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ACCOUNTING CA/CMA SANTOSH KUMAR

BRANCH ACCOUNTING
DEPENDENT BRANCH- (DEBTORS SYSTEM)

Question 1. Prepare branch Account under debtor system with following information.
Balance as on 1Jan 2015
Building = 2,00,000
Cash = 40,000
Debtors = 30,000
Stock = 35,000
Furniture = 1,00,000
Goods sent to Branch during the year = 3,80,000
Expenses paid by Branch = 28,000
Expenses paid by H.O = 22,000
Bad debts = 10,000
Cash sales = 2,20,000
Credit sales = 8,00,000
Collection from debtors = 6,30,000
Balances as on 31st December,2015
Stock = 25,000
Charge depreciation @ 10% on furniture.

Question:2 Opening balance of Cash = Nil

Cash sales = 40,000
Collection from debtors = 2,00,000
Expenses paid by Branch = 12,000
Expenses paid by H.O = 20,000

Question:3 Opening balance of cash = 15,000

Cash sales = 80,000
Collection from debtors = 2,50,000
Expenses Paid by Branch = 22,000
Expenses paid by H.O. = 8,000

Question:4 Opening balance of Cash = 10,000

Cash sales = 1,20,000
Collection from debtors = 2,40,000
Expenses paid by Branch = 18,000
Remittance by Branch to H.O = 2,30,000

Question:5 Opening balance of Cash = 20,000

Cash Sales = 1,40,000
Collection from debtors = 2,30,000
Cash sent by H.O to Branch= 15,000
Expenses incurred by Branch= 22,000

Question:6 Opening balance of Cash = 30,000

Cash sales = 4,00,000
Collection from debtors = 3,00,000
Expenses incurred by Branch= 45,000
Cash sent by H.O to Branch = 12,000
Remittances by Branch = 6,70,000

Question:7 Prepare branch account under debtor system.

Debtors(opening) = 40,000
Stock(opening) = 25,000
Goods sent to Branch = 7,00,000
Cash sales = 2,20,000

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 ACCOUNTING CA/CMA SANTOSH KUMAR

Credit sales = 5,80,000

Goods returned to HO = 35,000
Discount allowed = 80,000
Bad debts = 2,000
Collection from debtors = Rs. 3,30,000
Stock lost by fire = Rs. 8,000
Normal loss of stock due to spoilage= 4,000
Expenses paid by HO = 10,000
Goods are sold at a profit of 40% on sales.

Question:8 The COC Pvt. Ltd. invoices goods to their various branches at cost and the branches sell on credit as
well as for cash. From the following details relating to the Bombay branch, prepare the necessary
accounts in the Head Office books.

Debtors, 1st January, 2011 26,200

Debtors, 31st December, 2011 31,100
Cash Balance, 1st January, 2011 300
Stock, 1st January, 2011 15,000
Stock, 31st December, 2011 13,900
Goods received from Head Office 50,800
Cash received from Head Office 1,500
Goods returned to Head Office 700
Cash sales 33,500
Credit Sales 60,000
Allowances to Customers 320
Returns from Customers 580
Discount allowed to Customers 2,400
Bad Debts 600
Remittance to Head Office 74,900
Rent and Rates 1,800
Wages and Salaries 6,000
General Trade Charges 1,300
Normal loss of goods due to wastage 1,200
Abnormal loss of goods due to pilferage 3,000
Ans.: Profit 29,300 (ICWA-INTER 16 MARKS)

Question:9 Opening Balances at Branch as on 1 Jan 2015

Cash = 30,000
Debtors = 50,000
Stock = 20,000
Machine = 1,00,000
Creditors = 15,000
O/s rent = 5,000
Prepaid salary = 10,000
During the year:
Goods sent to Branch = Rs. 6,50,000
Cash sales = Rs. 2,00,000
Credit sales = Rs.9,00,000
Collection from debtors = Rs. 7,80,000
Credit purchase of goods = Rs. 60,000
Expenses Paid by H.O
Rent paid @ 5,000 p.m = 65,000
Salary (including Rs. 8,000 for next year) =70,000
Office expenses = 12,000
Insurance paid for the year ending on 31st March 16Rs. 12,000
Payment to creditors by H.O = 58,000
Petty expenses paid by Branch = Rs. 16,000
Closing balance of Stock = Rs. 75,000.
Charge depreciation @ 10 % on Machine
Prepare Branch Account.

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ACCOUNTING CA/CMA SANTOSH KUMAR

Question:10. IOCM with its Head Office at Delhi has a branch at Bombay. The Branch receives all goods
from Head Office who also remits cash for all expenses. Sales are made by the Branch on credit as well as
for cash. Total Sales by the Branch for the year ended 31st March, 2012 amounted to Rs.5,60,000 out of
which 20% is cash sales. The following further information is also relevant.

1-4-2011 31-3-2012
Stock-in-Trade 25,000 36,000
Debtors 60,000 48,000
Furniture 8,000 ?
Petty Cash 120 180
Expenses actually incurred by the Branch during the year were:
Salaries Rs. 36,000
Rent Rs. 9,000 (up to 31stDecember 2011)
Petty expenses Rs. 5,600
Sale of furniture on 1st October 2011 (Book value of furniture on the date of sale Rs.950) amounted to
Rs.900. All sales are made by the Branch at cost plus 25% Depreciation on furniture is 10% p.a.
Prepare Mumbai Branch Account in the books of IOCM(Head Office) for the year ending on 31sl March
2012.
[Ans. Cash received from Debtors = Rs.4,60,000; Goods sent to Branch = Rs. 4,59,000; Profit =
Rs.57,600]
( ICWA-INTER, CA-INTER-16 MARKS) ( BAS DIL KHUSH HO GAYA)

When goods are sent at Invoice Price

Question:11Hindustan Industries, Bombay has a branch in Cochin to which goods are invoiced at cost plus
25%. The Branch sells both for cash and on credit. Branch expenses are paid direct from Head Office and the
Branch has to remit all cash received into the Head office Bank Account at Cochin.

From the following details relating to the calendar year 2012, prepare the accounts in the Head Office Ledger
and ascertain the Branch Profit. Branch does not maintain any books of account, but sends weekly returns to
Head Office:

Goods received from Head Office at invoice price 6,00,000

Returns to Head Office at invoice price 12,000
Stock at Cochin as on 1st Jan. 2012 60,000
Sales in the year - Cash 2,00,000
-Credit 3,60,000
Sundry Debtors at Cochin as on 1stJan., 2012 72,000
Cash received from Debtors 3,20,000
Discount allowed to Debtors 6,000
Bad Debts in the year 4,000
Sales returns at Cochin Branch 8,000
Rent, Rates, Taxes at Branch 18,000
Salaries, Wages, Bonus at Branch 60,000
Office Expenses 17,600
Stock at Branch on 31st December 2012 at invoice Price 1,20,000
[Ans. Branch P/L surplus-24,000; Balance of Branch Debtors A/c 94,000. (Study material of ICAI)

Question:12. Gola Cloth Emporium has a head office in Bombay and many retail branches which are supplied
goods from head office at 25% profit on cost price. Accounts are kept at head office from where all expenses
(except petty expenses) are paid. Such petty expenses are paid by the branches which are allowed to maintain
petty cash balance of Rs. 1500 on imprest system. From the following balances as shown by the books, prepare
branch account:

Balances as on 1 January 2011:

Petty cash at Branch 1,500
Stock in hand at Branch at sale price 32,000

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ACCOUNTING CA/CMA SANTOSH KUMAR

Sundry Debtors at Branch 8,700

Sundry Creditors at Branch 2,500
Furniture and fixtures at Branch 7,500
Prepaid Rent 600
Transactions for the year ended 31 December 2011 were as follows:
Goods sent to Branch (less returns) 1,15,000
Cash sales at Branch 95,000
Credit Sales at Branch 65,000
Allowances to Debtors 1,200
Cash received from customers 55,000
Bad Debts to be written off 350
Cash purchases by the Branch (on permission from head office) 15,000
Cash paid to creditors 10,000
Creditors at the end 3,500

Payments made by Head Office :

Rent for one year (paid on July 1, 2011) 2,400
Salaries (paid in advance Rs.500) 2,500
Insurance paid for the year ending 31 March 2012 1,800
Payments made by the Branch:
Petty expenses 1,200
Balances on December 31,2011
Stock at cost 40,000
Provide Depreciation on furniture at 20% p.a.
[Ans.: Profit = Rs.47,000] (CA- INTER 16 MARKS) ( BAS MAJA AA GAYA)

Question:13. X Limited invoices goods to its branch at cost plus 20%. The branch sells goods for cash as
well as on credit. The branch meets its expenses out of cash collected from its debtors and cash sales and
remits the balance of cash to head office after withholding Rs. 10,000 necessary for meeting immediate
requirements of cash. On 31st March, 2011 the assets at the branch were as follows:
Rs. (,000)
Cash in Hand 10
Trade Debtors 384
Stock (at invoice price) 1,080
Furniture and fittings 500
During the accounting year ended 31st March, 2012 the invoice price of goods dispatched by the head office to
the branch amounted to Rs.1crore 32 lakh. Out of the goods received by it, the branch sent back to head office
goods invoiced at Rs.72,000. Other transactions at the branch during the year were as follows:
Rs. ('000)
Cash Sales 9,700
Credit Sales 3,140
Cash collected by Branch from Debtors 2,842
Cash Discount allowed to Debtors 58
Returns by Customers 102
Bad Debts written off 37
Expenses paid by Branch 842
On 1st January, 2012, the branch purchased new furniture for Rs.1 lakh for which payment was made by head
office through a cheque.

On 31st March, 2012 branch expenses amounting to Rs. 6,000 were outstanding and cash in hand was again Rs.
10,000. Furniture is subject to depreciation @ 16% per annum on diminishing balances method. Prepare
Branch Account in the books of Head office for the year ended 31st March, 2012. [CA-MAY 2001—16 MARKS],
ICWA-INTER 2004-16 MARKS)

Question:14 .Poonam Ltd., Mumbai has a branch in Delhi to which goods were sent at selling price, which is
fixed at 25% above cost. The branch makes both credit and cash sales. Branch expenses are met from branch

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ACCOUNTING CA/CMA SANTOSH KUMAR

cash, balance money remitted to H.O. The branch does not maintain double entry books of account and
necessary accounts relating to branch are maintained in H.O.

Opening Balances (as on 1-4-2011) Rs.

Stock at Branch at its cost 75,000
Petty cash Balance 1,200
Office Furniture 12,000
Branch Debtors 32,000
Outstanding Salary 1,280
Following further details are given for the year ended 31st March, 2012:

Cost of Goods sent to Branch 1,80,000

Cheques sent by H.O. to Branch:
Salaries (including Rs. 600 o/s paid) 10,280
Other Office Expenses 4,600
For petty Cash 3,500 18,380
Sales made by the Branch 2,51,800
(including credit sales Rs. 1,40,000)
Theft of Stock (at invoice price) 1,700

Other Abnormal loss of Stock (at IP) 3,500

Loss in weight at IP (Normal Loss) 1,000
Cash collected from Debtors 1,23,700
Discount allowed 1,250
Bad Debts written off 4,000
Petty Expenses paid 3,850
Office furniture purchased by branch Manager 4,500
Provide Depreciation @ 10% p.a. on furniture. You are required to prepare (a) Memorandum Debtors A/c. (b)
Memorandum Stock A/c. and (c) Branch A/c. [Ans.: Closing Debtors = Rs.43,050; Closing Stock = Rs.42,000

Question:15 (Goods in Transit and Closing Stock with Sales at Different G.P. Margins)A Head Office in
Calcutta has a branch in Delhi to which goods are invoiced by the Head Office at cost. All cash received by the
branch is daily remitted to Head Office. From the following particulars, Show how the Branch Account will
appear in the H.O. books.
Stock with the Branch (1-1 -2000) 60,000
Debtors (1-1-2000) 16,500
Petty Cash (1-1 -2000) 2,000
Office Furniture (1-1-2000) 10,800
Goods sent by H.O. to Branch 1,30,000
Goods received by Branch up to 31 -12-2000 1,15,000
Cheque sent to Branch:
Salaries 5,000
Rent 2,000
Other Expenses 1,500
for Petty Cash 1,000 9,500
Sales (including Rs.72,000 on cash basis) 1,77,000
Cash received from Debtors 95,000
Discount allowed 1,500
Petty Expenses paid by Branch Manager 1,800
Depreciate furniture by 10% p.a.
Closing Stock could not be ascertained, but it is known that the branch usually sells at cost
plus 20 percent on cash basis and at cost plus 25% to credit customers. Prepare Branch Account to ascertain
the profit in the books of Head office. (ICWA INTER 16 MARKS)
[Ans.: Profit = Rs. 20120, Closing Debtors = Rs. 25,000, Petty Cash = Rs. 1,200]

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ACCOUNTING CA/CMA SANTOSH KUMAR

Question:- 16. XYZ Company is having its Branch at Kolkata. Goods are invoiced to the branch at 20% profit on
sale. Branch has been instructed to send all cash daily to head office. All expenses are paid by head office
except petty expenses which are met by the Branch Manager. From the following particulars prepare branch
account in the books of Head Office.
Stock on 1st April 2010 30,000 Discount allowed to debtors 160
(Invoice price)
Sundry Debtors on 1stApril, 2010 18,000 Expenses paid by head office :
Cash in hand as on 1st April, 2010 800 Rent 1,800
Salary 3,200
Office furniture on 1st April, 2010 3,000 Stationery & Printing 800
Goods invoiced from the Petty exp. Paid by the branch 600
head office (invoice price) 1,60,000 Depreciation to be
Goods return to Head office 2,000 provided on branch
Goods return by debtors 960 furniture at 10% p.a.
Cash received from debtors 60,000
Cash Sales 1,00,000 Stock on 31st March,
Credit sales 60,000 2011 (at invoice price) 28,000
( CA-IPCC- May 2011)

Answer: Kolkata Branch Account

Particulars Amt. (Rs.) Particulars Amt. (Rs.)

To Balance b/d By Stock reserve (opening) 6,000
Stock 30,000 By Remittances:
Debtors 18,000 Cash Sales 1,00,000
Cash in hand 800 Cash from Debtors 60,000 1,60,000
Furniture 3,000 By Goods sent to branch (loading) 32,000
To Goods sent to branch 1,60,000 By Goods returned by
To Goods returned by 400 Branch (Return to H.O.) 2,000
branch (loading) By Balance c/d
Stock 28,000
To Bank (expenses Debtors 16,880
Paid by H.O.) Cash (800 - 600) 200
Rent 1,800 Furniture (3,000 - 300) 2,700
Salary 3,200
Stationary &
Printing 800 5,800
To Stock reserve (closing) 5,600
To Profit transferred to
General Profit & Loss A/c 24,180
247780 247780
Working Note Debtors Account

To Balance b/d 18,000 By Cash account 60,000

To Sales account (credit) 60,000 By Sales return account 960
By Discount allowed 160
account
By Balance c/d 16,880
78,000 78,000
Stock and debtor System

Question 17. H.O. sends goods to its branch at cost + 25%. From the following information prepare necessary
accounts under stock and debtor system.

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ACCOUNTING CA/CMA SANTOSH KUMAR

Opening balance at Branch

Furniture 50,000
Stock at invoice price 40,000
Debtors 60,000
Goods sent to Branch at invoice price 2,00,000
Cash sales 60,000
Credit sales 1,20,000
Cash collected from debtors 1,35,000
Discount allowed 8,000
Bad debts 2,000
Expenses paid by Branch 4,000
Expenses paid by HO 3,000
Charge deprecation @ 10% on furniture

Question:18 (Concepts of abnormal loss) Prepare Branch stock Account, Branch adjustment account and
Branch profit & loss account from following information H.O sends goods to its Branch at 25% profit on cost
Opening stock at Branch (I.P) 2,00,000
Sales (Cash basis) 4,80,000
Goods Lost by fire(I.P) 12,000
Branch expenses 6,500
Goods sent to branch 5,00,000

Question:19 (Normal Loss) Assume in previous Question goods were lost due to spoilage (normal Loss).
Prepare necessary accounts.
Question:20 Delhi head office supplied goods to its branch at Kanpur at invoice price which is cost plus 50%.
Branch strictly sells at invoice price only. All cash received by the branch is remitted to Delhi and all branch
expenses are paid by the head office. From the following particulars relating to Kanpur branch for the year
2016, prepare, Branch Stock Account, Branch Debtors account, Branch Expenses Account and Branch
Adjustment Account in the books of the head office so as to find out the gross profit and net profit made by
the branch:

Stock with Branch on 1.1.2016 (at invoice price) 60,000

Branch Debtors on 1.1.2016 12,000
Petty cash balance 1.1.2016 100
Goods received from Head Office (at invoice price) 1,86,000
Goods returned to Head Office 13,000
Credit Sales less Returns 86,000
Cash received from Debtors 90,000
Discount allowed to Debtors 2,400
Expenses (cash paid by Head Office)
Rent 2,400
Salaries 24,000
Petty Cash 1,000 27,400
Cash Sales 1,04,000
Stock with Branch on 31.12.2016 54,000
(at invoice price)
Petty cash balance on 31.12.2016 320
[Ans. Surplus -Rs. 11,000; Gross Profit = Rs.63.334; Net Profit = 41,087].

Question:21(Local Purchases by Branch)Aakash established a retail business in Delhi several years ago and
has since opened branch shops at Mumbai, Calcutta and chennai. All the purchasing and administration is
done at the Head Office. Branches are also allowed to purchase locally in special circumstances. Branches sell
both for cash and credit terms, but all invoices for credit sales are sent from Delhi and payments from credit
customers received there. The branches are expected to achieve a profit of 50% on cost price. The following
information relates to the Mumbai branch for the first six months of 2016:

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ACCOUNTING CA/CMA SANTOSH KUMAR

Rs.
Opening stock of goods at branch (Cost to H.O.) 28,000
Opening Debtors 9,000
Goods received by Branch at selling price 1,80,000
Credit Sales 60,000
Cash sales 1,18,000
Transfer from other branches to Mumbai
Branch at selling price 12,000
Transfer to other Branches from Mumbai at selling price 21,000
Goods returned to H.O. at selling price 6,000
Cash from Debtors received at H.O. 53,000
. Bad debts written off 2,000
Goods returned by credit customers to Branch 2,400
Goods returned by credit customers to H.O. 1,200
Goods purchased by Bombay Branch
from local suppliers (cost) 15,000
Expenses at the Branch 7,500
Closing stock at Branch:
From H.O. at selling price 45,000
From local purchases 3,000

Additional Information:
(i) Goods amounting to Rs.6,000 at cost to H.O. were in transit.
(ii) Branch had on 1 January,2016 furniture and other equipment at a book value of Rs. 7,500. Depreciation at
10% p.a. is to be provided on this item.
(iii) Goods purchased locally were sold at 25% profit on sales price.
Prepare : (i) Branch Stock Account; (ii) Branch Debtors Account and; (iii) Mumbai Branch
Account.(iv) branch adjustment account [Ans. Profit = Rs. 45,325].

Question:22 (Return by Customers Direct to H.O. at List Price) Kali Baba of Karol Bagh, Delhi invoices goods to its
Mumbai Branch at 20% less than the list price which is cost plus 100 percent with instructions that cash sales
were to be made at invoice price and credit sales at list price. From the following particulars available from
Mumbai Branch, prepare Branch Stock A/c, Branch Debtors A/c. and Branch Account to reveal the profit for
the year ending on 31st December 2011.

Stock on 1st January 2011 at invoice Price 18,000

Debtors on (1-1-2011) 10,000
Personal Computer at Branch 50,000
Goods received from H.O. at Invoice Price 1,80,000
Cash Sales 82,000
Credit Sales 1,20,000
Goods in transit on 31st Dec 2011 10,000
Cash sent to Branch for expenses 32,000
Actual expenses at Branch 30,000
Stock at the end at Invoice Price 16,000
Bad Debts written off 400
Goods returned by customers direct to
Head Office at list price 1,500
Debtors at the end 8,100
Depreciate Computers by 20% p.a.
[Ans.: Shortage = Rs. 4,000; Cash Received from Debtors = Rs. 1,20,000;Profit at the Branch = Rs.47,100].

Question:23(Where Branch Sells at Price Higher Than Invoice Price)Smart Trading Ltd. with its head office at
Mumbai, invoiced goods to its branch at Noida city at 20% less than the List Price which is cost plus 100% with
general instructions that cash sales were to be made at invoice price and credit sales at list price. From the
following particulars, prepare Ledger Accounts under stock and Debtor system:

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ACCOUNTING CA/CMA SANTOSH KUMAR

Opening Stock (at invoice price) 12,000 Allowances to customer 1,800

Opening Debtors 10,000 Exp. Paid by H.O.
Goods received from H.O. 1,60,000 Salaries 21,000
Sales: Misc. 17,000 38,000
Cash 44,800 Closing Debtors ?
Credit 1,21,375 1,66,175 Closing Stock (at IP) 28,700
Cash received from customers 91,700 Remittances to H.O. 1,36,500
Bad Debts reported 9,000
[Ans.: Gross Profit = Rs. 77,487; N. Profit = Rs. 27,812].

Question:24(Abnormal Loss of Stock)Bombay Traders Ltd. sends goods to its Madras Branch at cost plus 25%.
The following particulars are available in respect of the Branch for the year ended 31st March 2016:

Opening Stock at Branch (at cost to Branch) 80,000

Goods sent to Branch at invoice price 12,00,000
Loss-in-transit at invoice price 15,000
Pilferage at invoice price 6,000
Sales 12,19,000
Expenses 60,000
Closing stock at Branch (at cost to Branch) 40,000
Recovered from insurance Co. against Loss-in-transit 10,000
Show ledger accounts in the head office books for
a) Branch Stock Account
b) Goods Sent to Branch Account
c) Branch Adjustment Account
d) Branch Profit & Loss Account.
[CA Nov. 1988,ICWA-INTER 2010]

Final Account Methods

Question:25 (Goods Sent by Head Office at Cost) Sonika Electronics Limited with its Head Office in Kanpur
operates a retail branch at Delhi. All purchases are made by the head office. Goods are supplied to branch at
cost only. All the branch expenses are paid by the Head Office directly with the exception of petty expenses
which are paid by branch manager out of petty cash maintained for the purpose. You are given the following
particulars relating to Delhi branch for the year ended 31st March 2001:

Balances as on 1st April'2000 Goods returned by Branch 3,500

Stock at Branch 15,900 Cash sent to Branch for expenses:
Branch Debtors 16,900 Salary 11,900
Petty Cash 110 Petty Cash 2,600
Total Sales at Branch 73,800 Rent 3,900
(including Rs. 20,200 for Petty Cash (as on 31.3.2001) 85
Cash Sales) Stock (as on 31.3.2001) 18,900
Cash received from Debtors 52,700
Goods Sent to Branch 45,200
during the year
Prepare a Branch Trading and Profit and Loss Account and Delhi Branch Account in the books of Head Office.
[Ans.: Gross Profit = 35,100; Net Profit = Rs. 16,675].

Question:26(Normal/Abnormal Loss & Trade Discount). A Delhi merchant has a branch at Mumbai to
which he charges the goods at cost plus 25%. From the following particulars, determine profit under final
Account system:-
Opening Stock (at IP) 75,000 Cartage and freight 18,000
Goods Sent to B.O. 2,30,000 (IP) Rent & Taxes 8,000
Goods returned by B.O. 11,250 (IP) Insurance 1,200

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ACCOUNTING CA/CMA SANTOSH KUMAR

Cash Sales 98,500 Salaries Paid 19,000

Credit Sales 1,95,000 Salaries owing 300
[Trade Discount allowed Rs.3,000] Bad Debts 2,000
Normal Loss of Stock 1,000 (at IP) Depreciation 3,500
Shortage (Abnormal) 5,000 (at IP) Advertisement 8,250
Closing Stock at IP 35,625
[Ans.: Gross Profit = Rs. 73,000; Net Profit = 26,750].

Question:27(Miscellaneous Income Retained by Branch) A Delhi merchant has a branch at Madras to which
he charges the goods at cost plus 25%. The Madras Branch keeps its own sales ledger and transmits all cash
received from the head office every day. All expenses are paid from the Head Office. The transactions for the
branch were as follows:

Stock 1.1.2006 20,000

Debtors 1.1.2006 200
Petty cash 200
Cash sales 5,200
Goods sent to branch 35,000
Collections from ledger accounts 38,000
Goods returned to head office 500
Bad debts 400
Allowances to customers 350
Returns inwards 750
Cheques sent to branch:
Rent 1,000
Wages and salaries 2,000
Stock (31.12.2006) 25,000
Debtors 3,500
Petty cash (including Miscellaneous
income Rs.50 not remitted on 31.12.2006) 150
Prepare the Branch Trading and Profit and Loss Account for the year ending December 31, 2006 and Branch
Account in the books of Head Office. Also verify the answer under Stock &Debtor System.
[Ans.: Gross Profit = Rs. 21,650; N. Profit = 19.850; Branch A/c. Balance =Rs.23,650].

Question:28(Provision for Discount for Prompt Payment) M/s. Bright & Co., with its head office in Madras,
invoiced goods to its branch at Bombay, 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. Discount on
credit sale at 15% on prompt payment will be allowed. From the following particulars available from the
branch,Prepare the branch trading and profit and loss account for the year ended 31st March, 2006 in the head
office books, so as to show the actual profit or loss of the branch for the year 2005-06:
Stock 1-4-2005 12,000

Goods received from head office (invoice price) 1,32,000

Debtors on 1-4-2005 10,000
Sales (cash) 46,000
Sales (credit) 1,00,000
Cash realized from debtors 85,635
Discount allowed to debtors 13,365
Expenses at the branch 6,000
Remittance to head office 1,20,000
Debtors on 31 -3-2006 11,000
Cash in hand on 31-3-2006 5,635
Stock on 31-3-2006 (invoice price) 15,000
It was reported that a part of stock at the branch was lost by fire during the year whose value is to be
ascertained; and provision should be made for discount to be allowed to debtors as on 31 st March,2006,on the
basis of the year's trend of prompt payment. [C.A. (Inter) Nov. 1992 MODIFIED]

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[Ans.: Cost of stock lost by fire Rs. - 2,500; Provision for discount on debtors Rs. = 1485: Gross Profit Rs.
41,000; Net Profit Rs.17,650].

Question:29. X Ltd. Bombay, started on 1st January, 2011 has two branches in Kanpur and Lucknow. All goods
sold at the Branches are received from the head office invoiced at cost plus 25 percent. All expenses relating to
Branches are paid by the Head Office. Each Branch has its own Sales Ledger and sends weekly statements. All
cash collections are remitted daily to Head Office by the Branches. The following particulars relating to the
year ended 31st December 2011 have been extracted from the weekly statements sent by the branches:

Kanpur Lucknow
Credit Sales 1,25,200 1,10,000
Cash Sales 78,600 85,200
Sales Returns 2,300 1,200
Sundry Debtors 34,500 23,600
Rent and Rates 3,200 4,500
Bad Debts 6,000 --
Salaries 16,000 18,000
General Expenses 2,600 1,500
Goods received from H.O. 1,50,000 1,25,000
Advertisement 7,500 5,200
Stock on 31st December, 2011 45,000 35,000
You are required to prepare the Branch Accounts as they would appear in the books of the Head Office,
showing the Profit and Loss for the period and the Trading and Profit and Loss Account separately for each
Branch. ( ICWA-INTER 12 MARKS)

WHOLE SALE BRANCH

Question:30. A head Office send goods to its branch at 20% less than the list price. Goods are sold to
customers at cost plus 100%. From the following particulars ascertain the profit made at the Head office and
the branch on wholesale basis: Head Office (Rs.)
Branch (Rs.)

Purchases 20,00,000
Goods sent to Branch (invoice price) 8,00,000
Sales 17,00,000 8,00,000

Question:31. A Head Office sends goods to its branch at 20% less than list price i.e. catalogue price. Goods are
sold to customers at cost plus 100%. From the following particulars, ascertain the profit made at the head
office and the branch on the wholesale basis for the year ended 31st December, 2002:

HEAD OFFICE (Rs.) BRANCH (Rs.)

Opening Stock at its cost 1,69,500 40,000
Purchases 5,10,000
Goods sent to Branch (at Invoice Price) 4,80,000
Sales (at list price) 3,40,800 5,97,500
Expenses 21,000 4,500
Assume that the head office sells goods to customers at list price.
[Ans. G. P. = Rs. 3,50,400 (H.O.), Rs.l,19,500 (B.O.) Net Profit = Rs. 3,28,650 (H.O.), Rs. I,15,000 (B.O.)].

Question:32 IOCM Ltd with their Head office at Calcutta, invoiced goods to their Mumbai Branch at invoice
price. The invoice price is 20% less than the list price, which is cost plus 100% with instruction that sales are
made at list price. From the following particulars ascertain the profit earned by the Head Office and Branch:

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Calcutta H.O. Mumbai Branch

Opening Stock 40,000 32,000
Purchases 2,00,000
Goods sent to Branch (cost to H.O.) 62,500
Goods received from H.O. (invoice price) - 96,000
Sales (List price) 1,70,000 80,000
Trade Expenses 14,000 8,000
Stock at Head office are valued at cost price but those of Branch are valued at invoice price.
[Ans.:Net Profit = H.O. = Rs.95,000 and Branch = Rs.8,000].

Question:33 Bata Limited with its head office at Delhi has a branch at Punjab. The company supplied goods to
its branch at selling price less 20%. The company as well as branch sells goods to customers at a profit of 100%
on cost. The company also sells goods to their approved stockiest at the same price at which they are selling to
their branch at Punjab. From the following particulars, prepare Trading Account of the head office and of the
branch for the second year of their business and show the provisions for unrealized profits on stock at the
branch supplied by the head office.

Head Office Branch

Opening Stock 82,000 4,000
Purchases during the year 3,10,000 -
Goods Sent to the Branch 48,000
Goods received from the H.O. - 48,000
Goods Sold to approved stockiest 35,000 -
Goods Sold to Customers. 4,20,000 42,000
[Ans.: H.O. - G.P. Rs.2,41,125; N. P. Rs. 2,35,725; Branch G. P. Rs. 8,400].

Question:34. New Textiles Limited operates a number of retail shops to which goods are invoiced at
wholesale price which is cost plus 20%. Shops sell the goods at the list price which is wholesale price plus 10%.
From the following particulars ascertain the profit or loss for 2002 at Shop No. 143:(Study Material)

Stock at shop on January 1, 2002 15,000

Goods invoiced to shop during 2002 1,40,000
Sale at the shop during the year 1,54,770
Goods destroyed by accident (retail value) 660
Expenses at the shop 7,200

Solution:
Cost Price = 100 Invoice Price = 120 Sales Price = 132
Shop Trading Account
Particulars Amount Particulars Amount
To Opening stock 15,000 By Sales 1,54,770
To Goods received from H.O. 1,40,000 By Loss 600
To Gross profit 14,070 By Closing Stock 13,700
1,69,070 1,69,070

Shop P&L Account

Particulars Amount Particulars Amount
To Expenses 7,200 By Gross Profit 14,070
To Loss by fire 600
To Net profit 6,270
14,070 14,070
Question:35. Ganga Ltd. having head office at Mumbai has a branch at Nagpur. The head office does
wholesale trade only at cost plus 80%. The goods are sent to branch at the wholesale price viz., cost plus 80%.
The branch at Nagpur is wholly engaged in retail trade and the goods are sold at cost to H.O. plus
100%.Following details are furnished for the year ended 31stMarch, 2009:

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Head Office Branch

Opening stock (as on 1.4.2008) 2,25,000 —
Purchases 25,50,000 —
Goods sent to branch (Cost to H.O. plus 80%) 9,54,000 —
Sales 27,81,000 9,50,000
Office expenses 90,000 8,500
Selling expenses 72,000 6,300
Staff salary 65,000 12,000
You are required to prepare Trading and Profit and Loss Account of the head office and branch for the year
ended 31stMarch, 2009.

Solution: Trading and Profit and Loss A/c

Head office Branch Head office Branch

Rs. Rs. Rs. Rs.
To Opening stock 2,25,000 — By Sales 27,81,000 9,50,000
To Purchases 25,50,000 — By Goods sent to —
To Goods received branch 9,54,000
from head office — 9,54,000 By Closing stock
To Gross profit c/d 16,60,000 95,000 (W.N.I & 2) 7,00,000 99,000
44,35,000 10,49,000 44,35,000 10,49,000
To Office expenses 90,000 8,500 By Gross profit b/d 16,60,000 95,000
To Selling expenses 72,000 6,300
To Staff salaries 65,000 12,000
To Branch Stock Reserve (W.N.3) 44,000 -
To Net Profit 13,89,000 68,200
16,60,000 95,000 16,60,000 95,000
Working Notes:
Calculation of closing stock of head office: Rs.
Opening Stock of head office 2,25,000
Goods purchased by head office 25,50,000
27,75,000
Less: Cost of goods sold [37,35,000* x 100/180] 20,75,000 7,00,000
Calculation of closing stock of branch: Rs.
Goods received from head office [At invoice value] 9,54,000
Less: Invoice value of goods sold [9,50,000 x 180/200] 8,55,000
99,000
Calculation of unrealized profit in branch stock:
Branch stock Rs. 99,000
Profit included 80% of Cost
Hence, unrealized profit would be = Rs. 99,000 x 80/180 = Rs. 44,000

MISC.QUESTIONS
Question:36. Sellwell Lid. has two branches in Cochin and Bangalore. During the year ended 31 March, 1984,
goods have been invoiced to Cochin Branch at 20% above cost and to the Bangalore Branch at 25% above cost.
The branches do not maintain complete books of accounts but the following figures available for the year
ended 31 March, 1984:

Cochin Bangalore
Opening Stock at Invoice Price 10,000 10,000
Goods sent to Branch at Cost 50,000 40,000
Amount remitted by Branch 80,000 80,000
Amount remitted from H.O. 15,000 15,000
Goods returned by Branch at Invoice Price 3,000 _
Cash as on 1.4.1983 2,000 1,000
Cash as on 31.3.1984 1,000 500

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Goods retuned by Customers at Branch at Selling Price 5,000 4,000

Expenses at Branch in cash 9,000 3,000
All sales at the branches are for cash. During the year, Cochin Branch purchased fixed assets worth Rs.
4,000 and this amount is included in the figure of branch expenses. Cochin Branch transferred to the
Bangalore Branch stock costing Rs.5,000 during the year. The Bangalore Branch remitted Rs.2,000 to the
Cochin Branch also during the year. There was a closing stock of Rs.24,000 at invoice price at the Cochin
Branch. There was no closing stock at the Bangalore Branch. Prepare Branch Stock Accounts, Branch Stock
Adjustment Accounts, Goods sent to Branch Accounts, Branch Cash Accounts and Branch Profit and Loss
Accounts in the Head Office books ignoring depreciation.

[Ans.: G. Profit = Rs. 11834 (Cochin) Rs. 13,900 (Bangalore) Net Profit = Rs.35,167 (Cochin), Rs. 13,500
(Bangalore)]

Question:37(Closing Stock to be Ascertained) From the following particulars, prepare Branch A/c showing the
profit or loss of the Branch:

Opening Stock at Branch 82,000

Opening furniture at Branch 13,000
Goods sent to Branch 1,50,000
Sales (Cash) 2,37,500
Expenses:
Rent 5,480
Salaries 9,500
Other Misc. Expenses 3,500
Closing Stock could not be ascertained, but it is known that the branch usually sells at cost plus 25%.
The Branch manager is entitled to a commission of 5 percent on the profit of the Branch after charging such
commission. Depreciate furniture @ 10% p.a. Ascertain closing stock at branch, commission due to manager
and profit earned by the branch. [Ans. Closing Stock = Rs.42,000; Manager's Commission — 1,320; N. P.
(after Commission) -26,400].

Question:38(Determination of G. P. Margin) A business has three branches at Coimbatore, Trivandrum and

Bangalore. The Head Office at Madras purchases goods and sends them to branches, to be sold at a uniform
percentage of profit on cost. The following particulars are made available to you to enable you to prepare a
combined Trading Account for the year ended 31stMarch, 1992.

Madras Coimbatore Trivandrum Bangalore

Stock on 1st April, 1991 54,000 16,000 12,500 10,000
Purchases in the year 2,74,000 -
Sales - 1,80,000 1,20,000 1,00,000
Stock on 31st March, 1992 28,000 6,000 5,000 2,500
Branch Accounts on 1stApril, 1991:
Coimbatore 15,000
Trivandrum 32,000
Bangalore 4,000
Remittances from branches 3,20,000 1,50,000 1,00,000 70,000

Madras Office invoices goods to the branches at fixed sales prices but maintains branch accounts in its ledgers
at cost price. Show Branch Accounts in Madras Head Office Books. [C. A. (Inter) May 1992]

Question:39 IOCM who carried on a retail business opened a branch X on January 1st 2007 where all sales were
on credit basis. All goods required by the branch were supplied from the Head Office and were invoiced to the
branch at 10% above cost. The following were the transactions:

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Jan. 07 Feb. 07 Mar. 07

Goods sent to Branch (Purchase Price) 40,000 50,000 60,000
Sales as shown by the branch
(Monthly report) 38,000 42,000 55,000
Cash received from Debtors
and remitted to H.O. 20,000 51,000 35,000
Returns to H.O. (Invoice price at Branch) 1,200 600 2,400
The Stock of goods held by the branch on March 31, 2007 amounted to Rs.53,400 at invoice price to the
Branch. Record these transactions in the Head Office books, showing balances as on 31 st March 2007 and the
branch gross profit for the three months ended on that day. All working should form part of your answers.
[ C.A.(Inter) May 1987] [Ans. Profit to General P/LA/c. = Rs.37,363]

Question:40 Rahul Limited operates a number of retail outlets to which goods are invoiced at wholesale price
which is cost plus 25%. These outlets sell the goods at retail price which is wholesale price plus 20%. Following
is the information regarding one of the outlets for the year ended 31.3.97:

Stock at the outlet (1-4-1996) 30,000

Goods invoiced to the outlet during the year 3,24,000

Gross Profit made by the branch 60,000

Goods lost by fire ?

Expenses of the outlet for the year 20,000

Stock at the outlet (31 -3-1997) 36,000

You are required to prepare the following account in the books of Rahul Limited for the year ended 31.3.97:

(a) Outlet Stock Account

(b) Outlet Profit & Loss Account
(c) Stock Reserve Account[C.A. (Inter) May 1997(10 marks)

Answer. Outlet Stock Account

To Balance b/d 30,000 By Sales 3,60,000

To Good sent to outlet 3,24,000 By Goods Lost by fire 18,000
To Gross Profit c/d 60,000 By Balance c/d 36,000
4,14,000 4,14,000
Outlet Profit & Loss Account

To Expenses 20,000 By Gross Profit c/d 60,000

To Good lost by fire 18,000
To Profit Transferred 22,000
60,000 60,000
Stock Reserve Account

Particulars Rs. Particulars Rs.

To H.O.P&L A/c Transfer 6,000 By Balance b/d 6,000
To Balance c/d 7,200 By H.O. P&L A/c 7,200
(Stock Rs. Required)

13,200 13,200

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Working Notes: Rs.

1. Whole sale Price: 100+25=125

Retail Price 125+20%=150
Gross Profit at the outlet wholesale Price – Retail Price (150 + 125) =25
Retail Sales Value = 60,000 X 150/25 = Rs. 3,60,000

2. Goods lost by fire:

Opening Stock + Goods Sent + Gross Price – Sales – Closing Stock
30,000 + 3,24,000 + 60,000 – 3,60,000 – 36,000 = Rs. 18,000

3. Stock Reserve:
Opening Stock = 30,000 X 25/125 = Rs. 6,000
Closing Stock = 36,000 X 25/125 = Rs. 7,200

Question:41 (Where Accounts are Given)From the following information, prepare a Memorandum trading and
profit & loss account of branches and also show the branches account as it would appear in the head office
books at the end of the year
Branches Cash A/c

Jan. 1 To Balance b/d 7,500 Dec. 31 By Petty Cash 3,000

Dec.31 To Receipts from Debtors 37,500 By Bank 62,000
To Cash Sales 25,000 By Balance 5,000
70,000 70,000

Branches' Debtors Account

Jan. 1 To Balance b/d 3,000 Dec.31 By Cash 37,500

Dec. To Sales 45,000 By Discount Allowed 1,000
By Bad Debt 8,000
By Balance c/d 1500
48,000 48,000

Branch Account

Jan. 1 To Balance b/d Jan. 1 By Balance b/d

Cash 7,500 outstanding expenses 1000
Debtors 3,000
Furniture 7,500 Dec. 31By Bank 62,000
Stock 10,000 28,000 By Balance c/d 20,500
During To Goods Transferred 45,000
2000 To Furniture Purchased 2,500
To Sundry Expenses 8,000
83,500 83,500

Closing Stock at branches was Rs. 4,000 and expenses outstanding were Rs.900. Depreciation at
10% of the book value has to be provided on furniture. (C.A. (Inter), ICWA-INTER)

[Ans.: Gross Profit = Rs. 19,000; Net loss = ?].

Question:42 (Memorandum Column Method) A company with its Head Office at Calcutta has a Branch at New
Delhi. Goods are invoiced to the branch at cost plus 33 1/3 % which is the selling price. The following
information is given in respect of the branch for the year ended 31st March, 1998:

Goods sent to branch (invoice value) 4,80,000

Stock at Branch (1-4-1997) at selling price) 24,000
Cash Sales 1,80,000
Returns from Customers 6,000
Branch expenses paid for cash 53,500

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Branch Debtor's balance (1-4-97) 30,000

Discounts allowed 1,000
Bad debts 1,500
Stock at Branch (31.3.1998) at selling price 48,000
Branch Debtor's balance (31 -3-1998) 36,500
Collections from debtors 2,70,000
Branch Debtor's cheques returned dishonoured 5,000
You are required to prepare the Branch Stock Account by Memorandum Column method to ascertain shortage/surplus
and also ascertain the Net Profit made by the Branch. [Ans.: Gross Profit = Rs.1,13,500; Net Profit = Rs. 56,000]

Answer: BRANCH STOCK A/C

Selling Cost Price Memo (selling Cost Price

Price) Price)
Rs. Rs. Rs. Rs.
To Balance b/d 24,000 18,000 By Branch Bank 1,80,000 1,80,000
To Goods sent to 4,80,000 3,60,000 By Branch Debtors 2.80,000 2,80,000
branches 6,000 6,000 By stock discrepancy
To Branch Debtors - shortage
(return) 1,13,500 2,000 1,500
By Balance c/d 48,000 36,000
To Branch Profit & Loss
A/c
5,10,000 4,97,500 5,10,000 4,97,500
Branch Debtors A/c
To Balance b/d 30,000 By Return from Customers 6,000
To Bank-Cheques 5,000 By Discounts 1,000
Dishonored 2,80,000 By Bad debts 1,500
To Credit Sales By Cash Received 2.70,000
By Balance c/d 36,500

3,15,000 3,15,000
Branch Profit & Loss A/c

To Branch debtors A/c By Branch stock A/c 1,13,500

- Discount 1,000 -Gross Profit
- Bad debtors 1,500 2,500
To Branch Bank-expenses 53,500
To Branch Stock –Shortage 1,500
To Net Profit transferred to
General Profit & Loss A/c 56,000
1,13,500 1,13,500
Question 43. Following is the information of the Jammu branch of Best Ltd., New Delhi for the year ending
31st March, 2010 from the following:

(1) Goods are invoiced to the branch at cost plus 20%.

(2) The sale price is cost plus 50%.
(3) Other information’s:
Stock as on 01.04.2009 2,20,000
Goods sent during the year 11,00,000
Sales during the year 12,00,000
Expenses incurred at the branch 45,000
Ascertain
(i) The profit earned by the branch during the year
(ii) Branch stock reserve in respect of unrealized profit.

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Answer : Calculation of profit earned by the branch

Trading Account
Particulars Amount Particulars Amount
To Opening stock 2,20,000 By Sales 12,00,000
To Goods received by 11,00,000 By Closing stock 3,60,000
Head office (Refer W.N.)
To Expenses 45,000
To Gross profit 1,95,000
15,60,000 15,60,000

(ii) Stock reserve in respect of unrealized profit

= Rs. 3,60,000 x (20/120) = Rs. 60,000
Working Note:
Cost Price 100
Invoice Price 120
Sale Price 150
Calculation of closing stock at invoice price
Opening stock at invoice price 2,20,000
Goods received during the year at invoice price 11,00,000
13,20,000
Less : Cost of goods sold at invoice price (9,60,000) [12,00,000 x (120/150)]
Closing stock 3,60,000
Note : It is assumed that all figures given in the questions is at invoice price

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INDEPENDENT BRANCH ACCOUNT

Question: 1 The head office of a business and its branch keep their own books and each prepares its own
profit and loss Account. The following are the balances appearing in the two sets of book as on 31st
December.1994 after ascertainment of profit and after making all adjustments except those referred to below:

Head office Branch

Dr Cr Dr Cr
Capital 1,00,000
Fixed assets 36,000 16,000
Stock 34,200 10,740
Debtors and creditors 7,820 3,960 4,840 1,920
Cash 10,740 1,420
Profit and loss account 14,660 3,060
Branch office account 29,860
Head office account 28,020

1,18,620 1,18,620 33,000 33,000

st
Set out the balance sheet of the business as on 31 December,1994 and the journal entries necessary [in both
sets of books] to record the adjustments dealing with the following:

on 31st December,1994 the branch had sent a cheque of for Rs.1,000 to the head office ,not received by head-office nor
credited to Branch Account till 3rd January,1995.
(b) Goods valued at Rs.840 had been forwarded by the head office to the branch and invoiced on 30th December 1994 ,but
were not received by the branch nor dealt with in branch’s books till 11th January ,1995.
Question: 2 Sunil Enterprise operates a branch as well as a head office .the following Trial balance has been extracted
from the books of the concern as on 31st march, 2012;
HEAD OFFICE BRACH OFFICE
Dr Cr Dr Cr

Capital account __ 4,71,000 __ __

Drawings 84,000 __ __ __
Plant at cost 2,40,000 __ 1,20,000 __
Accumulated depreciation on plant __ 1,20,000 __ 60,000
Goods to branch/from head office __ 7,92,000 7,20,000 __
Head office current account __ __ __ 1,56,000
Branch current account 2,58,000 __ __ __
Branch stock provision(1-4-2011) __ 6,000 __ __
Operating expenses 30,000 __ 15,000 __
Purchases 22,92,000 __ __ __
Rent and rates 45,000 __ 18,000 __
Sales __ 21,00,000 __ 9,00,000
Stocks (1-4-2011) 1,80,000 __ 36,000 __
Debtors 90,000 __ 75,000 __
Creditor __ 1,35,000 __ __
Salaries and wages 3,60,000 __ 1,20,000 __
Cash and bank 45,000 __ 12,000 __
36,24,000 36,24,000 11,16,000 11,16,000
Additional information:

(a) All goods are purchased by the head office. The goods required by the branch are invoiced by head office
to the branch at cost plus 20%.On 31st march, 2012,the head office held stocks which had cost it Rs.2,40,000
On the same date the branch held stocks which had been invoiced to it at Rs.54,000.
(b) Fixed assets are to be depreciated at the rate 50% per annum based on the reducing balance method
.There had been no purchase or sale of fixed assets during the year.
(c) Goods of Rs.72,000 invoiced by the head office to the branch were in transit on 31 st march,2012.
(d) At 31st march,2012,cash Rs.30,000 was in transit from the branch to the head office .

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(e) The following expenses were outstanding on 31st march,2012;

Head office branch office

Salaries 2,000 1,000
Rent 1,000 2,000
You are required to prepare. In columnar form, for (1) the head office , (2) the branch ,and (3) the business as
a whole, the Trading and Profit & Loss Accounts for the year ended 31st march , 2012.Also, prepare a
combined Balance Sheet as on that date. (ICWA-INTER-20 MARKS)

Question:3 The following trial balance is extracted from the books of Nagpur branch of XYZ Ltd as on 31st
March. 1995:

Debits Credits
Stock—opening at invoice price 25,000
Branch debtors and creditors 10,000 3,000
Cash in hand 500
Goods received from H.O. 80,000
Branch expenses 9,000
Branch sales 1,80,000
Current account with head office 58,500
1,83,000 1,83,000
As on that date, closing stocks with branch at invoice price were valued at Rs. 30,000. There was an amount of
Rs. 18,500 remitted by the branch on 31st March which had not been received by the head office on that date.
The head office had sent goods, costing Rs. 20,000, to the branch on 29thMarch. These had not been received
by the branch till the closing date.

The head office enters in its books all goods sent to the branch at cost. The branch enters these, in its books,
at invoice price but sells them at an even higher one. At the end of each year, the difference is adjusted by
debiting the branch and crediting the profit and loss account in the books of head office. The proportionate
difference between cost and invoice price was the same at all relevant times.

The credit balance as on 31stMarch 1995, of the branch account in the head office books, was Rs. 60,000
before making any of the above adjustments (though the above-mentioned dispatch of goods of Rs. 20,000,
on 29th March had, of course, been duly debited to the branch account).

Prepare branch profit and loss account and head office profit and loss account (relevant portions only) for the
year ended 31st March, 1995. [C.A. (Inter)

Answer: NAGPUR BRANCH ACCOUNT

Rs. Rs.
To Profit and loss account 40,000 By Balance b/d 60,000
(balancing figure) By Cash in transit 18,500
To Balance c/d 58,500 By Goods in transit 20,000*
(as per branch books)
98,500 98,000
The balancing figure in the above account represents the loading on goods invoiced to branch during
the year. This is because while the H.O. makes entry for goods sent to the branch at cost, the branch makes
the entry at invoice price and. therefore, the balancing difference in the branch account represents loading.

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MEMORANDUM BRANCH PROFIT AND LOSS ACCOUNT Cr

Rs. Rs.
To Opening stock 25,000 By Branch sales 1,80,000
To Goods received from To Closing stock 30,000
H.O. 80,000
To Branch expenses 9,000
To Net profit 96,0002,1
0,000 2,10,000
Head Office PROFIT AND LOSS ACCOUNT(Relevant portion only)

Rs. Rs.
To Stock reserve @ 50% By Branch account—profit 96,000
—closing stock 15,000* By Loading goods sent to
To Net profit c/d 1,33,500 branch account By Stock reserve 40.000
@ 50%
—opening stock 12,500*
1,48,500 1,48,50
0
The loading on invoice price is 50% and is calculated as follows:
Invoice price of goods sent to branch 80,000
Loading thereon—(see branch account) 40,000
Loading as a % of invoice price 40,000/80,000 x 100 = 50%

Question:4 Anil and Sunil are partners of a business having head office in Delhi and branch at Calcutta. Anil
looks after the Delhi office and Sunil looks after the Calcutta branch. Anil is entitled to 40% of the profits
made at Delhi while Sunil is entitled to 30% of the profits at Calcutta. The balance profits/losses are shared
equally. The following trial balances as on 31st December, 2000 are furnished to you.

Delhi Calcutta
Dr. Cr. Dr. Cr.
Rs. Rs. Rs. Rs.
Opening stock at cost 30,000 — 40,000 —
Purchases and returns 1,80,000 10,000 2,75,000 15,000
Goods sent to:
Calcutta — 50,000 — —
Delhi — — — 70,000
Goods received from:
Calcutta 65,000 — — —
Delhi — — 48,000 —
Sales and returns 15,000 3,15,000 20,000 3,70,000
Expenses 28,000 — 39,000 —
Customer accounts 64,000 4,000 71,000 3,000
Suppliers accounts 2,000 32,000 1,000 51,000
Bank account 70,000 — — 6,000
Fixed assets opening written
down value 50,000 — 80,000 —
Calcutta branch account — 5,000 — —
Delhi head office account — — 17,000 —
Capital and drawing accounts:
Anil 30,000 83,000 4,000 35,000
Sunil 5,000 40,000 25,000 70,000
5,39,000 5,39,000 6,20,000 6,20,000

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 ACCOUNTING CA/CMA SANTOSH KUMAR

You are informed that:

(a) On 30th December, 2000 Delhi head office remitted Rs. 5.000 by bank draft to Calcutta
branch. The envelope was received by the branch on 2nd January, 2001.

(b) Stock at cost on 31st December, 2000 was worth:

(i) Rs, 46,000 at Delhi and (ii) Rs. 54,000 at Calcutta.``

(c) Depreciation is to be provided at 10%.

(d) 10% of the cash expenses relating to the head office are to be treated as overheads incurred
on behalf of the branch.

You are asked by the partners to prepare:

(1) Trading and Profit and Loss Account for the year ended 31st December, 2000 for Delhi office and
Calcutta branch in columnar form,
(2) Consolidated Balance Sheet of the firm as on 31st December, 2000, and
(3) Branch and Head office Accounts in respective books. [C.A. Inter]

Answer: TRADING, PROFIT AND LOSS ACCOUNT Cr,

Delhi H,O, Calcutta Total Delhi H,O, Calcutta Total

Branch Branch
To Opening stock, at Rs, Rs, Rs, Rs, Rs, Rs,
Cost 30,000 40,000 70,000 By Sales less returns 3,00,000 3,50,000 6,50,000
To Purchases less returns 1,70,000 2,60,000 4,30,000 By Goods sent to
To Goods received from Calcutta 48,000 — —
Calcutta 65,000 — — By Goods sent to
To Goods received from Delhi — 65,000 —
Delhi — 48,000 — By Closing stock, at
To Gross profit c/d 1,31,000 1,26,000 2,57,000 Cost 46,000 54,000 1,00,000
By Goods in transit 2,000 5,000 7,000

3,96,000 4,74,000 7,57,000 3,96,000 4,74,000 7,57,000

To Expenses 28,000 39,000 67,000 By Gross profit b/d 1,31,000 1,26,000 2,57,000
To Delhi H,O, (share By Calcutta branch
of expenses) — 2,800 — (expenses recover-
To Depreciation of able 10% of 28,000) 2,800 — —
fixed assets 5,000 8,000 13,000
To Net profit c/d 1,00,800 76,200 1,77,000
1,26,000
1,33,800 2,57,000 1,33,800 1,26,000 2,57,000
To Share of 'Branch' By Net Profit b/d 1,00,800 76,200 1,77,000
profit to partners:
Anil—40%
of 1,00,800 40,320 — 40,320
Sunil—30%
of 76,200 — 22,860 22,860
To Balance of profit-
shared equally 30,240 26,670 56,910
Anil 30,2 26,670 56,910
Sunil 40
97,230 76,200 1,77,000 1,00,800 76,200 1,77,000

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Question:5 Give Journal Entries to rectify or adjust the following in the books of both the Head Office and the
Branch:

(i) Goods costing Rs. 8,000 purchased by Branch, but payment made by Head office. The Head Office had
debited the amount to its own purchases account.
(ii) Branch paid Rs. 15,000 as salary to a visiting Head Office official. The Branch had debited the amount to
Salaries account.
(iii) Depreciation Rs.25,000 in respect of Branch assets whose accounts are kept in Head Office books
(iv) Expenses Rs. 35,000 to be charged to the Branch for work done on its behalf by the Head Office.
(v) Goods sent by the Head Office to its Branch Rs.20,000, not yet received by the Branch.

Question:6 A Delhi firm has two branches - one at Bombay and another at Calcutta. The branches keep
complete set of books. On 31st March, 1999 Bombay and Calcutta Branches Accounts in Delhi books showed a
debit balance of Rs.95,000 and Rs.40,000 respectively before taking the following information into account:

(1) Goods valued at Rs.8,000 were transferred from Bombay to Calcutta under instruction from Head Office.
(2) Bombay Branch collected Rs. 3500 from a local customer at the Head office.
(3) Calcutta Branch paid Rs.5000 for certain goods purchased by Head office in Calcutta.
(4) Rs. 12,500 remitted by Bombay Branch to Delhi on 29th March 1999, received in Delhi on 3rd April 1999.
(5) Calcutta Branch received on behalf of the Head office Rs. 3200 as dividend from a company located at
Calcutta.
(6) For the year 1998-99 Bombay Branch showed a net loss of Rs.9000 and Calcutta branch showed a net
profit of Rs. 15,850.
Pass journal entries to record the above transactions in the books of the Head Office(CA-IPCC 10 MARKS)

Question:7 Following are the Trial Balances of Ravindra Ltd. and its Delhi Branch as on December 31, 1989: -

Head Delhi Head Delhi

Office Branch Office Branch

Rs.Rs. Rs. Rs.

Stock on 1 January, 1988 45,000 16,400 Creditors 20,300 5,400

Purchases 1,10,000 25,600 Goods sent to Branch 14,400 —

Wages 80,800 13,100 Sales 3,30,200 69,900

Manufacturing Expenses 35,400 6,800 Head Office Account — 28,000

Machinery: Capital in Shares of

Rs. 10 each 2,00,000 —

H.O. 1,00,000 — Discount earned 1,100 300

Branch 50,000 — Purchase Returns 2,500 600

Furniture:

H.O. 5,000 —

Branch 2,000 —

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ACCOUNTING CA/CMA SANTOSH KUMAR

Rent 6,000 3,400

Salaries 32,000 11,000

Debtors 38,000 8,000

General Expenses 18,000 4,000

Goods Received from H.O — 14,400

Cash in Hand & Bank 10,300 1,500

Branch Account 36,000 —

5,68,500 1,04,200 5,68,500 1,04,200

Closing stock at head office was Rs.38,700 and at Delhi, Rs. 28,700. Depreciation is to be allowed at 10% on
machinery and at 15% on furniture. Rent still payable in respect of 1989 is Rs. 300 (for Branch). Rs 8000 sent
by branch but not received by H.O. till the end of year.

Prepare the Trading and Profit and Loss Account in columnar form, and the consolidated Balance Sheet. Also
show the Branch Account.

Question:8 Sri Sundaram commenced business on 1st1 April, 1992 with head office at Madras and a branch at
Nagpur. Purchases were made exclusively by the head office where the goods were processed before sale.
There was no loss or wastage in processing. Only the processed goods received from head office were handled
by the branch and these were charged thereto at processed cost plus 10%. All sales, whether by head office
or by the branch, were at a uniform gross profit of 25% on cost. Following is the Trial Balance of Sri Sundaram
as on 31st March, 1993:

Head Office
Dr. Cr.

Capital 62,000

Drawings 11,000

Purchases 3,93,900

Cost of Processing 10,100

Sales 2,56,000

Goods sent to Branch 1,84,800

Administrative Expenses 27,800

Selling Expenses 10,000

Debtors 61,920

Creditors 1,20,280

Branch Current Account 77,960

Bank Balance 30,400 ________

6,23,080 6,23,080

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Branch
Dr. Cr.

Sales 1,64,000

Goods received from Head Office 1,76,000

Administrative Expenses 3,000

Selling Expenses 1,240

Debtors 22,720

Creditors 2,160

H.O. Current Account 52,300

Bank Balance 15,500________________

2,18,460 2,18,460

The following further information are also available:

(i) Goods sent by H.O to the branch in March, 93 at Rs.8,800 were not received by the branch until April,93.

(ii) A remittance of Rs. 16,860 from the branch to head office was not received until April, 1993.
(iii) Stock taking at the branch disclosed a shortage of goods of Rs. 4,000 (at selling value).
(iv) Cost of unprocessed goods at head office on 31stMarch, 1993 was Rs. 20,000.
Prepare trading and Profit & Loss Account in Columnar form and Balance sheet of the business as a whole as on
31stMarch, 1993. [CA. (Inter) Nov. 1993, ICWA-INTER- 8 TIMES]

Hint: Stock of Head Office = 11,200, Stock of Branch = 28,160

Stock Reserve on closing stock = 28,160 X 10/ 110 = 2,560
Goods in transit = 8,800 X 10/100 = 800 = 33600
[Ans. G. Profit = Rs. 68,000 (H.O.), Rs. 19,680 (B.O.), Net Profit = Rs.26,840 (H.O) Rs. 11,920 (B.O), Total of
Balance Sheet = Rs. 2,12,200]

Question:9 Head Office passes adjustment entry at the end of each month to adjust the position arising out of
inter-branch transactions during the month. From the following inter-branch transactions in January, 2002,
make the entry in the books of Head Office:
(a) Mumbai Branch
(1) Received Goods: Rs. 6,000 from Calcutta Branch, Rs. 4,000 from Patna Branch.
(2) Sent Goods to: Rs. 10,000 to Patna Rs.8,000 to Calcutta.
(3) Received B/R: Rs. 6,000 from Patna.
(4) Sent Acceptance: Rs. 4,000 to Calcutta, Rs. 2,000 toPatna.
(b) Chennai Branch (Apart from the above)

(5) Received Goods; Rs. 10,600 from Calcutta, Rs. 4,000 fromMumbai.
(6) Cash Sent: Rs. 2,000 to Calcutta, Rs. 6,000 to Mumbai.
(c) Calcutta Branch (Apart from the above)

(7) Sent Goods to Patna: Rs. 6,000

(8) Issued B/P: Rs. 4,000 to Patna, Rs. 4,000 cash to Patna. (15 marks) (1996-May )

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Question:10 Show adjustment journal entry in the books of Head Office at the end of April, 2003 for
incorporation of inter-branch transactions assuming that only Head Office maintains different branch accounts
in its books.
A) Delhi Branch
1. Received goods from Mumbai - Rs. 35,000 and Rs. 15,000 from Kolkata.
2. Sent goods to Chennai - Rs. 25,000, Kolkata - Rs. 20,000.
3. Bill Receivable received - Rs. 20,000 from Chennai.
4. Acceptances sent to - Mumbai - Rs. 25,000, Kolkata - Rs. 10,000.
B) Mumbai Branch (apart from the above):
5. Received goods from Kolkata - Rs. 15,000, Delhi – RS. 20,000.
6. Cash sent to Delhi - Rs. 15,000, Kolkata - Rs. 7,000.
C) Chennai Branch (apart from the above):
7. Received goods from Kolkata — Rs. 30,000.
8. Acceptances and Cash sent to Kolkata - Rs. 20,000 and Rs. 10,000, respectively.
D) Kolkata Branch (apart from the above):
9. Sent goods to Chennai - Rs. 35,000.
10. Paid cash to Chennai - Rs. 15,000.

11. Acceptances sent to Chennai - Rs. 15,000.

All working should form part of the answer. (May 2003) 8 mark

Answer: Journal Entry In the books of H. O.

30th Mumbai Branch Account Dr. 3,000

April, Chennai Branch Account Dr. 70,000
2003 To Delhi Branch Account 15,000
To Kolkata Branch Account 58,000
(Being adjustment entry passed by H. O. in respect of inter branch
transaction for the month of April, 2003)
Question:11 On 31stMarch, 2000 Kanpur Branch submits the following Trial Balance to its Head Office at
Lucknow:

Debit Balances Rs. in lacs

Furniture and Equipment 18
Depreciation on Furniture 2
Salaries 25
Rent 10
Advertising 6
Telephone, Postage and Stationery 3
Sundry Office Expenses 1
Stock on 1st April, 1999 60
Goods Received from Head Office 288
Debtors 20
Cash at bank and in hand 8
Carriage Inwards 7
448
Credit Balances
Outstanding Expenses 3
Goods Returned to Head Office 5
Sales 360
Head Office 80
448

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Additional Information: Stock on 31st March, 2000 was valued at Rs. 62 lacs on 29th March, 2000 the Head Office
dispatched goods costing Rs. 10 lacs to its branch. Branch did not receive these goods before 1 st April, 2000. Hence the
figure of goods received from Head Office does not include these goods. Also the head office has charged the
branch Rs. 1 lac for centralized services for which the branch has not passed the entry. You are required to:

(i) Pass Journal Entries in the books of the Branch to make the necessary adjustments.
(ii) Prepare Final Accounts of the Branch including Balance Sheet, and
(iii) Pass Journal Entries in the books of the Head Office to incorporate the whole of the Branch(CA-16 marks)
Answer (i) Journal Entries in the Books of KANPUR BRANCH (Rs. in lacs.)

Particulars Dr. Cr.

Goods in transit A/c Dr. 10
To Head office A/c 10
(Goods dispatched by head office but not received by branch 1st April 2000)
Expenses A/c before Dr.
1
To Head office A/c 1
(Amount charged by head office for centralised services)

(ii) Trading and Profit & Loss Account of the Branch for the year ended 31st March, 2000

Particulars Rs. in lacs Particulars Rs. in lacs

To Opening Stock 60 By Sales 360
To Goods received from By Closing stock 62
Head office 288
Less: Returns 5 283
7
To Carriage
To Gross Inwards
profit c/d 72
422 422
To Salaries 25 By Gross Profit b/d 72
To Depreciation on furniture 2
To Rent 10
To Advertising 6 .
To Telephone, Postage & Stationery 3
To Sundry office expenses 1
To Head office expenses 1
To Net profit Transferred to H.O. A/c 24
72 72

Balance Sheet as on 31st March, 2000

Liabilities Rs. In Lacs Assets Rs. In Lacs

Head office 80 Furniture & equipment 20
Add: Goods in transit 10 Less: Dep. 2 18
Head office expenses 1 Stock in Hand 62
Net Profit 24 115 Goods in transit 10
Outstanding expenses 3 Debtors 20
8
118 Cash at Bank and in Hand 118

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Question: 12 Give Journal Entries in the books of Branch A to rectify or adjust the following.:

(i) Head Office expenses Rs. 3,500 allocated to the Branch, but not recorded in the Branch Books,
(ii) Depreciation of branch assets, whose accounts are kept by the Head Office not provided for Rs.
1,500.
(iii) Branch paid Rs. 2,000 as salary to a H.O. Inspector, but the amount paid has been debated by the
Branch to Salaries account.
(iv) H.O. collected Rs. 10,000 directly from a customer on behalf of the Branch, but no intimation to
this effect has been received by the Branch.
(v) A remittance of Rs. 15,000 sent by the Branch has not yet been received by theHead Office,
(vi) Branch A incurred advertisement expenses of Rs. 3,000 on behalf of Branch B.

Answer: In the Books of Branch A

Date Particulars Dr. (Rs.) CR. (Rs.)

Expenses account Dr. 3,500
To Head office account 3,500
(Being the allocated expenditure by the head office recorded in branch
books)
Depreciation account 1,500
To Head office account 1,500
(Being the depreciation provided)
Head office account 2,000
To Salaries account 2,000
(Being the rectification of salary paid on behalf of H.O.)
Head office account 10,000
To Debtors account 10,000
(Being the adjustment of collection from branch debtors)
No entry is passed for the said transaction in the books of Brach ____ ____
Head Office account 3,000
To Cash account 3,000
(Being the expenditure on account of Branch B, recorded in books)

Question: 13. Alpha& Co., having head office in Mumbai has a branch in Nagpur. The branch at Nagpur is an
independent branch maintaining separate books of account. On 31.3.2011, it was found that the goods
dispatched by head office for ` 2,00,000 was received by the branch only to the extent of ` 1,50,000. The
balance goods are in transit. What is the accounting entry to be passed by the branch for recording the goods
in transit, in its books? (CA-May, 2007)

Answer: Nagpur branch must include the inventory in its books as goods in transit.

The following journal entry must be made by the branch:

Goods in transit A/c Dr. 50,000
To Head office A/c 50,000
[Being Goods sent by Head office is still in transit on the closing date]

Question 14.M/s Shah & Co. commenced business on 1.4.2004 with Head Office at Mumbai and a Branch at
Chennai. Purchases were made exclusively by the Head Office, where the goods were processed before sale.
There was no loss or wastage in processing. Only the processed goods received from Head Office were handled
by the Branch. The goods were sent to branch at processed cost plus 10%.. All sales, whether by Head Office or
by the Branch, were at uniform gross profit of 25% on their respective cost. Following is the Trial Balance as
on 31.3.2005.

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Head Office Branch

Dr. Cr. Dr. Cr.

Capital 3,10,000
Drawings 55,000
Purchases 19,69,500
Cost of processing 50,500
Sales 12,80,000 8,20,000
Goods sent to Branch 9,24,000
Administrative expenses 1,39,000 15,000
Selling expenses 50,000 6,200
Debtors 3,09,600 1,13,600
Branch Current account 3,89,800
Creditors 6,01,400 10,800
Bank Balance 1,52,000 77,500
Head Office Current account 2,61,500
Goods received from H.O. 8,80,000
31,15,400 31,15,400 10,92,300 10,92,300
Following further information is provided:

(i) Goods sent by Head Office to the Branch in March, 2005 of Rs. 44,000 were not received by the Branch till
2.4.2005.
(ii) A remittance of Rs. 84,300 sent by the Branch to Head Office was also similarly not received upto
31.3.2005.
(iii) Stock taking at the Branch disclosed a shortage of Rs. 20,000 (at selling price to the branch).
(iv) Cost of unprocessed goods at Head Office on 31.3.2005 was Rs. 1,00,000.
Prepare Trading and Profit and Loss account in columnar form and Balance Sheet of the
business as a whole as at 31.3.2005
Answer: Trading and Profit and Loss Account

Particulars H.O. Branch Total Particulars H.O. Branch Total

To Purchases 19,69,500 - 19,69,500 By Sales 12,80,000 8,20,000 21,00,000

To Cost of processing 50,500 - 50,500 By Goods sent to Branch 9,24,000 - -

To Goods received By Stock shortage - 16,000 14,545

from H.O. - 8,80,000 - By Goods in transit 44,000

To Gross profit c/d 3,40,000 1,64,000 5,02,545 By Closing stock:

Processed goods 56,000 2,08,000 2,64,000

Unprocessed goods 1,00,000

23,60,000 10,44,000 25,22,545 23,60,000 10,44,000 25,22,545

To Admn. Expenses 1,39,000 15,000 1,54,000 By Gross profit b/d 3,40,000 1,64,000 5,02,545

To Selling Expenses 50,000 6,200 56,200

To Stock shortage - 16,000 14,545

To Stock reserve 22,909 - 22,909

To Net profit 1,28,091 1,26,800 2,54,891

3,40,000 1,64,000 5,02,545 3,40,000 1,64,000 5,02,545

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Balance Sheet as at 31st March, 2005

Liabilities Amount Assets Amount

Capital 3,10,000 Debtors
Add: Net profit 2,54,891 H.O. 3,09,600
5,64,891 Branch 1,13,600
Less: Drawings 55,000 5,09,891 Closing stock:
Creditors: Processed goods
H.O. 6,01,400 H.O. 56,000
Branch 10,800 6,12,200 Branch 2,08,000
2,64,000
Less: Stock reserve 18,909 2,45,091
Unprocessed 1,00,000
goods Bank Balance
H.O. 1,52,000
Branch 77,500
Goods in transit 44,000 40,000
Less: Stock reserve 4,000
Cash in transit 84,300
11,22,091 11,22,091
Working Notes: 1. Calculation of closing stock: Stock at Head Office:

Cost of goods processed ` (19,69,500 + 50,500 – 1,00,000) 19,20,000

Less: Cost of goods sent to Branch
9,24,000 ×100/110 8,40,000
Cost of goods sold 12,80,000 ×100/125 10,24,000 18,64,000
Stock of processed goods with H.O. 56,000
Stock at Branch:

Goods received from H.O. (at invoice price) 8,80,000

Less: Invoice value of goods sold
8,20,000 ×100/125 6,56,000
Invoice value of stock shortage 20,000x100/125 16,000 6,72,000
Stock at Branch at invoice price 2,08,000
Less: Stock Reserve 2,08,000 x10/110 18,909
Stock of processed goods with Branch (at cost) 1,89,091
2. Stock Reserve:

Unrealized profit on Branch stock (2,08,000x10/110) 18,909

Unrealized profit on goods in transit (44,000x10/110 4,000
22,909
Question:-15. Global Limited has a branch which closes its books of account every year on 31st March. This is
an independent branch which maintains comprehensive books of account for recording their transactions. You
are required to show journal entries in the books of branch on 31stMarch, 2011 to rectify or adjust the
following:

(i) Head Office allocates Rs. 1,35,000 to the branch as head office expenses, which have not yet
been recorded by branch.
(ii) Depreciation of branch fixed assets, whose accounts are kept by head office in its books, not yet
recorded in the branch books, Rs. 1,15,000.
(iii) Branch paid Rs. 1,40,000 as salary to an official from head office on visit to branch and debited
the amount to its Salaries Account,
(iv) Head Office collected Rs. 1,30,000 directly from a branch customer on behalf of the branch, but
no intimation was received earlier by the branch. Now the branch learns about it.
(v) It is learnt that a remittance of Rs. 1,50,000 sent by the branch has not been Received by head
office till date.

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Question:16.The following is the Trial Balance of Malabar Hills Branch as at 30thJune, 2002:

H.O. Account 32,400

Stock on July 1,2001 60,000
Purchases 1,78,000
Goods received from H.O. 90,000
Sales 3,80,000
Goods supplied to H.O. 60,000
Salaries 15,000
Debtors 37,000
Creditors 18,500
Rent 9,600
Office Expenses 4,700
Cash in hand and at Bank 17,800
Furniture 14,000
4,58,500 4,58,500
Additional Information

a) Stock on hand was valued at Rs. 27,000

b) The Branch account in the Head Office Books on 30thJune, 2002 stood at Rs. 4,600 (Debit Balance).
c) On 28thJune, 2002, the Head Office forwarded goods to the value of Rs. 25,000 to the branch where
they were received on 3rdJuly, 2002.
d) A cash remittance of Rs. 12,000 by branch on 24thJune was received by H.O. on July 1. Required
1. Journal entries necessary to incorporate the above trial balance.
2. The result of trading at Branch.
3. Malabar Hills Branch Account in the H.O. Books. (ICAI Study Material)

Solution: Step 1: Reconcile Books of Branch

(i) Goods in Transit A/c Dr. 25,000

To Head Office a/c 25,000
(Being goods in transit recorded)

Books of Head Office

(ii) Cash in - Transit A/c Dr. 12,000

To Branch 12,000
(Being Cash in Transit Recognised)

Step 2: Book of Branch

Trading & Profit & Loss A/C

To Opening Stock 60,000 By Sales 3,80,000

To Purchase 1,78,000 By goods Supplied to HO 60,000
To Goods recd HO 90,000 By Closing Stock 27,000
To Gross Profit 1,39,000
4,67,000 4,67,000
To Salaries 15,000 By Gross Profit 1,39,000
To Rent 9,600
To office Expenses 4,700
To Net Profit 1,09,700
1,39,000 1,39,000

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Branch Balance Sheet

To Creditors 18,500 By Debtors 37,000

By Cash 17,800
To Profit & Loss A/c 1,09,700 By Furniture 14,000
By Stock 27,000
By Goods in Transit 25,000
H.O A/c 7,400

1,28,200 1,28,200
Step 3: Book of HO - Incorporation Journal

Debtors Dr. 37,000

Cash Dr. 17,800
Furniture Dr. 14,000
Stock Dr. 27,000
Goods in Transit Dr. 25,000
To Branch A/c 1,20,800
(Being Sundry Asset incorporated)
Branch A/c Dr. 18,500
To Creditor 18,500
(Being Liability incorporated)
Branch Dr. 109700
To profit and loss account 1,09,700
(Being profit incorporated)
Question:17. KP Ltd. manufactures a range of goods which it sells to wholesale customers only from its head office.
In addition, the H.O. transfers goods to a newly opened branch at factory cost plus 15%. The branch then sells these
goods to the general public on only cash basis. The selling price to wholesale customers is designed to give a factory
profit which amounts to 30% of the sales value. The selling price to the general public is designed to give a gross
margin (i.e., selling price less cost of goods from H.O.) of 30%of the sales value. The company operates from rented
premises and leases all other types of fixed assets. The rent and hire charges for these are included in the overhead
costs shown in the trial balances. From the information given below, you are required to prepare for the year ended
31stDec, 2002 in columnar form a Profit & Loss account for (i) H.O. (ii) the branch (iii) the entire business and a
Balance Sheet as on 31st Dec, 2002 for the entire business.

H.O. Branch

Raw materials purchased 35,000

Direct wages 1,08,500
Factory overheads 39,000
Stock on 1-1-2002
Raw materials 1,800
Finished goods 13,000 9,200
Debtors 37,000
Cash 22,000 1,000
Administrative Salaries 13,900 4,000
Salesmen's Salaries 22,500 6,200
Other administrative &
Selling overheads 12,500 2,300
lnter-unit accounts 5,000 2,000
Capital 50,000
Sundry Creditors 13,000
Provision for Unrealized
Profit in stock 1,200
Sales 2,00,000 65,200
Goods sent to Branch 46,000
Goods Received from H.O. 44,500
3,10,200 3,10,200 67,200 67,200

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ACCOUNTING CA/CMA SANTOSH KUMAR

Notes:

(1) On 28thDec, 2002 the branch remitted Rs. 1,500 to the H.O. and this has not yet been recorded in the
H.O. books. Also on the same date, the H.O. dispatched goods to the branch invoiced at Rs. 1,500 and
these too have not yet been entered into the branch books. It is the company's policy to adjust items
in transit in the books of the recipient.
(2) The stock of raw materials held at the H.O. on 31st Dec, 2002 was valued at Rs. 2,300.
(3) You are advised that:
a) There were no stock losses incurred at the H.O. or at the branch.
b) It is the company's practice to value finished goods stock at the H.O. at factory cost.
c) There was no opening or closing stock of work-in-progress.
(4) Branch employees are entitled to a bonus of Rs. 156 under a bilateral agreement.
(Study Material)

Solution: Trading & Profit & Loss A/C

H.O. Branch Total H.O. Branch Total

To Raw Materials 1,800 1,800 By Sales 65,200 2,00,000 2,65,200
To Opening Stock 9,200 13,000 22,200 By Closing 8,060 15,000 23,060
To Goods reed form Stock
Head Office 44,500 By Goods send 46,000
to purchaser
To Raw Material 35,000 35,000 By Closing
Purchase Stock-Raw
material 23,000 23,000
To Direct Wages 1,08,500 1,08,500 By Gross Total 1,500

To Factory overhead 39,000 39,000

To Gross profit 19,560 66,000 85,560
1,19,260 2,38,000 3,57,260 1,19,260 2,38,000 3,57,260
By Gross Profit 19,560 66,000 85,560
By provision
unrealised
profit 1,200 1,200
To Adm. Salaries 4,000 13,900 17,900
To Sales man's
Comm. 6,200 22,500 28,700
To Adm. & Selling of
HS 2,300 12,500 14,800
To Bonus to
employees 156 156
To Net Profit 6,904 18,300 25,204
19,560 67,200 86,760 19,560 67,200 86,760

Consolidated Balance Sheet

Capital 50,000 Debtors 37,000

Creditor 13,000 Cash 22,000
Profit & Loss 1.8,300 (+) Branch 1,000 23,000
(+)Branch 6,904
(-) Opening Profit 1,247 23,957 Cash-in-transit 1,500
Provision for unrealised Profit 12,347 Stock:
Bonus payable 156 Finished Goods - HO Finished 15,000
Goods - Branch 8,060
Raw Material - HO 2,300
Goods-in-transit 1,500
88,360 88,360

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W.NOTES

Cash-in-transit Dr. 1,500

To Branch 1,500
(Being of Head Office)
Goods-in-transit Dr. 15,00
To Head Office 1,500
(Being branch)
Branch Balance Sheet

To Head Office 2000 By Cash 1,000

(+)Goods-in-transit 1,500 3,500 By Goods-in-transit 1,500
To Profit & Loss 6,904 By Stock 8,060
To Bonus payable 156
10,560 10,560
Head Office Stock Account

To Balance- Raw Materials 1,800 By Sales(30% 2,00,000) 1,40,000

- Finished Goods 13,000 By Goods sent to Branch 40,000
To Raw material 35,000 By Closing Stock-Raw material 2,300
To Direct wages 1,08,500 - Finished Goods 15,000
To Factory overhead 39,000
1,97,300 1,97,300
Question:18.M/s Surplus commenced business on 1.04.2009 with the head office at Ahmedabad and branch
at Surat. All goods were purchased by head office and normally packed immediately, but on 31.3.2010, goods
costing Rs. 5,000 remained unpacked. Only the packed goods were sent to the branch which was charged at
selling price less 10%. The following information is furnished to you as on 31 stMarch 2010, from the Head
Office and Branch Office books:

Particulars H.O. (Rs.) Branch (Rs.)

Capital Account 40,000
Drawings by Proprietor 10,000
Purchases 4,00,000
Packing materials bought 6,000
Sales 3,20,000 1,00,000
Dispatch of goods to Branch 1,13,400
Selling expenses 16,000 800
Clerk's salary, wages, etc. 20,000 3,000
Sundry Debtors 28,000 4,200
Sundry Creditors 26,600 5,000
Head Office Current A/c 12,000
Branch Office Current A/c 19,000
Bank Balances 2,000
Goods received from Head Office 1,08,000

Information

a) Sales by head office were on uniform gross profit, after charging packing materials, of 20% at the fixed
selling price.
b) Sales at Branch were at fixed selling price.
c) Goods invoiced and dispatched by head office to branch in March 2010 for Rs. 5,400 were received in
the Branch only on 10thApril.
d) Stock of packing materials at head office as on 31stMarch 2010 was valued at Rs. 1,000.
e) Remittance of Rs. 1,600 from the branch to the Head Office was in transit on 31.3.2010.
f) Rs. 2,000 worth of stock at selling price was damaged at the branch. For valuing stock, this was
reduced by Rs. 1,090 below the invoice cost to the branch. It was decided that the Head office and

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ACCOUNTING CA/CMA SANTOSH KUMAR

branch would share equally the loss occasioned by this and also the deficit in stock, ascertained on
actual stock taking at the Branch of goods at selling price of Rs. 500.
Prepare Trading and Profit and Loss Account of Surat and Ahmedabad Office and also a Balance Sheet as at
31.3.2010 of the business. (RTP-Nov-10)

Answer: Trading and Profit and Loss Account

Particulars H.O. Branch Particulars H.O. Branch

(Rs.) (Rs.) (Rs.) (Rs.)
To Purchases 4,00,000 By Sales 3,20,000 1,00,000
To Packing material 5,000 By Goods sent to Branch A/c 1,13,400
consumed (6,000-1,000) (in transit Rs. 5,400)
To Goods from H.O. 1,08,000 By Stock damaged and 1,540
shortage
To Gross Profit c/d 76,600 10,000 By Closing Stock (includes 48,200 16,460
[Working Notes (i) & (ii)] unpacked goods of Rs. 5,000)
(Bal.fig.)
4,81,600 1,18,000 4,81,600 1,18,000
To Salaries and Wages 20,000 3,000 By Gross Profit b/d 76,600 10,000
To Selling Expenses 16,000 800
To Stock Reserve 2,350
(Unrealised Profit)
To Stock damaged and 770 770
shortage
To Net Profit t/f to 37,480 5,430
Capital A/c
76,600 10,000 76,600 10,000

Balance Sheet as at 31stMarch, 2010

Liabilities Rs. Assets Rs.

Capital 40,000 Stock-in-trade:
Add: Net Profit 42,910 H.O.: Packed 43,200
82,910 Unpacked 5,000
Less: Drawings 10,000 72,910 Packing Material 1,000 49,200
Sundry Creditors: Branch: In hand 16,460
H.O. 26,600 In transit 5,400
Branch 5,000 31,600 21,860
Less: Unrealised Profit 2,350 19,510
Sundry Debtors: H.O. 28,000 32,200
Branch 4,200 2,000
Cash at Bank 1,600
Cash-in-transit
1,04.510 1,04.510
Working Notes:

Rs.
Gross Profit made by Head Office (20% of Sales of Rs. 3,20,000) 64,000
10/90 of Goods sent to Branch [(Rs. 1,08,000 + Rs. 5,400) x 1/9] 12,600
(Since Invoice Price is 90% of normal selling price) 76,600
The Gross Profit made by branch is 10% of sales (10% of Rs. 1,00,000) 10,000
The amount to be written off at invoice value at branch is:
Amount written off on damaged goods 1,090
Invoice price of deficit in stock (Rs. 500 x 90/100) 450 1,540
Value of damaged goods included in Closing Stock
Selling Price of Goods Damaged
Invoice Price of Goods Damaged (Rs. 2,000 x 90/100) 2,000

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ACCOUNTING CA/CMA SANTOSH KUMAR

Amount already written off 1,800

Amount still included in Closing Stock (B - C) 1,090
Calculation of Stock Reserve Required 710
Stock (as per Trading Account)
Less: Value of damaged goods included 16,460
Value of undamaged in hand (A-B) 710
Add: Goods-in-transit 15,750
Value to Total Goods (C + D) 5,400
Stock Reserve required (Rs. 21,150x 10/90) 21,150
2,350
Question:19.Goods sent to a branch were charged by the head office at cost plus 10 percent. Head Office
makes a uniform gross profit of 33-1/3% on selling price. The Branch sells goods at a uniform gross profit of
25% on selling price. The following transactions have taken place during the year ended on 31 stMarch 2010.

a) Head Office purchases amounted to Rs. 15,02,350, purchases returns were Rs. 1,00,000 and discount
allowed by suppliers amounted to Rs. 30,090.
b) Sales by Head Office amounted to Rs. 10,80,000. Goods sent to branch were Rs. 5,44,500 (at invoice
price), discount allowed to customers amounted to Rs.9,180.
c) Goods sent to Branch for Rs. 66,000 in March, were not received at the Branch until April.
d) Branch purchased goods locally for Rs. 1,87,500, discount allowed by suppliers amounted toRs. 4,875.
e) Overhead expenses of Head Office were Rs. 2,80,260, and of Branch Rs. 80,475.
f) Sales by the Branch amounted to Rs. 7,20,000, discount allowed to customers amounted to Rs. 5,640
and cost of goods lost-in-transit was Rs. 8,010.
g) Branch Stock as on 31st March, included stock invoiced by Head Office at Rs. 1,15,500.Prepare
columnar Trading and Profit and Loss Account of Head Office and the Branch for the year ending 31st
March 2010.
(RTP May 11)

Answer: Trading and Profit and Loss Account

Particulars H.O. Branch Total Particulars H.O. Branch Total

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
To Purchases less 14,02,350 1,87,500 15,89,850 By Sales 10,80,000 7,20,000 18,00,000
returns
To Goods from 4,78,500 - By Goods sent to 4,78,500 - -
H.O, less in transit Branch
To Gross Profit 4,03,500 1,80,000 5,83,500 By Goods lost in - 8,010 8,010
c/d (W.N .4) transit
By Closing
Stock
(W.N.1&2) 2,47,350 1,17,990 3,65,340
18,05,850 8,46,000 21,73,350 18,05,850 8,46,000 21,73,350
To Expenses 2,80,260 80,475 3,60,735 By Gross profit 4,03,500 1,80,000 5,83,500
b/d
To Discount 9,180 5,640 14,820 By Discount 30,090 4,875 34,965
Allowed allowed
To Goods lost in - 8,010 8,010
transit
To Stock Reserve 10,500 - 10,500
(W.N.3)
To Net Profit 1,33,650 90,750 2,24,400
4,33,590 1,84,875 6,18,465 4,33,590 1,84,875 6,18,465

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Working Notes:

Closing stock at head office

Purchases less returns 14,02,350
Less:(a) Cost of Sales.(Rs. 10,80,000 x 2/3) 7,20,000
(b) Cost of goods sent to Branch
(Rs. 4,78,500 x 100/110) 4,35,000 11,55,000
Closing Stock 2,47,350
Closing stock at Branch
Branch local purchases 1,87,500
Add: Goods received from head office 4,75,500
6,66,000
Less:(a) Cost of Branch Sales (Rs. 7,20,000 x 3/4)
(V) Goods lost-in-transit 8,010 5,48,010
Closing Stock 1,17,990
Stock Reserve at Branch [Rs. 1,15,500x10/110] 10,500
Gross profit of Head Office (10,80,000 x 33.333%) 3,60,000
Add: Loading on goods sent to branch [4,78,500x10/110] 43,500
4,03,500

FOREIGN BRANCH
Question:1 Kashmir Crafts Ltd. incorporated in India with its Head Office at Delhi has a branch in New York
where the local currency is U.S. Dollars. The following balances are extracted from the books of the Head
Office and its independent branch as on 31st December 1998 :

Head Office Branch

(Rs.) ($)
Debit balances :
Fixed assets at cost 4,50,000 9,000
Debtors and cash 17,600 360
Operating costs 1,03,700 2,250
Branch current account 42,600
6,13,900 11,610
Credit balances:
Share capital 2,00,000
Reserves 1,10,800
Sales revenue 1,86,300 4,800
Creditors 9,700 250
Head Office Current A/c 4,200
Accumulated depreciation 1,07,100 2.360
6,13,900 11,610
The following information Is provided regarding exchange rates:
The fixed assets of the branch were acquired when one U.S. dollar was equal to 10 rupees.
The exchange rates ruling during 1988 were:
1st January 1$ = 13Rs., Average 1$= 14Rs., 31st December 1 $ = 15 Rs.
There are no cash or goods in transit between H.O. and branch at the year end. You are required to prepare
the final accounts of Kashmir Crafts Ltd. after translating the branch balances by the Temporal method.

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Question:2 Indian company has a branch at Washington. Its Trial Balance as at 30th September, 1998 is as
follows:

Dr.($) Cr.($)
Plant and machinery 1,20,000 —
Furniture and fixtures 8,000 —
Stock, Oct. 1,1997 56,000 —
Purchases 2,40,000 —
Sales — 4,16,000
Goods from Indian Co. (H. O.) 80,000 —
Wages 2,000 —
Carriage inward 1,000 —
Salaries 6,000 —
Rent, rates and taxes 2,000 —
Insurance 1,000 —
Trade expenses 1,000 —
Head Office A/c — 1,14,000
Trade debtors 24,000 —
Trade creditors — 17,000
Cash at bank 5,000 —
Cash in hand 1,000 —
5,47,000 5,47,000

The following further information is given:

(1) Wages outstanding—$ l,000.
(2) Depreciate Plant and Machinery and Furniture and Fixtures @ 10 per cent p.a.
(3) The Head Office sent goods to Branch for Rs. 39,40,000.
(4) The Head Office shows an amount of Rs. 43,00,000 due from Branch.
(5) Stock on 30th September, 1998—$ 52,000.
(6) There were no in transit items either at the start or at the end of the year.
(7) On September 1, 1996, when the fixed assets were purchased, the rate of exchange was Rs. 38 to
one $. On October 1, 1997, the rate was Rs. 39 to one $. On September 30, 1998. the rate was Rs. 41
to one $. Average rate during the year was Rs. 40 to one $. You are asked to prepare:
(a) Trial balance incorporating adjustments given under 1 to 4 above, converting dollars into rupees.

(b) Trading and Profit and Loss Account for the year ended 30th September, 1998 and Balance Sheet as
on that date depicting the profitability and net position of the branch as would appear in India for
the purpose of incorporating in the main Balance Sheet. [CA Inter, Nov1999 , may 2012](16 marks)

Question 3.The London Branch of Delhi Export sent the following Trial balance as on 31 /l 2/1991.

£( Dr.) £( Cr)

Fixed Assets 17,500

Loan (taken to purchase fixed assets) 13,000

Depreciation 2,500

Stock (01:01:1991) 8,200

Goods from H.O 58,800

Sales 1,05,200

Salaries & Wages 15,200

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ACCOUNTING CA/CMA SANTOSH KUMAR

Interest 2,880

Cash at Bank 1,700

Debtors 21,200

H.O ______ 9,780

1,27,980 1,27,980

Fixed Assets were purchased on 01:01:1989 when £1 = Rs.25.50 life was estimated to be 10 years. To
finance the fixed asset a loan amounting to £22,000 was taken @ 18% interest p.a. Annual loan installment
of £ 3,000 and interest were payable in every December. Closing Stock = £2400.

Exchange Rates: Average of 1989 £1 = Rs. 25.70

31:12:1989 £l =Rs. 26.10

Average of 1990 £1 = Rs. 26.20

31:12:1990 £l = Rs. 26.40

Average of 1991 £1 = Rs. 36.50

31:12:1991 £1 = Rs. 42.20

In the Head Office Books of London Branch A/c appeared as follows:

London Branch A/c

£ Rs. £ Rs.

To Balance B/d 7,000 1,84,800 By Bank 56,020 20,44,730

To Goods 58,800 21,46,200 By balance 9,780 4,12,716

To P & L A/c. — 1,26,446 _______________________________________

65,800 24,57,446 65,800 24,57,446

You are required to show:-

(1) Branch Fixed Assets A/c (2) Branch Loan A/c. (3) Branch Trial Balance in Rupee Terms, (4) Branch P&L A/c.

(5) Adjustment Entries to incorporate branch balance in the books of Head Office.

Hint: Branch Trial Balance (Rupee Terms)

Dr. Cr.
Rs. Rs.
Fixed Assets 4,46,250
18% Loan 5,48,600
Depreciation 63,750
Stock (8,200 x 26.4) 2,16,480
Goods from H.O. 21,46,200
Sales (105,200 x 36.5) 38,39,800
Salaries and Wages (15,200 x 36.5) 5,54,800

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Interest 1,05,120
Cash at Bank (1700 x 42.20) 71,740
Debtors (21,200 x 42.20) 8,94,640
H.O. Account 4,12,716
Exchange Loss (Balancing Figures) 3,02,136
48,01,116 48,01,116
[Ans.: gross profit 15,78,400, Profit at Branch = Rs. 5,52,594]

Question:4 Carlin & Co. has head office at New York (U.S.A.) and branch at Mumbai (India). Mumbai branch
furnishes you with its trial Balance as on 31/3/1999 and the additional information given thereafter:

Dr. Cr.

Stock on 1/4/98 300 —

Purchases and Sales 800 1,200

S. Debtors and Creditors 400 300

Bills of exchange 120 240

Wages & Salaries 560 —

Rent, rates & taxes 360

Sundry charges 160 —

Computers 240 —

Bank 420 —

New York office A/c1,620

3,360 3,360

Additional information:

(a) Computers were acquired from a remittance of US $6,000 received from New York head office &paid to
the suppliers, Depreciate computers at 60% for the year.
(b) Unsold stock of Mumbai Branch was worth Rs. 4,20,000 on 31/3/99.
(c) The rate of exchange may be taken as follows:
(i) On 1/4/98 @ Rs.40 per US $

(ii) On 31/3/99 @ Rs.42 per US $

(iii) Average exchange rate for the year @ Rs.41 per US $

(iv) Conversion in $ shall be made up to two decimal accuracy.

You are asked to prepare in US $ the revenue statement for the year ended 31/3/99 and Balance sheet as on that
date of Mumbai branch as would appear in the books of New York H. O. of Carlin & Co. You are informed that
Mumbai branch A/c. showed a debit balance of US $ 39,609.18 and 31/3/99 in New York books and there were
no inter responding reconciliation. [C.A. (Inter) May 99 (10 Marks)

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Question :5 The New York Branch of Fine Textiles Limited, Delhi sent the following Trial Balance as on 31st
December, 1978:

$ $
Fixed Assets 1,20,000

Stock, 1st January, 1978 56,000

Good from H. Office. 3,20,000

Sales 4,20,000

Expenses 25,000

Debtors and Creditors 24,000 17,000

Cash at Bank 6,000

H.O Account ______ 1,14,000

5,5 1,000 5,51,000

In the H. O. Books the Branch Account stood as shown below:

Dr. New York Branch AccountCr.

Rs. Rs.
To balance b/d 10,05,000 By Cash 26,08,000
To Goods sent to Branch 24,63,000 By Balance c/d 8,60,000
34,68,000 34,68,000
Goods are invoiced to the Branch at cost plus 10% and branch has instruction to sell at invoice price plus 25%.
Fixed assets were acquired on 1st January, 1970 when $ 100 = Rs. 380. Rates of exchange were:

1st January, 1978 $ 100 = Rs. 760

31st December, 1978 $ 100 = Rs. 770
Average: $100 = Rs. 750
Fixed assets have to be depreciated by 10% and the Branch manager is entitled to commission of 5% on the
profit of the branch. You are required prepare trading and profit and loss account in foreign currency and to
convert the Branch Trial Balance into rupees and prepare the branch Trading and profit & Loss Account and
the Branch Account.

Question:6 DM Ltd., Delhi has a branch in London branch is an integral foreign operation of DM Ltd. At the
end of the year 31stMarch, 2009, the branch furnishes the following trial balance in U.K. Pound:

Particulars £ £
Dr. Cr.
Fixed assets (Acquired on 1st April, 2005) 24,000
Stock as on 1st April, 2008 11,200
Goods from head Office 64,000
Expenses 4,800
Debtors 4,800
Creditors 3,200
Cash at bank 1,200
Head Office Account 22,800
Purchases 12,000
Sales 96,000
1,22,000 1,22,000
In head office books, the branch account stood as shown below:

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ACCOUNTING CA/CMA SANTOSH KUMAR

Dr. London Branch A/c Cr.

Particulars Amount ` Particulars Amount `

To Balance B/d 20,10,000 By Bank A/c By 52,16,000

49,26,000 Balance C/d 17,20,000
To Goods sent to branch 69,36,000 69,36,000

The following further information are given:

(a) Fixed assets are to be depreciated @ 10 % p.a on straight line basis.

(b) On 31st March, 2008 :
Expenses outstanding - £ 400
Prepaid expenses - £ 200
Closing stock - £ 8,000
(c) Rate of Exchanges :

1st April, 2007 - Rs. 70 to £ 1

1st April, 2010 - Rs. 76 to £ 1
31st March, 2011 - Rs. 77 to £ 1
Average - Rs. 75 to £ 1
You are required to prepare:

2. Trial balance, incorporating adjustments of outstanding and prepaid expenses, converting U.K.
pound into Indian rupees.
3. Trading and profit and loss account for the year ended 31st March, 2009 and the Balance Sheet as
on that date of London branch as would appear in the books of Delhi head office of DM Ltd.

Answer: Trial Balance of London Branch as on 31st March, 2011

4.

Particulars U.K. Pound Rate Per Dr. (Rs.) Cr. (Rs.)

Fixed Assets 24,000 U.K.Pound 70 16,80,000

Stock (as on 1st April, 2010) 11,200 76 8,51,200
Goods from Head Office 64,000 - 49,26,000
Sales 96,000 75 72,00,000
Purchases 12,000 75 9,00,000
Expenses (4,800 + 400 – 200) 5,000 75 3,75,000
Debtors 4,800 77 3,69,600
Creditors 3,200 77 2,46,400
Outstanding Expenses 400 77 30,800
Prepaid expenses 200 77 15,400
Cash at Bank 1,200 77 92,400
Head office Account - 17,20,000
Difference in Exchange 12,400
92,09,600 92,09,600
Closing stock will be (£ 8,000 ×Rs. 77) = Rs. 6,16,000

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ACCOUNTING CA/CMA SANTOSH KUMAR

Trading and Profit & Loss A/c for the year ended 31stMarch, 2009

Particulars Amount Particulars Amount

(Rs.) (Rs.)
To Opening Stock 8,51,200 By Sales 72,00,000
To Purchases 9,00,000 By Closing Stock 6,16,000
To Goods from H.O. 49,26,000
To Gross Profit 11,38,800
78,16,000 78,16,000
To Expenses 3,75,000 By Gross Profit 11,38,800
To Depreciation 1,68,000 By Profit due to 12,400

To Net Profit 6,08,200 Exchange difference

11,51,200 11,51,200

Balance Sheet as on 31st March, 2008

Liabilities Rs. Assets Rs.

Head office Fixed Assets 16,80,000

Less: Depreciation 1,68,000 15,12,000

Balance 17,20,000 Debtors 3,69,600

Add: Net Profit 6,08,200 23,28,200 Prepaid expenses 15,400

26,05,400 26,05,400
Outstanding Expenses 30,800 Closing stock 6,16,000
Question:7 On 31st March, 2010, the following ledger balances have been extracted from the books of
Creditors
Washington branch office: 2,46,400 Cash at bank 92,400

Ledger Accounts $
Building 180
Stock as on 1.4.2009 26
Cash and Bank Balances 57
Purchases 96
Sales 110
Commission receipts 28
Debtors 46
Creditors 65
You are required to convert above Ledger balances into Indian Rupees. Use the following rates of exchange:

Per $
Opening rate 46
Closing rate
Average rate 50
For fixed assets 48
(CA-IPCC GROUP 2)
42

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Answer: Conversion of ledger balances (in Dollars) into Rupees

$ Rate per $ Amount in Rupees

Building 180 42 7,560
Stock as on 01.04.2009 26 46 1,196
Cash and bank balances 57 50 2,850
Purchases 96 48 4,608
Sales 110 48 5,280
Commission receipts 28 48 1,344
Debtors 46 50 2,300
Creditors 65 50 3,250

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or android phone.

We promise you that, if we see you bringing one step forward then we'll take you to
level up by our support and care in getting the concepts clear for once and all.

OUR ROOTS: COC Education Pvt. Ltd. (Concept Online Classes)

In 2006, CA/CMA Santosh Kumar started an educational institute after

leaving his well-paying corporate job with mission to solve problem of
quality education to student preparing for CA, CS and CMA. With the
commitment to excellence, in less than a decade time - 4 institutes were
opened in different corners of Delhi and we provided education to more
than 45,000 students. But the vision was bigger, to provide the same
quality of education at reasonable price to all commerce students
throughout the world.

And then the revolution in online education started and Concept Online
Classes (COC Education Pvt. Ltd.) was formed. With the virtue of excellent
teaching methodology and the team with dedication and devotion toward
student success in every challenge we reached to 225k+ students online
and more than 40,000 students have enrolled with us in different

Website:- www.conceptonlineclasses.com Mob. No. 9999631597/8448322142/7303445575

courses in the span of just 3 years. We have the vision to become global
leader in providing exemplary education for betterment of individual. We
have evolved, developed and implemented strategies to be the pioneer in
every stage.

Our Video Lectures edge over market:

1. Unlimited Views till exam

2. Best Quality Video
3. Study Material, Past attempts(s) questions, and questions
from practice manual
4. Better understanding of the students all the lectures are
given in simple and understandable language.
5. Covers the entire study material, past attempts(s) questions,
and questions from practice manual
CONTACT US:

 For any Purchases Inquiry-0120-4225002/3/4

& Call/WhatsApp - 8448322142, 9999631597, 7303445575
 For Technical Team- 0120-4225001/6

Email Id: [email protected]

Address:

COC Education Pvt. Ltd.

1201, Tower B, i-thum, Sector 62, Noida

Pin code- 201309

Website:- www.conceptonlineclasses.com Mob. No. 9999631597/8448322142/7303445575