HOME OFFICE, BRANCH & AGENCY ACCTG

LECTURES FROM YT: ACCTG LESSONS W BCV

PART 1: AGENCY VS BRANCH
AGENCY BRANCH
Nature New sales outlet put up by the head office to reach new territories or markets.
Not an independent business but rather acts only An independent business which acts
Business form on behalf of the home office. independently but within the bounds of company
policy and subject to the control of the home
office.
Does the sales outlet Displays merchandise and takes Carries stock of merchandise used to fill customer
carry stocks or customers' orders but does not carry stock of orders (or provides services similar to those
merchandise? merchandise to fill customers' orders. provided by the home office).
Customers' orders are sent to the home office for Grants credit in accordance with the company's
Manner of filling up to approval of credit. Customers remit payments policies,
customers’ orders directly to the home office. makes normal
warranties, fill customers' orders, and makes
collections on sales.
Holds revolving cash (Working Fund) fund Has its own assets and liabilities and generates its
Funds/accounts held provided by the home office that is replenished own revenues and incurs its own expenses. Makes
when depleted. No other cash funds are held. periodic remittances to home office subject to
company policy.
Not a separate accounting entity. The only A separate accounting entity for internal
accounting records maintained are cash receipts reporting. It maintains its own complete set of
Does it maintain its own and cash disbursements books necessary to accounting records. For external reporting, the
accounting records? account for the revolving fund. The home or main branch’s financial statements are combined with
office maintains records of sales made through the home office’s financial statement.
the agency and the expenses it incurs.

PART 2: ACCOUNTING FOR AGENCY HOME OFFICE’S BOOKS BRANCH’S BOOKS

ENTRIES MADE BY HOME OFFICE Establishment of branch by transferring cash to the branch
Establishment of Working Fund – Agency Branch current xx Cash xx
agency working fund Cash Cash xx HO – Current xx
Shipment of samples Sample Inventory Shipment of merchandise by home office to branch
Shipment to Agency Branch current xx Shipment from HO xx
Receipt of orders from Accounts Receivable Shipment to Branch xx HO – current xx
customers Sales – Agency Purchase of merchandise from outsiders by the branch
Cost of shipment to COGS Purchases xx
agency Merchandise Inventory NO ENTRY A/P or Cash xx
Replenishment of Expenses (Itemized)
agency working fund Cash
COST OF GOODS SOLD COMPUTATION
PART 3: HOME OFFICE & BRANCH GENERAL ACCTG Home Office Branch
Maintained Branch Noncurrent Beg. Inventory xx xx
in the books current/ asset (LT Net Purchases:
of the home Investment Investment) Shipments to Branch (xx)
Reciprocal office in Branch Shipments from HO xx
Accounts Maintained COG-Available for Sale Xx xx
in the books Home office Less: Ending Inventory (xx) (xx)
current Equity
of the Cost of Goods sold xx xx
branch

ACCOUNTING FOR BRANCH PLANT ASSETS

Branch plant asset recorded are maintained in the books of Branch plant asset recorded are maintained in the books of
the Home Office – METHOD 1 the Branch – METHOD 2
HO’s books Branch’s Books HO’s books Branch’s Books
THE HOME OFFICE PURCHASED AN EQUIPMENT FOR BRANCH’S USE
Equipment – Branch xx Branch – current xx Equipment xx
Cash xx NO ENTRY Cash xx HO – current xx
THE BRANCH PURCHASED AN EQUIPMENT TO BE USED IN ITS OPERATIONS
Equipment – Branch xx Home Office – current xx Equipment xx
Branch – current xx Cash xx NO ENTRY Cash xx
RECORDING DEPRECIATION EXPENSE ON BRANCH’S EQUIPMENT
Branch – current xx Depreciation Expense xx Depreciation expense xx
Accum dep’n xx HO – Current xx NO ENTRY Accum dep’n xx
*Kung sino ang gumagamit nasa kanya ang Depreciation Expense.
**Kung nakanino ang record nasa kanya ang Accumulated Depreciation
HOME OFFICE, BRANCH & AGENCY ACCTG
LECTURES FROM YT: ACCTG LESSONS W BCV

PART 4: HOME OFFICE AND BRANCH: RECONCILIATION

OF RECIPROCAL ACOCUNTS
BRANCH CURRENT  HOME OFFICE – CURRENT
­ Timing differences
­ Errors

PART 5: HOME OFFICE AND BRANCH: SPECIAL

PROCEDURES – MERCHANDISE AT BILLED PRICE
CONCEPT OF “BILLED PRICE”
Original Cost
Billed Price
Mark-up imposed by the HO

SHIPMENT OF MERCHANDISE TO THE BRANCH

HO’s Books
Br – current (at Billed Price) xx
Shipments to Branch (at original cost) xx
Allowance for overvaluation (AFO) xx
Branch’s Books
Shipments fr Home Office xx
Billed Price
Home Office - current xx

COMPUTATION OF COST OF GOODS SOLD

Fr Home Office billed original Overvaluation
price cost
Beg Inventory
Shipments fr HO
Cost of GAS Unadjusted bal
Less: Ending Inv Adjusted bal
COGS Realized mark-
up/ adjustments
to AFO

PART 6: HOME OFFICE AND BRANCH: SPECIAL

PROCEDURES – INTERBRANCH TRANSFERS
­ As if they are transacting with the Home Office.

Total Freight paid xx

Less: Should be freight xx
Excess freight xx
 Loss on inter-branch transfer
 Recorded in the books of Home Office