Branch Account


Welcome to class! 

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

Branch Account

Branch Account |

A branch Account is a system of accounting adopted to record the transactions of a small part of a business organization which has or has not some degree of independence.

Divisions of branch accounting

The divisions can be:

 1. Where the head office keeps all the accounts: This happens where the branch is fully dependent on the head office. In this case, the following accounts are kept.

  • Branch stock A/C
  • Goods sent to branch A/C
  • Branch stock adjustment A/C
  • Branch debtors A/C (where credit sales are allowed)
  • Branch bank A/C
  • Branch profit & loss A/C

2. Where the branches keep separate accounts: This happens where a branch is semi-autonomous. In this situation the following accounts are kept to show the relationships:

    • Branch current A/C in head office books
    • Head office current A/C in branch books
Pricing methods

Three different pricing methods are available for charging goods to branches. They are:

  1. At cost price: This is used when the goods concerned are perishable so that branch managers can use their discretions to avoid losses.
  2. At cost plus a percentage: This helps the head office to exercise control over the branch by stating the required percentage profit.
  3. At selling price: This is a measure of control also where the branch has no choice but to sell the goods at the selling price given.

Note: Where the cost plus a percentage method of pricing is used, two methods of accounting can be used also:

  1. Double column or a memorandum column method
  2. Branch adjustment method.
A memorandum or double column method

This method combines two accounts:

  1. Branch Stock Account which appears in the invoice price column and
  2. Branch Stock Adjustment Account which appears in the “cost price” column However the use of this method requires some items or transactions to be shown at the same price in the two separate columns. These items are:
  • Cash sales
  • Credits sales
  • Cash remitted to head office
  • Cash in transit
  • Sundry expenses from takings (ie sales)
  • Sundry expenses paid out of cash
  • Cash taken/stolen.

Thus, the adoption of the memorandum or double column method, in cost plus percentage pricing system, requires the following accounts:

  1. Branch stock A/C with double column i.e. memorandum branch A/C
  2. Goods sent to branch A/C (entries in this A/C are made at cost price only)
  3. Branch P & L A/C/

Formats of the three account above:

Memorandum Branch Stock A/C

Invoice          cost                                                    invoice          cost

Price               Price                                                   Price               Price

N                     N                                                                     N                     N

Stock at start            X                      X          Rent to head office                       X                      X

Goods sent to Branch x                x          credit sales                                       x                      x

Gross profit C/D                              x          cash sales                                         x                      x

Allowance of selling price           x                      x

Goods stolen                                   x                      x

Cash stolen                                      x                      x

Expenses paid

Out of takings                                 x                      x

Normal loss                                      x                      x                                                                      stock at close                                  x                      x

X                      x                                                          x                      x


Goods sent to branch A/C (at cost)

N                                             N

Returns to branch              x          branch stock A/C   x

Transport to head Office

Trading A/C                         x

X                                              x

Branch profit & Loss A/C

N                                             N

Branch  stock A/C                         Gross profit               x

Sundry expenses                x          (from a memo.

Branch Stock A/C)

Stock stolen at cost price x

Cash stolen                          X

Net profit                              x

X                                              x


  1. What is a branch accounts
  2. State the pricing methods in branch accounts


Suzi Ltd operates a head office in Lokoja and branch office in Lagos. All goods are purchased by Lokoja and sent to Lagos at cost plus 25%. The following information was given for the year ended 31/12/04.


Credit sales                                                              3,500

Goods sent to branch at cost                            50,000

Returns to head office at cost                            500

Cash takings remitted to H.O.                            10,000

Stock at close at cost price                                 12,500

Cash takings/stolen                                               150

Sundry expenses paid out of takings               950

Goods stolen at cost                                             40

Allowances off selling price                                100

You are required to prepare

  • Branch A/C in the head office books including the necessary A/Cs
  • The P & L A/C for the ended 31/12/04

The system of accounting the head office uses is the memorandum column method.



Step 1: Calculate the selling price (or invoice price) using the mark-up of 25% on cost

  1. Selling price of goods sent to branch

Profit = mark-up x cost price

= 25/100 x 50,000 = N12500


  1. Selling price = cost + profit

=          50,000 + 12500

= N623,500


  1. Selling price of returns to Head office

=          cost + mark-up

=          N500 + (25/100 x 500)

  1. P = N500 + 125 = N625


  1. Selling price of stock at close

=          cost + mark-up

=          N12500 + (25/100 x 12500

  1. P = N12500 + 3,125 = N15,625


  1. Selling price of goods stolen

=          cost + mark-up

=          N40 + (25/100 x N40)

  1. P. =          N40 + 10 = N50


step II: Preparation of branch stock A/C using memorandum column

Memorandum branch stock A/C

Invoice          cost                                                    Invoice          cost

Price               Price                                                   Price               Price

N             N                                                     N                     N

Goods sent to branch      62,500   50,000 Rent to head office      625                 500

Gross profit C/D                  –              9140    credit sales                       3500               3500

x    cash remitted to H. Office10,000      10,000

cash takings/stolen            150                 150

sundry expenses                 950                 950

goods stolen                       50                    40

Allowance off selling price100           –                                                                                       stock at close                      15624      12500

62500    59140                                              62500       59140


Profit & loss A/C

N                                                         N

Sundry expenses                950                 Gross profit B/D       9140

Cash stolen                          150

Goods stolen at cost         40

Net profit                              8000

  • 9150


  1. State four objectives of Branch Accounting.
  2. State five reasons why branches may decide to keep their accounts rather than the Head office doing so.
General evaluation
  1. State five characteristics of depreciable assets
  2. Explain three reasons why an accountant will consider end- of- year adjustments
  3. Differentiate between bad debts and provision for bad debts
  4. Differentiate between the bank statement and bank reconciliation statement
  5. State four reasons for making provision for depreciation

Reading assignment

Simplified and Amplified Financial Accounting – page 466-487

Essential financial Accounting by O.A. Longe and other pages 375-379

Weekend assignment

  1. If the cost of goods is N10,000 and there is a 25% mark-up on it, then the selling price is ———-(a)N10,000 (b)N10,200 (c)N12,500 (d)N13,500
  2. If the cost of an article is N500 the company’s profit margin is 20% then the selling price is ———-(a)N6250 (b)5000 (c)72250 (d)6000
  3. If the margin allowed by a business is 25% then the business mark-up is ———-(a)20% (b)30% (c)311% (d)50%
  4. If the profit on cost price is 1/5 then the profit on selling price is ———-(a)1/2 (b)1/3 (c)5% (d)1/4 (e)1/6
  5. The margin on sales of a trader is 15%, therefore, the trader’s mark-up is ———-(a)12/7 (b)15/17 (c)3/20 (d)3/17


In our next class, we will be talking more about Branch Account.  We hope you enjoyed the class.

Should you have any further question, feel free to ask in the comment section below and trust us to respond as soon as possible.

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