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Hoba Review

Notes on Accounting for Home Office, Branch and Agency

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Sophia Lampa
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133 views2 pages

Hoba Review

Notes on Accounting for Home Office, Branch and Agency

Uploaded by

Sophia Lampa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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General Procedures: Accounting for Branch Operations

- A branch is accounted for as a separate entity but subject to the control of the home office
- The home office and its branch usually maintain its own accounting books/records and prepares
their own financial statements
o Each records its transactions with outside parties in its own accounting books/records in
the usual manner
o Both the home office and the branch must record transaction with one another in their
respective accounting books/records
▪ These are recorded in intra-company/reciprocal accounts
▪ All accounts are combined for purposes of external financial reporting, so that the
financial statements will represent the company as a single economic entity.

Maintained in the Branch


books of the home current/Investment Noncurrent asset
office in Branch
Reciprocal
Accounts
Maintained in the Home office
Equity
books of the branch current

Home office’s books Branch’s books


Establishment of branch by transferring cash to the branch
Branch current xx Cash xx
Cash xx Home office current xx
Shipment of merchandise by home office to the branch
Branch current xx Shipment from Home office xx
Shipment to Branch xx Home office current xx
Purchase of merchandise from outsiders by the branch
Purchases xx
No entry
Accounts Payable/Cash xx

Formula: Cost of goods sold

Home office Branch


Beginning inventory xx xx
Net purchases xx xx
Shipment to Branch (xx) -
Shipment from Home office - xx

Cost of goods avail. for sale xx xx


Ending inventory (xx) (xx)
Cost of goods sold xx xx

Branch plant asset records – maintained in Branch plant asset records – maintained in
HO’s books Branch’s books
Home office’s books Branch’s books Home office’s books Branch’s books
The home office purchased an equipment for branch’s use
Equipment-Br xx Branch current xx Equipment xx
No entry
Cash xx Cash xx HO current xx
The branch purchased an equipment to be used in its operations
Equipment-Br xx HO current xx Equipment xx
No entry
Branch current xx Cash xx Cash xx
Recording depreciation expense on branch’s equipment
Branch current xx Dep. Exp. xx Dep. Exp. xx
No entry
Acc. Dep. xx HO current xx Acc. Dep. xx
Special Procedures: Merchandise at Billed price

Original cost

Billed Price
Mark-up
imposed by the
HO

Shipment of merchandise to the branch


HO’s books Br.’s books
Branch current Shipments from HO (@BP) xx
Branch current(@BP) xx Home office current (@BP) xx
Shipments to Branch (@OC) xx
Allowance for Overvaluation (MU) xx

Unadjusted Allowance = COGAS-HO

Adjusted Allowance = EI-HO

Realized Markup/Adjustment to AFO = COGS-HO

• Equal to the difference of Branch COGS & True Branch COGS


• Equal to the total of Branch NI & True Branch NI

When true amount is required = use original cost

Combined COGS/NI = use true amounts

“per GAAP” = true amount (original cost)

FIFO system = use most recent markup (SHO)

Original cost = always @ 100%

Special Procedures: Interbranch Transfers

Focuses on transactions between branches – as if they are transacting with the Home Office

Interbranch transfers of CASH – as if branch is remitting(receiving) cash to(from) HO

Interbranch transfers of MERCHANDISE

Excess Freight = Loss on Interbranch Transfers

• Recorded in HO’s books

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