{"id":12902,"date":"2024-03-24T10:39:12","date_gmt":"2024-03-24T05:09:12","guid":{"rendered":"https:\/\/gstguntur.com\/?p=12902"},"modified":"2024-03-25T17:28:15","modified_gmt":"2024-03-25T11:58:15","slug":"accounting-for-branches-including-foreign-branches-ca-inter-accounts-study-material","status":"publish","type":"post","link":"https:\/\/gstguntur.com\/accounting-for-branches-including-foreign-branches-ca-inter-accounts-study-material\/","title":{"rendered":"Accounting for Branches Including Foreign Branches \u2013 CA Inter Accounts Study Material"},"content":{"rendered":"

Accounting for Branches Including Foreign Branches \u2013 CA Inter Accounting Study Material<\/a> is designed strictly as per the latest syllabus and exam pattern.<\/p>\n

Accounting for Branches Including Foreign Branches \u2013 CA Inter Accounts Study Material<\/h2>\n

Theory Questions<\/strong><\/p>\n

Question 1.
\nWhy goods are marked on invoice price by the head office while sending goods to the branch? (4 Marks) (May 2011)
\nAnswer:
\nGoods are marked on invoice price to achieve the following objectives:<\/p>\n

    \n
  1. To keep secret from the branch manager, the cost price of the goods and profit made, so that the branch manager may not start a rival and competitive business with the concern; and<\/li>\n
  2. To have effective control on stock i.e. stock at any time must be equal to opening stock plus goods received from head office minus sales made at branch.<\/li>\n
  3. To dictate pricing policy to its branches, as well as save work at branch because prices have already been decided.<\/li>\n<\/ol>\n

    Debtors Method<\/strong><\/p>\n

    Question 2.
    \nWidespread 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 \u20b9 10,000 necessary for meeting immediate requirements of cash. On 31st March, 20X1 the assets at the branch were as follows:
    \n\"Accounting
    \nDuring the accounting year ended 31st March, 20X2 the invoice price of goods dispatched by the head office to the branch amounted to \u20b9 1 crore 32 lakhs. Out of the goods received by it, the branch sent back to head office goods invoiced at \u20b9 72,000. Other transactions at the branch during the year were as follows:
    \n\"Accounting
    \nOn 1st January, 20X2 the branch purchased new furniture for \u20b9 1 lakh for which payment was made by head office through a cheque.<\/p>\n

    On 31 st March, 20X2 branch expenses amounting to \u20b9 6,000 were outstanding and cash in hand was again \u20b9 10,000. Furniture is subject to depreciation @ 16% per annum on diminishing balance method.
    \nPrepare Branch Account in the books of head office for the year ended 31st March, 20X2. (16 Marks) (May 2001)
    \nAnswer:
    \nIn the Head Office Books Branch Account for the year ended 31st March, 20X2
    \n\"Accounting<\/p>\n

    \"Accounting<\/p>\n

    Working Notes:<\/strong><\/p>\n

    1. Invoice price and cost
    \nLet cost be 100
    \nSo, invoice price 120
    \nLoading 20
    \nLoading: Invoice price = 20: 120 = 1:6<\/p>\n

    2. Invoice price of closing stock in branch
    \nBranch Stock Account
    \n\"Accounting
    \n3. Closing balance of branch debtors
    \nBranch Debtors
    \n\"Accounting
    \n4. Closing balance of furniture and fittings
    \nBranch Furniture and Fittings Account
    \n\"Accounting
    \nNote: Since the new furniture was purchased on 1st Jan 20X2 depreciation will be for 3 months.
    \n5. Remittance by branch to head office
    \nBranch Cash Account
    \n\"Accounting<\/p>\n

    \"Accounting
    \n\"Accounting<\/p>\n

    Question 3.
    \nFanna Cloth Mills opened a branch at Mumbai on 1st April, 2011. The goods were invoiced to the branch at selling price which was 125% of the cost to the head office.
    \nThe following are the particulars of the transactions relating to branch during the year ended 31st March, 2012:
    \n\"Accounting
    \nPrepare Branch Account based on invoice price under Debtors method for ascertaining profit for the year ended 31st March, 2012. (RTPMay 2013)
    \nAnswer:
    \nBranch Account
    \n\"Accounting
    \n\"Accounting<\/p>\n

    Working Notes:<\/strong><\/p>\n

    1. Memorandum Branch Stock Account
    \n\"Accounting<\/p>\n

    2. Memorandum Branch Debtors Account
    \n\"Accounting<\/p>\n

    \"Accounting<\/p>\n

    Question 4.
    \nM\/s. X has a branch at Delhi and the goods are Invoiced to branch at a profit of 20% on invoice price. Head Office paid all the branch expenses from its bank account, except petty cash expenses which were met by the branch. Branch expenses directly paid by M\/s X on behalf of Delhi branch amounted to \u20b9 20,000. Following information Is available of the transactions at Delhi branch for the year ended 31st December, 2012:
    \n\"Accounting
    \n\"Accounting
    \nYou are required to prepare Delhi Branch account (on cost basis) in the books of M\/s X under Debtors System. (RTP)
    \nAnswer:
    \nIn the Books\u2019 of M\/s X
    \nDelhi Branch Account
    \n\"Accounting<\/p>\n

    Working Notes:<\/p>\n

    1.
    \n\"Accounting
    \n\"Accounting<\/p>\n

    2. Petty expenses
    \n\"Accounting<\/p>\n

    Question 5.
    \nFrom the following particulars relating to Pune branch for the year ending December 31, 2013, prepare Branch Account in the books of Head office.
    \n\"Accounting
    \nGoods costing \u20b9 1,200 were destroyed on account of fire and a sum of \u20b9 1,000 was received from the Insurance Company. (RTP)
    \nAnswer:
    \nPune Branch Account
    \n\"Accounting
    \nNOTE: Alternatively, the amount of liabilities could have been deducted from assets.<\/p>\n

    Working Note:<\/strong><\/p>\n

    \"Accounting<\/p>\n

    \"Accounting<\/p>\n

    Question 6.
    \nXYZ 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.
    \n\"Accounting
    \n(8 Marks) (May 2011)
    \nAnswer:
    \nIn the books of Head Office – XYZ
    \nCompany Kolkata Branch Account (at invoice)
    \n\"Accounting<\/p>\n

    Working Notes<\/strong><\/p>\n

    Debtors Account
    \n\"Accounting<\/p>\n

    Note: It is assumed that goods returned by branch are at invoice price.<\/p>\n

    Question 7.
    \nLMN is having branch at Mumbai. Goods are invoiced to the branch at 25% 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. From the following particulars, prepare branch account in the books of head office:
    \n\"Accounting
    \n(Nov. 2014)
    \nAnswer:
    \nIn the books of Head Office – LMN
    \nMumbai Branch Account (At invoice price)
    \n\"Accounting<\/p>\n

    Working Note:<\/strong><\/p>\n

    Debtors Account
    \n\"Accounting
    \nNote: It is assumed that goods returned by branch are at invoice price.<\/p>\n

    \"Accounting<\/p>\n

    Question 8.
    \nM\/s Rahul 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 the retail price which is wholesale price plus 20%.
    \nFollowing is the information regarding one of the outlets for the year ended 31.3.20X2:
    \n\"Accounting
    \nYou are required to prepare the following accounts in the books of Rahul Limited for the year ended 31.3.20X2:
    \n(a) Outlet Stock Account.
    \n(b) Outlet Profit & Loss Account.
    \n(c) Stock Reserve Account (Exam Question)
    \nAnswer:
    \nOutlet Stock Account
    \n\"Accounting
    \nOutlet Profit & Loss Account
    \n\"Accounting
    \nStock Reserve Account
    \n\"Accounting<\/p>\n

    Working Notes:<\/strong><\/p>\n

    (1)
    \n\"Accounting<\/p>\n

    (2) Goods lost by fire \u20b9
    \nOpening Stock + Goods Sent + Gross Profit – Sales – Closing Stock
    \n30,000 + 3,24,000 + 60,000 – 3,60,000 – 36,000 = \u20b9 18,000<\/p>\n

    (3) Stock Reserve
    \nOpening Stock = 30,000 \u00d7 25\/125 = 6,000
    \nClosing Stock = 36,000 \u00d7 25\/125 = \u20b9 7,200<\/p>\n

    \"Accounting<\/p>\n

    Question 9.
    \nUsing the Stock and Debtors system, find out the profit or loss made at the Kolkata Branch in 2014.
    \n\"Accounting
    \nGoods are invoiced to the Branch at the selling price so as to show a profit of 30% on invoice price. (RTP Nov 2014)
    \nAnswer:
    \nBranch Stock Account
    \n\"Accounting
    \nBranch Debtors Account
    \n\"Accounting
    \nBranch Expenses Account
    \n\"Accounting
    \nGoods Sent to Branch Account
    \n\"Accounting
    \nBranch Adjustment Account
    \n\"Accounting
    \nBranch Profit and Loss Account
    \n\"Accounting<\/p>\n

    Question 10.
    \nRam Limited of Chennai has a branch at Nagpur to which office, goods are invoiced at cost plus 25%. The branch makes sales 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 Nagpur.<\/p>\n

    From the following details, relating to the year 2009, prepare the accounts in Head Office Ledger and ascertain Branch Profit as per stock and debtors method. Branch does not maintain any books of account, but sends weekly returns to head office:
    \n\"Accounting
    \n(8 Marks) (May 2010)
    \nAnswer:
    \nNagpur Branch Stock Account
    \n\"Accounting
    \nNagpur Branch Adjustment Account
    \n\"Accounting
    \nBranch Profit & Loss Account
    \n\"Accounting
    \nBranch Expenses Account
    \n\"Accounting
    \nBranch Debtors Account
    \n\"Accounting
    \nGoods sent to Branch Account
    \n\"Accounting<\/p>\n

    \"Accounting<\/p>\n

    Question 11.
    \nM\/s Marena, Delhi has a branch at Bangalore to which office 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.<\/p>\n

    From the following details, relating to calendar year 2017, prepare the accounts in the Head Office Ledger and ascertain the Branch Profit.<\/p>\n

    Branch does not maintain any books of account, but sends weekly returns to the Head Office.
    \n\"Accounting
    \n(8 Marks) (May 2018)
    \nAnswer:
    \nBangalore Branch Stock Account
    \n\"Accounting
    \n* Alternatively, this may directly be transferred to Branch P&L A\/c without routing it through Branch Adjustment Account.<\/p>\n

    Bangalore Branch Adjustment Account
    \n\"Accounting<\/p>\n

    Branch Profit & Loss Account
    \n\"Accounting<\/p>\n

    Branch Expenses Account
    \n\"Accounting<\/p>\n

    Branch Debtors Account
    \n\"Accounting<\/p>\n

    Goods sent to Branch Account
    \n\"Accounting<\/p>\n

    Note: The answer has been given on \u2018Stock and Debtors Method\u2019. As the question is silent on the method to be adopted, an alternate answer is also possible.<\/p>\n

    \"Accounting<\/p>\n

    Question 12.
    \nAyan Ltd. invoices goods to its branch at cost plus 331\/3%. From the following particulars prepare Branch Stock Account, Branch Stock Adjustment Account and Branch Profit and Loss Account as they would appear in the books of head office.
    \n\"Accounting
    \nAyan closes its books on 31st March, 2018. (10 Marks) (May 2018)
    \nAnswer:
    \nIn the books of Head Office Branch Stock Account
    \n\"Accounting
    \n\"Accounting<\/p>\n

    * Alternatively, combined posting for the amount of \u20b9 24,000 may be passed through Goods pilfered account.
    \n** Alternatively, it may first be transferred to normal Loss account which may ultimately be closed by transfer to Branch Adjustment account. The final amount of net profit will however remain same.
    \n*** It has been assumed that the surplus may be due to sale of goods by branch at price higher than invoice price.<\/p>\n

    Branch Stock Adjustment Account
    \n\"Accounting<\/p>\n

    Branch Profit and Loss Account
    \n\"Accounting<\/p>\n

    Final Accounts Method<\/strong><\/p>\n

    Question 13.
    \nL Ltd. has its head office at Mumbai and two branches at Pune and Goa. The branches purchase goods independently. The Pune branch makes a profit of 33-1\/3% on cost which the Goa branch makes a profit of 20% on sales. Goods are also supplied by one branch to another at the respective sales price. From the following particulars, prepare the Trading and Profit and Loss Account of each of the branches and find out the profit or loss made by each of them after taking into account the reserve for unrealised profits:
    \n\"Accounting<\/p>\n

    Information:<\/p>\n

    (i) Opening stock at Pune Branch includes goods of \u20b9 10,000 taken from Goa Branch,
    \n(ii) Opening stock at Goa Branch includes goods of \u20b9 17,000 taken from Pune Branch at cost to receiving branch,
    \n(Hi) The Pune Branch sales includes transfer of goods to Goa Branch at selling price \u20b9 20,000
    \n(iv) The sales of Goa Branch include transfer of goods to Pune Branch at selling price \u20b9 15,000.
    \n(v) Closing stock at Pune Branch includes goods received from Goa Branch \u20b9 5,000.
    \n(vi) Closing stock at Goa Branch includes goods of \u20b9 4,000 received from Pune Branch. (RTP May 2017)
    \nAnswer:
    \nPune Branch Trading and Profit and Loss Account
    \n\"Accounting
    \n\"Accounting<\/p>\n

    Goa Branch Trading and Profit and Loss Account
    \nFor the year ending on ………..
    \n\"Accounting
    \n\"Accounting
    \nGoa Branch Trading and Profit and Loss Account
    \nFor the year ending on ………..
    \n\"Accounting<\/p>\n

    \"Accounting<\/p>\n

    Question 14.
    \nFollowing is the information of the Jammu branch of Best Ltd., New Delhi for the year ending 31st March, 2010 from the following:<\/p>\n

      \n
    1. Goods are invoiced to the branch at cost plus 20%.<\/li>\n
    2. The sale price is cost plus 50%.<\/li>\n
    3. Other informations:<\/li>\n<\/ol>\n

      Stock as on 1.4.2009 \u20b9 2,20,000
      \nGoods sent during the year \u20b9 11,00,000
      \nSales during the year \u20b9 12,00,000
      \nExpenses incurred at the branch \u20b9 45,000
      \nAscertain<\/p>\n

        \n
      1. the profit earned by the branch during the year<\/li>\n
      2. branch stock reserve in respect of unrealized profit. (4 Marks) (Nov. 2010)<\/li>\n<\/ol>\n

        Answer:
        \n(i) Calculation of profit earned by the branch
        \nIn the books of Jammu Branch
        \nTrading Account
        \n\"Accounting<\/p>\n

        (ii) Stock reserve in respect of unrealised profit
        \n= \u20b9 3,60,000 \u00d7 (20\/120) = \u20b9 60,000<\/p>\n

        Working Note:
        \n\"Accounting<\/p>\n

        Calculation of closing stock at invoice price
        \n\"Accounting
        \n\"Accounting<\/p>\n

        Note: It is assumed that all figures given in the questions is at invoice price.<\/p>\n

        Debtors + Stock And Debtors + Final Accounts Method<\/p>\n

        \"Accounting<\/p>\n

        Question 15.
        \nAlpha Ltd. has a retail shop under the supervision of a manager. The ratio of gross profit at selling price is constant at 25 per cent throughout the year to 31st March, 2017.<\/p>\n

        Branch manager is entitled to a commission of 10 per cent of the profit earned by his branch, calculated before charging his commission but subject to a deduction from such commission equal in 25 per cent of any ascertained deficiency of branch stock. All goods were supplied to the branch in head office.
        \nFrom the under mentioned figures, calculate the commission due to manager for the year ended 31st March, 2017.
        \n\"Accounting
        \n(RTF) (May 2018)
        \nAnswer:
        \nStep 1: Calculation of Deficiency
        \nBranch stock account (at invoice price)
        \n\"Accounting
        \nStep 2: Calculation of Net Profit before Commission
        \nBranch account
        \n\"Accounting
        \n\"Accounting
        \nStep 3: Calculation of Commission still due to manager
        \n\"Accounting<\/p>\n

        Question 16.
        \nMr. Chena Swami of Chennai trades in Refined Oil and Ghee. It has a branch at Salem. He despatches 30 tins of Refined Oil @ \u20b9 1,500 per tin and 20 tins of Ghee \u20b9 5,000 per tin on 1st of every month. The Branch has incurred expenditure of \u20b9 45,890 which is met out of its collections; this is in addition to expenditure directly paid by Head Office.
        \nFollowing are the other details:
        \n\"Accounting<\/p>\n

        Chennai H.O.
        \n\"Accounting<\/p>\n

        Salem Branch Office<\/p>\n

        \"Accounting<\/p>\n

        Additional information:<\/p>\n

          \n
        1. Addition to Building on 1-4-2015 \u20b9 2,41,600 by H.O.<\/li>\n
        2. Rate of depreciation: Furniture & Fixtures @ 10% and Building @ 5% (already adjusted in the above figure)<\/li>\n
        3. The Branch Manager is entitled to 10% commission on overall organ-isational profits after charging such commission.<\/li>\n
        4. The General Manager is entitled to a salary of \u20b9 20,000 per month.<\/li>\n
        5. General expenses incurred by Head Office is \u20b9 1,86,000.
          \nYou are requested to prepare Branch Account in the Head Office books and also prepare Chena Swami\u2019s Trading and Profit & Loss Account (excluding branch transactions) for the year ended 31st March, 2016. (8 Marks) (Nov. 2016)<\/li>\n<\/ol>\n

          Answer:
          \nIn the books of Mr. Chena Swami
          \nSalem Branch Account
          \n\"Accounting
          \n\"Accounting<\/p>\n

          Mr. Chena Swarni
          \nTrading and Profit and Loss account for the year ended 31st March, 2016
          \n(Excluding branch transactions)
          \n\"Accounting<\/p>\n

          Working Notes:<\/strong><\/p>\n

          (1) Debtors Account
          \n\"Accounting<\/p>\n

          (2) Branch Cash Account
          \n\"Accounting<\/p>\n

          Notes:<\/strong><\/p>\n

          1. Branch managers generally get commission based on the Branch profits and not on overall organizational profits. The answer given above is on the basis of the information given in the question and the commission of branch manager is computed as 10% on overall organizational profits after charging such commission.<\/p>\n

          2. Since the amount of cash sales was not given specifically in the question, total amount of cash collections during the year amounting s 20,15,000 has been considered as collection from Debtors in the above answer.<\/p>\n

          Wholesale Branch Method<\/strong><\/p>\n

          Question 17.
          \nM\/s. Sandeep having Head Office at Deihi has a Branch at Kolkata. 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 Kolkata wholly engaged in retail trade and the goods are sold at cost to Head Office plus 100%.<\/p>\n

          Following details are furnished for the year ended 31st March, 2014:
          \n\"Accounting
          \nYou are required to prepare Trading and Profit & Loss Account of the Head Office and Branch for the Year ended 31st March, 2014. (8 Marks) (May 2015)
          \nAnswer:
          \nTrading and Profit and Loss A\/c
          \nFor the year ended 31st March 2014
          \n\"Accounting<\/p>\n

          Working Notes:<\/strong><\/p>\n

          \"Accounting<\/p>\n

          \"Accounting<\/p>\n

          Independent Branches – Journal Entries<\/strong><\/p>\n

          Question 18.
          \nShow adjustment Journal entry in the books of Head Office at the end of April, 2014 for incorporation of inter-branch transactions assuming that only Head Office maintains different branch accounts in its books.<\/p>\n

          A. A.P. Branch:<\/p>\n

          (1) Received goods from M.P. – \u20b9 30,000 and \u20b9 25,000 from U.P.
          \n(2) Sent goods to W.B. – \u20b9 20,000, U.P. – \u20b9 30,000.
          \n(3) Bill Receivable received – \u20b9 10,000 from W.B.
          \n(4) Acceptances sent to M.P. – \u20b9 10,000, U.P. – \u20b9 20,000.<\/p>\n

          B. M.P. Branch (apart from the above) :<\/p>\n

          (5) Received goods from U.P. – \u20b9 20,000, A.P – \u20b9 10,000.
          \n(6) Cash sent to A.P – \u20b9 20,000, U.P. – \u20b9 10,000.<\/p>\n

          C. W.B. Branch (apart from the above) :<\/p>\n

          (7) Received goods from U.P. – \u20b9 40,000.
          \n(8) Acceptances and Cash sent to U.P. – \u20b9 10,000 and \u20b9 15,000 re-spectively.<\/p>\n

          D. U.P. Branch (apart from the above) :<\/p>\n

          (9) Paid cash to W.B. – \u20b9 20,000 and M.P. – \u20b9 10,000 (RTP)<\/p>\n

          Answer:<\/p>\n

          Journal entry in the books of Head Office
          \n\"Accounting<\/p>\n

          Working Note:<\/strong><\/p>\n

          Inter Branch transactions
          \n\"Accounting
          \n\"Accounting<\/p>\n

          \"Accounting<\/p>\n

          Question 19.
          \nShow Adjustment journal Entry alongwith working notes in the books of head office at the end of April, 2017 for incorporation of inter branch transactions assuming that only head office maintains different branch account in its books:<\/p>\n

          (A) Delhi Branch:<\/p>\n

            \n
          1. Received goods from Mumbai \u20b9 1,40,000 and \u20b9 60,000 from Kolkata.<\/li>\n
          2. Sent goods to Chennai \u20b9 1,00,000, Kolkata \u20b9 80,000<\/li>\n
          3. Bill receivable received 80,000 from Chennai<\/li>\n
          4. Acceptances sent to Mumbai \u20b9 1,00,000, Kolkata \u20b9 40,000<\/li>\n<\/ol>\n

            (B) Mumbai Branch (Apart from the above):<\/p>\n

              \n
            1. Received goods from Kolkata 60,000, Delhi 80,000<\/li>\n
            2. Cash sent to Delhi 60,000, Kolkata 28,000<\/li>\n<\/ol>\n

              (C) Chennai Branch (Apart from the above):<\/p>\n

                \n
              1. Received goods from Kolkata \u20b9 1,20,000<\/li>\n
              2. Acceptances and cash sent to Kolkata 80,000, Kolkata 40,000 respectively.<\/li>\n<\/ol>\n

                (D) Kolkata Branch (Apart from the above):<\/p>\n

                  \n
                1. Sent goods to Chennai 1,40,000<\/li>\n
                2. Paid cash to Chennai 60,000<\/li>\n
                3. Acceptance sent to Chennai \u20b9 60,000. (8 Marks) (May 2017)<\/li>\n<\/ol>\n

                  Answer:
                  \nJournal entry in the books of Head Office
                  \n\"Accounting<\/p>\n

                  Working Note:<\/strong><\/p>\n

                  Inter Branch transactions
                  \n\"Accounting<\/p>\n

                  \"Accounting<\/p>\n

                  Question 20.
                  \nPass necessary Journal entries in the books of an independent Branch of M\/s TPL Sons, wherever required, to rectify or adjust the following transactions:<\/p>\n

                    \n
                  1. Branch paid \u20b9 5,000 as salary to a Head Office Manager, but the amount paid has been debited by the Branch to Salaries Account.<\/li>\n
                  2. A remittance of \u20b9 1,50,000 sent by the Branch has not received by Head Office on the date of reconciliation of Accounts.<\/li>\n
                  3. Branch assets accounts retained at head office, depreciation charged for the year \u20b9 15,000 not recorded by Branch.<\/li>\n
                  4. Head Office expenses \u20b9 75,000 allocated to the Branch, but not yet been recorded by the Branch.<\/li>\n
                  5. Head Office collected \u20b9 60,000 directly from a Branch Customer. The intimation of the fact has not been received by the Branch.<\/li>\n
                  6. Goods dispatched by the Head office amounting to \u20b9 50,000, but not received by the Branch till date of reconciliation.<\/li>\n
                  7. Branch incurred advertisement expenses of \u20b9 10,000 on behalf of other Branches, but not recorded in the books of Branch.<\/li>\n
                  8. Head office made payment of \u20b9 16,000 for purchase of goods by branch, but not recorded in branch books. (RTF)<\/li>\n<\/ol>\n

                    Answer:<\/p>\n

                    Books of Branch
                    \nJournal Entries
                    \n\"Accounting
                    \n\"Accounting<\/p>\n

                    \"Accounting<\/p>\n

                    Question 21.
                    \nGlobal Limited has a branch which closes its books of account every year on 31 st March. This is an independent branch which maintains comprehensive books of account for recording their transactions.
                    \nYou are required to show journal entries in the books of branch on 31st March, 2011 to rectify or adjust the following:<\/p>\n

                      \n
                    1. Head Office allocates \u20b9 1,35,000 to the branch as head office expenses, which have not yet been recorded by branch.<\/li>\n
                    2. Depreciation of branch fixed assets, whose accounts are kept by head office in its books, not yet recorded in the branch books, \u20b9 1,15,000.<\/li>\n
                    3. Branch paid \u20b9 1,40,000 as salary to an official from head office on visit to branch and debited the amount to its Salaries Account.<\/li>\n
                    4. Head Office collected \u20b9 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.<\/li>\n
                    5. It is learnt that a remittance of \u20b9 1,50,000 sent by the branch has not been received by head office till date. (5 Marks) (Nov 2011)<\/li>\n<\/ol>\n

                      Answer:
                      \nIn the books of Branch
                      \nJournal Entries
                      \n\"Accounting
                      \n\"Accounting<\/p>\n

                      Note: Cash-in-transit of \u20b9 1,50,000 will be shown in the books of Head office.<\/p>\n

                      \"Accounting<\/p>\n

                      Question 22.
                      \nGive Journal Entries in the books of Head Office to rectify or adjust the following:<\/p>\n

                        \n
                      1. Goods sent to Branch \u20b9 12,000 stolen during transit. Branch manager refused to accept any liability.<\/li>\n
                      2. Branch paid \u20b9 15,000 as salary to the officer of Head Office on his visit to the branch.<\/li>\n
                      3. On 28th March, 2012, the H.O. dispatched goods to the Branch invoiced at \u20b9 25,000 which was not received by Branch till 31st March, 2012.<\/li>\n
                      4. A remittance of \u20b9 10,000 sent by the branch on 30th March, 2012, received by the Head Office on 1st April, 2012.<\/li>\n
                      5. Head Office made payment of \u20b9 25,000 for purchase of goods by Branch and wrongly debited its own purchase account. (5 Marks) (Nov 2012)<\/li>\n<\/ol>\n

                        Answer:
                        \nIn the books of Head Office
                        \nJournal Entries
                        \n\"Accounting
                        \n\"Accounting<\/p>\n

                        Note.In entry (i), it is assumed that refusal of branch manager (to accept liability of stolen goods) is accepted by the Head Office. Alternatively, Branch account will be credited on the basis of assumption that refusal of branch manager is not accepted by the Head Office.<\/p>\n

                        \"Accounting<\/p>\n

                        Question 23.
                        \nPass necessary Journal entries in the books of an independent Branch of a Company, wherever required, to rectify or adjust the following:<\/p>\n

                          \n
                        1. Income of \u20b9 2,800 allocated to the Branch by Head Office but not recorded in the Branch books.<\/li>\n
                        2. Provision for doubtful debts, whose accounts are kept by the Head Office, not provided earlier for \u20b9 1,000.<\/li>\n
                        3. Branch paid \u20b9 3,000 as salary to a Head Office Manager, but the amount paid has been debited by the Branch to Salaries Account.<\/li>\n
                        4. Branch incurred travelling expenses of \u20b9 5,000 on behalf of other Branches, but not recorded in the books of Branch.<\/li>\n
                        5. A remittance of \u20b9 1,50,000 sent by the Branch has not received by Head Office on the date of reconciliation of Accounts.<\/li>\n
                        6. Head Office allocates \u20b9 75,000 to the Branch as Head Office expenses, which has not yet been recorded by the Branch.<\/li>\n
                        7. Head Office collected \u20b9 30,000 directly from a Branch Customer. The intimation of the fact has been received by the Branch only now.<\/li>\n
                        8. Goods dispatched by the Head office amounting to \u20b9 10,000, but not received by the Branch till date of reconciliation. The Goods have been received subsequently. (8 Marks) (May 2014)<\/li>\n<\/ol>\n

                          Answer:
                          \nBooks of Branch
                          \nJournal Entries
                          \n\"Accounting<\/p>\n

                          \"Accounting<\/p>\n

                          Question 24.
                          \nOn 31st December, 2012 the following balances appeared in the books of Chennai Branch of an English firm having its HO office in New York:
                          \n\"Accounting
                          \n\"Accounting<\/p>\n

                          Stock on 31st December, 2012 was \u20b9 6,37,500.
                          \nBranch account in New York books showed a debit balance of $ 13,400 on 31 st December, 2012 and Furniture appeared in the Head Office books at $ 1,750.
                          \nThe rate of exchange on 31st December, 2011 was \u20b9 52 and on 31st December, 2012 was \u20b9 51. The average rate for the year was \u20b9 50.
                          \nPrepare in the Head Office books the Profit and Loss a\/c and the Balance Sheet of the Branch. (RTP)
                          \nAnswer:
                          \nIn the books of English Firm (Head Office in New York) Chennai Branch
                          \nProfit and Loss Account for the year ended 31st December, 2012
                          \n\"Accounting
                          \nBalance Sheet of Chennai Branch as on 31st December, 2012
                          \n\"Accounting<\/p>\n

                          Working Note:<\/strong><\/p>\n

                          Computation of Exchange Translation Loss Chennai Branch Trial Balance (converted in $) as on 31st December, 2012
                          \n\"Accounting<\/p>\n

                          Question 25.
                          \nABC Ltd. has head office at Delhi (India) and branch at New York (U.S.A). New York branch is an integral foreign operation of ABC Ltd. New York branch furnishes you with its trial balance as on 31st March, 2013 and the additional information given thereafter:
                          \n\"Accounting
                          \nThe rates of exchange may be taken as follows:
                          \n* on 1.4.2012 @ \u20b9 40 per US $
                          \n* on 31.3.2013 @ \u20b9 42 per US $
                          \n* average exchange rate for the year @ \u20b9 41 per US $.
                          \nNew York branch account showed a debit balance of \u20b9 22,190 on 31.3.2013 in Delhi books and there were no items pending reconciliation.
                          \nYou are asked to prepare trial balance of New York branch in X in the books of ABC Ltd. (RTP)
                          \nAnswer:
                          \nIn the books of ABC Ltd.
                          \nNew York Branch Trial Balance in (\u20b9) as on 31st March, 2013
                          \n\"Accounting<\/p>\n

                          \"Accounting<\/p>\n

                          Question 26.
                          \nM\/s Heera & Co. has head office at U.S.A. and branch in Patna (India). Patna branch is an integral foreign operation of Heera & Co. Patna branch furnishes you with its trial balance as on 31st March, 2016 and the additional information given thereafter:
                          \n\"Accounting<\/p>\n

                          Information:<\/p>\n

                          (a) Plant was acquired from a remittance of US $ 6,000 received from USA head office and paid to the suppliers. Depreciate Plant at 60% for the year.<\/p>\n

                          (b) Unsold stock of Patna branch was worth \u20b9 4,20,000 on 31st March, 2016.<\/p>\n

                          (c) The rates of exchange may be taken as follows:<\/p>\n

                            \n
                          • On 01.04.2015 @ \u20b9 55 per US $<\/li>\n
                          • On 31.03.2016 @ \u20b9 60 per US $<\/li>\n
                          • Average exchange rate for the year @ \u20b9 58 per US $<\/li>\n
                          • Conversion in $ shall be made up to two decimal accuracy.<\/li>\n<\/ul>\n

                            You are asked to prepare in US dollars the revenue statement for the year ended 31st March, 2016 and the balance sheet as on that date of Patna branch as would appear in the books of USA head office of Heera & Co. You are informed that Patna branch account showed a debit balance of US $ 29845.35 on 31.3.2016 in USA books and there were no items pending reconciliation. (RTP)
                            \nAnswer:
                            \nM\/s Heera & Co.
                            \nPatna Branch Trial Balance in (US $)
                            \nas on 31st March, 2016
                            \n\"Accounting<\/p>\n

                            Trading and Profit & Loss Account for the year ended 31st March, 2016
                            \n\"Accounting<\/p>\n

                            Balance Sheet of Patna Branch as on 31st March, 2016
                            \n\"Accounting<\/p>\n

                            \"Accounting<\/p>\n

                            Question 27.
                            \nDM Ltd., Delhi has a branch in London. London branch is an integral foreign operation of DM Ltd. At the end of the year 31st March, 2009, the branch furnishes the following trial balance in U.K. Pound:
                            \n\"Accounting
                            \nIn head office books, the branch account stood as shown below:
                            \nLondon Branch A\/c
                            \n\"Accounting<\/p>\n

                            The following further information are given:<\/p>\n

                            (a) Fixed assets are to be depreciated @ 10% p.a on straight line basis.<\/p>\n

                            (b) On 31st March, 2009:<\/p>\n

                            Expenses outstanding – \u00a3 400
                            \nPrepaid expenses – \u00a3 200
                            \nClosing stock – \u00a3 8,000<\/p>\n

                            (c) Rate of Exchange:
                            \n1st April, 2005 – \u20b9 70 to \u00a3 1
                            \n1st April, 2008 – \u20b9 76 to \u00a3 1
                            \n31st March, 2009 – \u20b9 77 to \u00a3 1
                            \nAverage – \u20b9 75 to \u00a3 1<\/p>\n

                            (i) Trial balance, incorporating adjustments of outstanding and prepaid expenses, converting U.K. pound into Indian rupees.<\/p>\n

                            (ii) 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. (16 Marks) (Nov 2009)<\/p>\n

                            Answer:
                            \n(i) Trial Balance of London Branch as on 31st March, 2009
                            \n\"Accounting
                            \nClosing stock will be (\u00a3 8,000 \u00d7 \u20b9 77) = \u20b9 6,16,000<\/p>\n

                            (ii) Trading and Profit & Loss Account for the year ended 31st March, 2009
                            \n\"Accounting
                            \n\"Accounting<\/p>\n

                            (iii) Balance Sheet as on 31st March, 2008
                            \n\"Accounting<\/p>\n

                            Question 28.
                            \nOn 31 st March, 2010, the following ledger balances have been extracted from the books of Washington branch office:
                            \n\"Accounting
                            \nYou are required to convert above Ledger balances into Indian Rupees. Use the following rates of exchange:
                            \n\"Accounting
                            \n(May 2010)
                            \nAnswer:
                            \nConversion of ledger balances (in Dollars) into Rupees
                            \n\"Accounting<\/p>\n

                            \"Accounting<\/p>\n

                            Question 29.
                            \nAn Indian company Moon Star Limited has a branch at Virginia (USA). The Branch is a non-integral foreign operation of the Indian Company. The trial balance of the Branch as at 31st March, 2012 is as follows:
                            \n\"Accounting<\/p>\n

                            The following further information\u2019s are given:<\/p>\n

                              \n
                            1. Salaries outstanding $400.<\/li>\n
                            2. Depreciate office equipment and Furniture & Fixtures @10% p.a. at written down value.<\/li>\n
                            3. The Head Office sent goods to Branch for \u20b9 15,80,000<\/li>\n
                            4. The Head Office shown an amount of \u20b9 20,50,000 due from Branch.<\/li>\n
                            5. Stock on 31st March, 2013 -$ 21,500.<\/li>\n
                            6. There were no transit items either at the start or at the end of the year.<\/li>\n
                            7. On April 1,2010 when the fixed assets were purchased the rate of ex-change was \u20b9 43 to one $ . On April 1, 2011, the rate was \u20b9 47 per $. On March 31, 2012 the rate was \u20b9 50 per $. Average Rate during the year was \u20b9 45 to one $.<\/li>\n<\/ol>\n

                              Prepare:<\/p>\n

                              (a) Trial balance incorporating adjustments given converting dollars into rupees.<\/p>\n

                              (b) Trading, Profit and Loss Account for the year ended 31st March, 2012 and Balance Sheet as on date depicting the profitability and net position of the Branch as would appear in the books of Indian company for the purpose of incorporating in the main Balance Sheet. (16 Marks) (May 12)<\/p>\n

                              Answer:<\/p>\n

                              In the books of Moon Star Ltd. – an Indian Company Trial Balance (in Rupees) of Virginia (USA) Branch as on 31st March, 2012
                              \n\"Accounting
                              \n\"Accounting<\/p>\n

                              \"Accounting<\/p>\n

                              (b) Trading and Profit and Loss Account of Virginia Branch for the year ended 31st March, 2012
                              \n\"Accounting<\/p>\n

                              Balance Sheet of Virginia Branch as on 31st March, 2012<\/p>\n

                              \"Accounting<\/p>\n

                              \"Accounting<\/p>\n

                              Question 30.
                              \nABCD Ltd., Delhi has a branch in New York, USA, which is an integral foreign operation of the company. At the end of 31 st March, 2013, the following ledger balances have been extracted from the books of the Delhi office and the New York Branch:
                              \n\"Accounting<\/p>\n

                              The following information is also available:<\/p>\n

                                \n
                              1. Stock as on 31-03-2013
                                \nDelhi – 2,00,000
                                \nNew York – $ 10 (all stock received from Delhi)<\/li>\n
                              2. Head Office always sent goods to the Branch at cost plus 25%.<\/li>\n
                              3. Provision is to be made for doubtful debts at 5%.<\/li>\n
                              4. Depreciation is to be provided on Buildings at 10% and on Plant and Machinery at 20% on written down values.<\/li>\n<\/ol>\n

                                You are required:<\/p>\n

                                (a) To convert the branch Trial Balance into rupees, using the following rates of exchange:
                                \nExchange:
                                \nOpen rate 1 $ = \u20b9 50
                                \nClosing rate 1 $ = \u20b9 55
                                \nAverage rate 1 $ = 52
                                \nFor Fixed assets 1 $ = \u20b9 45<\/p>\n

                                (b) To prepare the Trading and Profit & Loss Account for the year ended 31st March, 2013, showing to the extent possible, Head Office results and Branch results separately. (16 Marks) (May 2013)<\/p>\n

                                Answer:<\/p>\n

                                ABCD Ltd.
                                \n(a) New York Branch Trial Balance as on 31st March 2013
                                \n\"Accounting<\/p>\n

                                (b) Trading and Profit & Loss Account for the year ended 31st March, 2013
                                \n\"Accounting
                                \n\"Accounting<\/p>\n

                                Working Notes:<\/strong><\/p>\n

                                (1) Calculation of Depreciation
                                \n\"Accounting<\/p>\n

                                (2) Calculation of Additional Branch Stock Reserve
                                \n\"Accounting<\/p>\n

                                Question 31.
                                \nM\/s ABC & Co. has head office at New York (U.S.A.) and branch in Bangalore (India). Bangalore branch is an integral foreign operation of ABC & Co.
                                \nBangalore branch furnishes you with its trial balance as on 31st March, 2015 and the additional information given thereafter:
                                \n\"Accounting<\/p>\n

                                Additional Information:<\/p>\n

                                (a) Computers were acquired from a remittance of US $ 6,000 received from New York head office and paid to the suppliers. Depreciate computers at 60% for the year.
                                \n(b) Unsold stock of Bangalore branch was worth \u20b9 4,20,000 on 31 st March, 2015.
                                \n(c) The rates of exchange may be taken as follows:<\/p>\n