 1.	Banpur branch A/c dr. To Kolkata branch A/c (Goods transferred from Kolkata branch to Kanpur branch)		5,000
2.	Branch A/c Dr. To branch fixed assets A/c (Depreciation on branch fixed assets)		–	–
3.	No entry will be recorded in H.O. Books on 31^st March,2015		–	–
4.	Goods-in-transit A/c Dr. To Kanpur branch a/c (Goods sent to Kanpur branch in transit)		5,000	5,000

Q.8. Explain inter-branch transaction.

Ans. Inter-branch Transaction: When a head office has various branches and the branches a allowed to transact with each other in certain circumstances, then the transactions between two branches are called inter-branch transactions. For example, branches can send goods or cash to om another and transfer their customers’ account to one another.

The transactions between the branches are recorded in the books of head office as well as in the books of concerned branches. The following entries are passed for the inter-branch transactions:

1. In the Books of Head Office:

Receiver branch A/C Dr.

To Sender branch A/C

(Gods/Cash sent by sender branch to receiver branch)

2. In the Books of Sender Branch:

Head office A/C

Dr. To Goods/Cash A/c

(Being goods/cash sent to … branch under the instruction of H.O.)

3. In the Books of Receiver Branch: Dr.

Goods/Cash A/C

To Head office A/C

(Goods/Cash received from … branch under the instruction of H.O.)

Classification of Entries in the Books of Branch: As a branch is not permitted to open account of the other branches in its books, so each branch considers the transaction with the other branch as a transaction with head office and recorded accordingly. If a branch sends some goods or cash to other branches, then it is treated as goods or cash sent to head office and if a branch receives some goods or cash from other branches, then it is treated as goods or cash received from head office.

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BCOM 1st Year Branch Account Short Question Answer Study Material Notes

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