Branch Account II


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In today’s class, we will be talking more about the branch account. Enjoy the class!

Branch Account II

Branch Account |


  • Branch Adjustment Method
  • Accounting Entries
  • Formats and Illustration
  • Where branches keep separate Accounts

Branch adjustment method of branch accounting

Unlike the memorandum or double column method, under this method, the profit loading will be taken to a separate A/C called “Branch adjustment A/C”. Under this method, the following are the main A/C that will be prepared:-

  1. Branch stock A/C – at invoice price
  2. Branch stock adjustment A/C showing profit loading
  3. Goods sent to branch A/C – based on the cost price
  4. Debtors A/C (where goods are sold or credit)
  5. Branch P & L A/C
Accounting entries
  1. When goods are sent to branch Dr. Branch stock A/C at invoice price Cr. Goods sent to branch A/C (at cost)
  2. When there are sales – cash or credit Dr. Cash A/C with cash sales Dr. Debtors A/C with credit sales Cr branch stock A/C with cash or credit sales.
  3. Stock at the start.

Dr. branch stock A/C – (with invoice price) Cr. Branch stock adjust A/C (profit loading)

  1. Stock at close

Dr. Branch stock adjust A/C (profit loading)

Cr. Branch stock A/C with invoice price

  1. Returns to head office.

Cr. Branch stock A/C at invoice price

Dr. Goods sent to branch A/C at cost price

Dr. Branch stock adjustment A/C with profit loading

  1. Transfer to other branches

Cr. Branch stock A/C at invoice price

Dr. Goods sent to branch A/C at cost price

Dr. branch stock adjustment A/C with profit loading

  1. Allowances of selling price or reduction in selling price

Dr. branch stock adjustment A/C (total allowance)

Cr. Branch stock A/C (total allowance)

  1. Goods in transit

Dr. branch stock adjustment A/C (with profit loading)

Cr. Branch stock A/C (with invoice price)

  1. Goods lost in transit

Dr. Branch stock adjustment A/C (with profit loading)

Dr. Goods lost in transit A/C (at cost price and write it off to P & L A/C)

Cr. Branch stock A/C (at invoice price)

  1. Goods stolen or deficiencies

Cr. Branch stock A/C (invoice price)

Dr. Branch stock adjustment A/C (profit loading)

Dr. Goods stolen A/C (with cost price)

  1. Cash Stolen

Cr. Branch stock A/C (Total amount)

Dr. Defalcation A/C (total amount) to be written off to P & L A/C

  1. Goods returned by customers to head office

Cr. Debtors A/C (invoice price)

Dr. goods sent to branch A/C (cost price)

Dr. Branch stock adjustment A/C (profit loading)

  1. Balance of adjustment A/C will be transferred to branch profit and loss A/C
  2. The goods sent branch A/C will be closed by transferring the balance to H.O. trading A/C. Formats

Branch Stock Account (invoice price)

N                                                                                 N

Stock at start                        x          goods transferred to another branch x

Goods sent to branch      x          cash sales                                                     x

Credit sales                                                  x

Expenses paid out of takings                  x

Reducting in selling price             x

Goods in transit                                          x

Returns to H.O.                                            x

Cash stolen (pilterage)                             x

Normal loss                                                  x

Cash in hand                                              x

Bal c/d stock at close                               x

xx                                                                               xx


Goods sent to Branch A/C (cost price)

Return to H.O                      x          Branch stock A/C                                      x

Transfer to other branch  x

Bal C/D transp. To H.O

Trading A/C                         x

x                                                                                  x




Branch stock adj. or branch mark-up Account profit loading

                                      N                                                                 N

Profit on return to H. O      x                      Profit on opening stock                x

Profit on stock at close     x                      profit on goods sent to branch x

Profit on goods returned

By customers to H.O          x

Profit on goods in transit  x

Normal loss (selling price)x

Profit on goods stolen      x

Profit on return to other

Branch                                  x

Reduction in selling pricex

GP to branch & P&L A/C

c/d                                         x

xx                                                                                xx



Branch P & L A/C

                                                N                                                                                 N

Cost of goods stolen                     x                      Branch stock Adj A/C b/d           x

Sundry expenses                            x

Cost of goods lost in transit         x

Cost stolen                                       x

Net profit c/d                                  x

xx                                                                                xx


Evaluation questions

  1. What are the entries involved in selling goods on credit by a branch?
  2. What is the purpose of preparing branch stock accounts?



Suzuki Ltd has a head office in Lagos and a branch in Ibadan. All goods are purchased by the head office and sent to Ibadan at cost plus mark-up of 1/3 of the selling price. During the year to 31/12/05 the following transaction took place at Ibadan.


Goods received from Lagos                              360,000

Goods returned to Lagos                                    3360

Bad debt                                                                  1192

Cash received from debtors                              137248

Cash discount given                                             3616

Cash sales                                                                201600

Credit sales                                                              144,000


The following additional information is relevant

1/1/05                        31/12/05


N                                 N

Stock in hand at selling price      32160                         42000

Debtors                                             13216                         15160


You are required to prepare

  1. Branch stock A/C
  2. Goods sent to Branch A/C
  3. Branch stock adjustment A/C
  4. Branch debtors A/C


Suzuki Ltd

Branch stock A/C (invoice price)

N                                                                     N

  1. balance b/f             32160             cash sales                             201600

Goods sent to branch debtors

At cost (2/3 x 360,000)                  240,000          -credit sales                          144,000

Branch stock adj.                                                   goods return

Profit loading (1/3 x 360,000)      120,000          to H.O.

Cost – (2/3 x 3360)             2,240

Branch stock


Loading (1/3×3360)           1,120

Branch stock

(The difference)                  1,200

bal (c/d stock

at close                                 4,200

39216                                                             39216

  1. Goods sent to branch A/C (cost price)

N                                                                     N

Branch stock

Goods returned to H.O                            A/C (2/3×360,000)                         240,000

Cost (2/3×3360)                    2240

Transferred to

H.O. trading A/C

(Balancing figure)              237,760

240,000                                                          240,000


  1. Branch stock adjustment A/C (profit loading)

                                                     N                                                                                 N

Branch stock A/C                                                  bal b/f (1/3×32,160                        10,720

Less in stock                          1200                           branch stock A/C              120,000

Returns to H.O                                                         (profit on G.S.B

(profit on it 1/3×3360         1120                           (1/3×360,000)

Profit on closing

Stock (1/3×42000) c/d      14,000

Branch P&L A/C GP c/d  114,400

130720                                                                       130720

Bal b/d                                              14000




  1. Branch debtors A/C

                                                N                                                                 N

Bal b/f                                    13216             cash received from debtors       137248

Credit sales                          144,000          Discount allowed                           3616

Bad debt                                          1192

Bal c/d                                              15,160

157216                                                                       157216

Bal b/d                                  15160


Evaluation questions

  1. Explain the following pricing methods used in preparing branch accounts

(a)   cost price       (b) cost plus a percentage       (c) selling price

  1. List any five items that may feature in the Branch stock Adjustment Account.
General evaluation
  1. List five source documents used in preparing the Cash Book
  2. State five  factors to be considered in determining the depreciation charge for a fixed asset
  3. State five differences between capital expenditure and revenue expenditure
  4. State three features of each of the following (a) cash book (b) trading account (c) profit and loss account
  5. Differentiate between prime costs and overhead costs

Reading assignment

Essential Financial Accounting O. A. Longe, Pages 379-383


In our next class, we will be talking about Introduction to Data Processing.  We hope you enjoyed the class.

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