13. BRANCH ACCOUNTS SOLUTIONS TO ASSIGNMENT PROBLEMS

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1 13. BRANCH ACCOUNTS SOLUTIONS TO ASSIGNMENT PROBLEMS PROBLEM No. 1 (A) Debtors Method: Delhi Branch Account 2010 Particulars Rs. Rs Particulars Rs. Rs. Jan. 1 Dec.31 By Bank Stock 7,000 Cash Sales 17, Debtors 12, Cash from Petty cash ,800 Sundry Debts. 28, 46,000 To Goods sent to Branch A/c To Bank: Salaries & Wages Rent & Rates Sundry Exp. To Balance being Profit carried to (HO) P&L A/c 6,200 1, ,000 8,200 9,0 By Goods sent to Br. A/c Returns to H.O Stock Debtors Petty Cash 6, 9,800 16,0 63,0 16,0 63,0 (B) Memorandum Branch Trading and Profit and Loss Account Date Particulars Rs. Rs. Particulars Rs. Rs Jan.1 To Stock To Goods sent From H.O. Less: Returns to H.O. To Gross profit c/d To Salaries & Wages To Rent & Rates To Sundry Exp. To Petty Cash Exp. To Allowance to Customer To Discounts To Bad debts To Net Profit 26,000 () 7,000 25,000 45,0 6, 51,900 51,900 6,200 By Gross Profit b/d 1, ,0 9,0 By Sales: Cash Credit 28,0 Less: Returns () By Closing Stock 17, 27,900 IPCC 33e_Accounts_Group-II_Branch Accounts_Assignment Solutions 1

2 Ph: /26 Stock and Debtors Method: Branch Stock Account 2010 Particulars Rs Particulars Rs. Rs. Rs. Jan.1 To Stock To Goods sent to 7,000 Dec. 31 By Sales: Cash 17, Branch A/c To Branch P & L A/c 26,000 Credit 28,0 (Gross profit c/d) Less: Ret. By Goods sent to () 27,900 45,0 Br. A/c Returns 2011 Jan.1 6, 52,900 (Stock) 52,900 6, Delhi Branch Debtors Account 2010 Particulars Rs Particulars Rs. Jan.1 To Balance 12, Dec.31 Dec.31 To Sales 28, Jan.1 9,800 By Cash 28, By Returns By Allowances 200 By Discounts 1,0 By Bad debts 9,800,000,000 Delhi Branch Expenses Account 2010 Particulars Rs Particulars Rs. Dec.31 To Salaries & Wages To Rent & Rates To Sundry Expenses To Petty Cash Expenses To Allowance to customer To Discounts To Bad Debts 6,200 1, ,0 10, Dec.31 Delhi Branch Profit & Loss Account By Branch P & L A/c 10, 10, 2010 Particulars Rs Particulars Rs. Dec.31 To Branch Expenses A/c To Net Profit to General Profit & Loss A/c 10, 9,0 Dec.31 By Gross Profit b/d IPCC 33e_Accounts_Group-II_Branch Accounts_Assignment Solutions 2

3 PROBLEM NO 2 Books of Sell Well Branch Accounts To Goods sent to Branch A/c 110 1,50,000 To Stock Reserve (W.N-2) To Balance Profit to General Profit & Loss A/c 1,65,000 4,855 37,363 2,07,218 By Cash collected from debts By Goods sent to Branch Returns By Goods sent to Branch (W.No.1) Stock 53,0 Debtors 29,000 1,06,000 4,200 14,618 82,0 2,07,218 Memorandum Branch Debtors Account Date Particulars Rs. Date Particulars Rs Jan. 01 Jan-Mar. To Sales - 1,35,000 1,35, Jan-Mar. By Cash / Bank Goods Sent to Branch Account To Branch A/c (Returns) To Branch A/c (Loading) To Purchases A/c 4,200 14,618 1,46,182 1,65,000 By Branch Account A/c Working Notes: 1. Loading on Goods sent to Branch = 1/11 of (Rs.1,65,000 Rs.4,200) = Rs.14, Stock Reserve = 1/11 of 53,0 = Rs.4,855 1,06,000 29,000 1,35,000 1,65,000 1,65,000 PROBLEM NO 3 In the books of head office Nagpur Branch Stock Account Date Particulars Rs. Date Particulars Rs To Branch b/d To Goods sent to Branch A/c To Branch Debtors 24,000 4,80,000 6,000 5,10, By Bank A/c (Cash Sales) By Branch Debtors (Credit Sales) By Stock shortage: Branch P & L A/c 1,* Branch Adjustment A/c (Loading) 1,80,000 2,80,000 2,000 48,000 5,10,000 IPCC 33e_Accounts_Group-II_Branch Accounts_Assignment Solutions 3

4 Ph: /26 Nagpur Branch Adjustment Account Date Particulars Rs. Date Particulars Rs To Branch b/d To Bank A/c (Dishonour of cheques) To Branch Stock 30,000 5,000 2,80,000* By Bank A/c (Collection) By Branch Stock A/c By Bad debts By Discount allowed 2,70,000 6,000 1, 36, 3,15,000 3,15,000 Nagpur Branch Adjustment Account * To Branch Stock A/c (Loading of loss) To Stock Reserve To Gross Profit c/d To Branch Stock A/c (Cost of loss) To Branch Expenses To Net Profit (Transferred to General P & L A/c) By Stock Reserve A/c 6,000 By Goods sent to Branch A/c 1,20,000 12,000 1,13, 1,26,000 1,26,000 By Gross Profit b/d 1,13, 1, 56,000 56,000 1,13, 1,13, * Balance figure Working Notes: 1. Credit Sales have not been given in problem. So, the balancing figure of Branch Debtor Account is taken as credit sales. 2. Loading is 33 1/3% of Cost ; i.e. 25% of invoice value Loading on opening stock = Rs.24,000 x 25% = Rs.6, Loading on goods sent = Rs.4,80,000 x 25% = Rs.1,20, Loading on Closing Stock = Rs.48,000 x 25% = Rs.12, Total Branch Expenses = Cash expenses + Bad debt + Discount allowed = Rs.53, + Rs.1, + Rs. = Rs.56, Gross Profit: Total sales (at invoice price) Goods returned by customers (at invoice price) x {( Rs.1,80,000 + Rs.2,80,00 ) Rs.6,000 } = Rs.1,13, PROBLEM NO 4 i. Calculation of profit earned by the branch In the books of Jammu Branch Trading Account 2,20,000 11,00,000 45,000 1,95,000 By Sales By Closing stock (Refer W.N) To Opening stock To Goods received by Head office To Expenses To Gross profit 12,00,000 3,60,000 15,60,000 15,60,000 ii. Stock reserve in respect of unrealised profit = Rs.3,60,000 x (20/120) = Rs.60,000 Working Note: Particulars Amount Amount Cost Price Invoice Price Sale Price Calculation of closing stock at invoice price: Opening stock at Invoice price Goods received during the year at Invoice price Less: Cost of goods sold at invoice price Closing stock Rs. 2,20,000 11,00,000 13,20,000 (9,60,000) 3,60,000 [12,00,000 x (120/150)] IPCC 33e_Accounts_Group-II_Branch Accounts_Assignment Solutions 4

5 PROBLEM NO 5 S.No. Particulars Debit Credit (i) Head Office Expenses A/c Dr. 1,35,000 To Head Office A/c 1,35,000 (Expenses allocated by the Head Office) (ii) Depreciation of Fixed Assets A/d Dr. 1,15,000 To Head Office A/c 1,15,000 (Depreciation on fixed assets whose accounts are maintained by the Head Office) (iii) Head Office A/c Dr. 1, To Salaries A/c 1, (Rectification of errors regarding salary paid to head office official) (iv) Head Office A/c Dr. 1,30,000 To Debtors A/c 1,30,000 (Amount directly collected by Head Office from a branch debtor) (v) No entry will be passed in the books of the Branch. Note: It is presumed that Global Ltd. has an independent branch which maintains comprehensive books of account for recording their transactions. PROBLEM NO 6 Journal entry in the books Head Office Date Particulars Debit (Rs,) Credit (Rs,) 30 th April, 2013 Mumbai Branch Account Dr. Chennai Branch Account Dr. 70,000 To Delhi Branch Account To Kolkata Branch Account 15,000 58,000 (Being adjustment entry passed by Head Office in respect of inter-branch transactions for the month of April, 2013) WORKING NOTE: S.No. A (1) (2) (3) (4) Particulars Delhi Branch Received Goods Sent goods Received bills receivable Sent acceptance Delhi (Rs.) 50,000 (Dr) 45,000 (Cr) 20,000 (Dr) 35,000 (Cr) Mumbai (Rs.) 35,000 (Cr) 25,000 (Dr) Chennai (Rs.) 25,000 (Dr) 20,000 (Cr) Kolkata (Rs.) 15,000 (Cr) 20,000 (Dr) 10,000 (Dr) B (5) (6) Mumbai Branch Received goods Sent cash 20,000 (Cr) 15,000 (Dr) 35,000 (Dr) 22,000 (Cr) 15,000 (Cr) 7,000 (Dr) C (7) (8) Chennai Branch Received goods Sent cash and acceptances 30,000 (Dr) 30,000 (Cr) 30,000 (Cr) 30,000 (Dr) D (9) (10) (11) Kolkata Branch Sent goods Sent cash Sent acceptances 35,000 (Dr) 15,000 (Dr) 15,000 (Dr) 35,000 (Cr) 15,000 (Cr) 15,000 (Cr) 15,000 (Cr) (Dr) 70,000 (Dr) 58,000 (Cr) IPCC 33e_Accounts_Group-II_Branch Accounts_Assignment Solutions 5

6 Ph: /26 (a) Particulars Plant and Machinery Depreciation on plant and machinery Furniture and Fixture Depreciation on furniture and fixture Stock, Oct Purchases Sales Goods from Omega (H.O) Wages Outstanding wages Carriage inward Salaries Rent, Rate and taxes Insurance Trade expenses Head Office A/c Trade debtors Trade creditors Cash at bank Cash at hand Exchange gain (bal. fig) (b) To Opening stock To Purchases To Goods from Head Office To Wages To Carriage inward To Gross profit c/d PROBLEM NO 7 In the books of Omega Washington Branch Trial Balance (in Rupees) as on 30 th September, 2012 Dr. Cr. Conversion Dr. Cr. US $ US $ Rate (Rs. 000) (Rs. 000) 1,08,000 12,000 7, ,000 2, 39 44,28,000 4,92,000 2,95,200 32,800 21,84,000 96,00,000 4,16,000 1,66, 80,000 6,000 2,000 24,000 5,000 IPCC 33e_Accounts_Group-II_Branch Accounts_Assignment Solutions 6 1,14,000 17,000 5,48,000 5,48,000 39, 1,20,000,000 2, 80,000 43,00,000 9,84,000 6,97,000 2,05,000,000 10,84,000 2,27,62,000 2,27,62,000 Washington Branch Trading and Profit and Loss Account for the year ended 30 th September, ,84,000 96,00,000 39, 1,20,000 28,88,000 By Sales By Closing stock (52,000 US $ x ) 1,66, 21,32,000 1,87,72,000 1,87,72,000 To Salaries 2, By Gross Profit b/d 28,88,000 To Rent, Rates and Taxes 80,000 To Insurance To Trade expenses To Depreciation on plant and machinery 4,92,000 To Depreciation on furniture and fixture 32,800 To Net Profit c/d 19,63,200 Balance Sheet of Washington Branch as on 30 th September, 2012 Liabilities Rs. Rs. Assets Rs. Rs. Head Office A/c Add: Net Profit Foreign currency Transaction reserve Trade creditors Outstanding wages 43,00,00 19,63,200 62,63,200 10,84,000 6,97,000,000 80,85,200 Plant & Machinery Less: Depreciation Furniture & Fixtures Less: Depreciation Closing stock Trade debtors Cash in hand Cash at bank 49,20,000 (4,92,00) 3,28,000 (32,800) 44,28,000 2,95,000 21,32,000 9,84,000,000 2,05,000 80,85,200

7 Note: 1. Depreciation has been calculated at the given depreciation rate of 10% on WDV basis. 2. The above solution has been given assuming that the Washington branch is non-integral foreign operation of the Omega. PROBLEM NO 8 In the Head Office Books Branch Account for the year ended 31st March, 2013 Particulars Amount Particulars Amount Cash in hand Trade debtors Stock Furniture and fittings To Goods sent to branch A/c To Bank A/c (Payment for furniture) To Balance c/d Stock reserve (1,470 x 1/6) To Outstanding expenses To Profit and loss A/c (Net Profit) ,080 13, ,096 16,621 Working Notes: 1. Invoice price and cost Let cost be So, invoice price 120 Loading 20 Loading: Invoice price = 20 : 120 = 1 : 6 By Balance b/d Stock reserve ` 1,080 x 1/6 By Goods sent to branch A/c (Returns to H.O.) By Goods sent to branch A/c (Loading on net goods sent to branch (13,128 x 1/6) By Bank A/c (Remittance from Branch to H.O.) Cash in hand Trade debtors Stock Furniture and fittings 2. Invoice price of closing stock in branch Branch Stock Account Particulars Rs. 000 Particulars Rs. 000 To Goods sent to branch To Branch debtors 1,080 13, ,382 By Goods sent to branch By Branch Cash By Branch debtors ,188 11, , , ,700 3,1 1,470 14, Closing balance of branch debtors Branch Debtors Account Particulars Rs. 000 Particulars Rs. 000 To Branch stock 384 3,1 3,524 By Branch cash By Branch expenses discount By Branch stock (Returns) By Branch expenses (Bad debts) By Balance b/d 2, ,524 IPCC 33e_Accounts_Group-II_Branch Accounts_Assignment Solutions 7

8 Ph: / Closing balance of furniture and fittings Branch Furniture and Fittings Account Particulars Rs. 000 Particulars Rs. 000 To Bank By Depreciation (80 + 4) Note: Since the new furniture was purchased on 1st Jan 2013 depreciation will be for 3 months. 5. Remittance by branch to head office Branch Cash Account Particulars Rs. 000 Particulars Rs. 000 To Branch stock To Branch debtors 10 9,700 2,842 12,552 By Branch expenses By Remittances to H.O. By Balance b/d Note: The Branch Trading Account will show the following Profit: Rs. 000 Net Profit as per Branch Account 1,096 Less: Cash Expenses 842 Less: Discount to Debtors 58 Less: Bad Debts 37 Net Profit Transferred to General Profit / Loss Account 159 PROBLEM NO 9 Delhi Branch Trading and Profit & Loss Account for the year ended 31st Dec., , ,552 Particulars Amount Particulars Amount To Opening Stock: Head office Goods 3,200 Others To Goods to Branch (50,000 x 80%) To Purchases To Gross Profit c/d To Salaries To Rent To Office Expenses To Dep. on 10% To Net profit 3,700 20,000 42,700 1,00,000 3,0 1,06,0 1,06,0 7,000 2,000 30,200 By Gross Profit b/d 42,700 42,700 By Sales By Goods from Branch By Closing Stock : Head Office goods 2,0 Others Branch (Fixed) Assets Account (In Head Office Books) 42,700 Date Particulars Amount Date Particulars Amount Jan. 1 5,000 Dec. 31 By Delhi Branch A/c (Depreciation) 4, 5,000 5, Jan. 1 4, IPCC 33e_Accounts_Group-II_Branch Accounts_Assignment Solutions 8

9 Working Notes: Cash/Bank Account (Branch Books) Particulars Amount Particulars Amount To Sales Proceeds By Salaries By Rent 7,000 Sales 1,00,000 By Office Exp. 2,000 Opening balance of Debtors 9, 1,09, By Creditors* By Head Office (Balancing fig.) By Cash Balance 47,000 32,000 Less: Closing bal. (15,000) By Bank Balance 4,000 To Cash Received 94, 94, 95, *Opening Balance + Purchases Closing balance = Payment ` 30,000 + ` 20,000 ` = ` 47,000. To Balance (transfer) To Cash To Goods sent Trial Balance of Delhi Branch as on Particulars Amount Dr. (Rs.) Cr. (Rs.) 9, Debtors Cash Stock: H.O. Goods Others Creditors Head Office Account 4,000 4, 95, 15,000 30,000 30,000 30,000 Head Office Account Particulars Amount Particulars Amount 15,000 By Goods from Head Office 50,000 32,000 50,000 Credit balance in Head Office Account before this transfer will be ` 15,000 credit. Note : Furniture A/c is maintained in Head office books; it is not a part of either opening or closing balance. THE END 50,000 IPCC 33e_Accounts_Group-II_Branch Accounts_Assignment Solutions 9

SOLUTIONS TO ASSIGNMENT PROBLEMS. PROBLEM No. 1. Dec.31 By Bank Stock. 17,500 Debtors. Cash from Petty cash 26,000 8,200 9,400 63,400 16,400

SOLUTIONS TO ASSIGNMENT PROBLEMS PROBLEM No. 1 12. BRANCH ACCOUNTS (A) Debtors Method: Dr. Delhi Branch Account Cr. 2010 Particulars Rs. Rs. 2010 Particulars Rs. Rs. Jan. 1 Dec.31 By Bank Stock Cash Sales