Branch Accounts

Seminar Questions

Question One:

The following are the details of the ABC a business branch of CD Company
Ltd.
- Stock at cost on 1st January 2008 was Tshs.1,200,000
- Goods sent to the branch at cost during the year Tshs.6,000,000
- Branch sales Tshs.7,428,000
- Stock 31st December 2008 at cost Tshs.1,500,000
- Allowances for wastage set at 1% of branch sales expenses
Tshs.1,000,000
- The actual deficiency was to be tolerated to the maximum of 1% of
total sales of the branch, although the actual deficiency became
Tshs.172,000.
- The branch sells goods at a uniform mark-up of 33⅓% profit on cost
price.
Required: Open up the ABC Branch Trading and Profit and Loss Account.

Question two
QT Ltd, whose head office is at Mbeya, operates a branch at Kigoma. All
goods are purchased by head office and invoiced to and sold by the branch
at cost plus 33⅓%. Other than a sales ledger kept at Mbeya, all transactions
are recorded in the books at Kigoma. The following particulars are given of
the transactions at the branch during the year ended 28 th February,2007.

Tshs.
Stock on hand, 1st March 2006, at invoice price 4,400,00
Debtors on 1st March 2006 0
Stock on hand, 28th February 2007, at invoice price 3,946,00
Goods sent from Mbeya during the year at invoice price 0
Credit sales 3,948,00
Cash sales 0
Returns to head office at invoice price 24,800,00
Invoice value of goods stolen 0
Bad debts written off 21,000,00
Cash from debtors 0
Normal loss at invoice price due to wastage 2,400,00
Cash discount allowed to debtors 0
1,000,00
0
600,00
0

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 148,00
0
22,400,00
0
100,00
0
428,00
0

You are required to write up the branch stock account and the branch total
debtors account for the year ended 28th February 2007, as they would
appear in the head office books.

Question three

Pappy Limited with its head office in Kibaha invoiced goods to its branch at
Mwanza at
20% less than the catalogue price which is cost plus 50% with instructions
that cash sales were to be made at invoice price and credit sales at
catalogue price. Head office also gave the instruction to provide discount @
15% of catalogue price on prompt payments by debtors. From the particulars
available from the branch, prepare the Branch Stock Account, Branch
Adjustment Account and Branch Profit and Loss Account for the year ended
31st March, 2008 (showing workings) in the head office books:
Tshs.
Stock on 1st April, 2007 (Invoice Price) 12,000,000
Debtors on 1st April, 2007 10,000,000
Goods received from H.O. (Invoice Price) 132,000,000
Sales (Cash) 46,000,000
Sales (Credit) 100,000,000
Cash received from Debtors 85,635,000
Discount allowed to Debtors 13,365,000
Expenses at the Branch 6,000,000
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Remittances to H.O. 120,000,000
Debtors on 31st March, 2008 11,000,000
Cash in hand on 31st March, 2008 5,635,000
Stock on 31st March, 2008 (Invoice Price) 15,000,000
It was further reported that a part of the stock was lost by fire (not covered
by insurance) during the year whose value is to be ascertained and a
provision should be made for discount to be allowed to debtors as on 31st
March, 2008 on the basis of year’s trend of prompt payments.

Question four
Nikon is a retail stock outlet operating from a head office in London and a
branch in Manchester. The following trial balances have been extracted from
the books of account as at 31st October, 2001.

Head Office Books Branch

Books
DR Cr Dr
Cr
£ £ £ £
Drawings 40,000
Non Current Assets: at cost 350,000 100,000
Acc. Depr (As at 1 Nov.2000)
st
140,000
30,000
Stock at 1st Nov.2000 8,000 20,000
Provision for unrealized profit 4,000
Purchases 914,000
Goods sent (invoice price) 380,000
375,000
Sales 850,000
437,000
Provision for doubtful debts 9,000
2,500
Current accounts 175,000
120,000
Distribution expenses 80,500 5,000
Administrative expenses 200,000 16,500
Trade debtors 60,000 60,000
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Trade creditors 50,000
Cash and Bank balances 15,500 13,000
Capital 410,000

Additional information:

1. All goods are purchased by the head office. Those goods sent are invoiced at
cost plus 25%.
2. Stocks were valued at 31 October 2001 as being at head office, £12,000; and
at the branch, £15,000 at their invoiced price.
3. Depreciation is to be provided for the year on the fixed assets at a rate of
10% on the historic cost.
4. The provision for doubtful debts is to be maintained at a rate of 5% of
outstanding trade debtors as at the end of the financial year.
5. As at 31st October 2001, there was £50,000 cash in transit from the branch to
the head office; this cash was received in London on 3 rd November 2001.
There was also £5,000 of goods in transit at invoice price from the head office
to the branch; the branch received these goods on 10 th November 2001.

Required: Prepare,

In adjacent columns; the head office, and the branch income statements for
the year to 31st October 2001; and a combined statement of financial
position as at that date

Foreign Branch Questions:

Question 1
S & M Ltd. a UK company operating in Manchester, has a branch in Sydney,
Australia. The Sydney branch is an integral foreign operation of S & M Ltd.

At the end of 31st March, 2011, the following ledger balances have been
extracted from the books of the Bombay Office and the Sydney Office:

Manchester Sydney
(£ in thousands) (Austr. Dollas in
Thousands)
Debit Credit Debit Credit
Share capital - 2,000 - -
Reserve and surplus - - - -
Land 500 - - -
Buildings (cost) 1,000 - - -
Building depreciation - 200 - -
Plant and Machinery (Cost) 2,500 - 200 -
Plant and Machinery depreciation - 600 - 130
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Debtors / Creditors 280 200 60 30
Inventory (1.4.2010) 100 - 20 -
Branch Inventory reserve - 4 - -
Cash and Bank balances 10 - 10 -
Purchases / Sales 240 520 20 123
Goods sent to Branch - 100 5 -
Managing Director’s salary 30 - - -
Wages and Salaries 75 - 45 -
Rent - - 12 -
Office Expenses 25 - 18 -
Commission Receipts - 256 - 100
Branch / H.O current Account 120 - - 7
4,880 4,880 390 390

The following information is also available:

Depreciation on building and on plant and machinery is charged at 10% p.a.
Inventory as at 31.3.2011 was:
- Manchester £150,000
- Sydney A$3,125
Required:
i) Prepare the branch financial statements in pounds.
ii) Prepare the combined (branch and Head office) financial statements.
The following rates of exchange were available:
Opening rate A$=£20
Closing rate A$=£24
Average rate A$=£22
For all non-current assets A$=£18

Question 2:
Carlin & Co. has a head office in New York (U.S.A) and a branch at Tokyo
(Japan). Tokyo branch is an integral foreign operation of Carlin & Co. Tokyo
branch furnishes you with its trial balance as on 31 st March, 2012 and the
additional information given thereafter:
Japans yen
in thousands
Dr.
Cr.
Inventory on 1st April, 2011 300 -
Purchases and Sales 800 1,200
Sundry Debtors and Creditors 400 300
Bills exchange 120 240
Wages and salaries 560 -
Rent, rates and taxes 360 -
Sundry charges 160 -

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Computers 240 -
Bank balance 420
New York office Account 1,620
3,360 3,360

Additional information:
a) Computers were acquired from a remittance of US $ 6,000 received
from New York head office and paid to the suppliers. Depreciate
computers at 60% for the year.
b) Unsold inventory of Tokyo branch was worth ¥420,000 on 31 st March,
2012.
c) The rates of exchange may be taken as follows:
 On 1.4.2011 @ ¥40 per US $
 On 31.3.2012 @ ¥42 per US $
 Average exchange rate for the year @ ¥41 per US $

Required:
Prepare in US dollars, the Tokyo branch income statement for the year ended 31 st
March, 2012 and the Statement of Financial Position as on that date as would
appear in the books of New York head office of Carlin & Co.

You are also informed that, Tokyo branch account showed a debit balance of US $
39,609.18 on 31.3.2012 in New York books and there were no items pending
reconciliation.