The posting in the account of each branch in the branch ledger is done from the branch statements containing the original entries. This account has a credit opening balance because in the books of the branch, the head office is taken to be a creditor (accounts payable). This account is maintained in the branch books to record all the transactions between the head office and branch. Likewise, "B" would have to send similar statements to "A." Tinder the other system, the adjustment is done at the head office. This is used to determine the credit sales made by the branch. A balance in the head office current account at the end of the period indicates the obligation of the branch towards the head office. The branches are allowed to purchase goods from the local markets from their cash sales. When all the outstandings of both are taken into account, the balances as shown by each branch should then agree; their accounts would be adjusted. Those described would be outstanding entries of "A" branch. Also available from Amazon: Manual of Canadian Banking. Head Office Expenses Account is an expense and will be transferred to its Profit and Loss Account by the branch at the end of the accounting year. Change ), You are commenting using your Google account. Reconciliation of Transit Items: Normally, the balance shown in Branch Account (in head office books) and in the Head Office Account (in branch books) should be the same. In case of firm Branch PL & HO PL is only for MIS matter for income tax purpose we have to file merged or say consolidated PL, Sale of 2018-19 Mentioned in 2019-20 in GST Returns, Tax treatment on cash received in lieu of factional shares. To enable the officers of the two branches to discover their outstandings "A" would have to send "B" statements containing all the entries affecting "B" that had originated in "A" branch during the period since the last adjustment, and all the entries affecting "B" that had been made at "A" branch in response to entries by "B." The adjustment is not between branch and branch, but between branch and head office. This section is from the book "Manual Of Canadian Banking", by H. M. P. Eckardt. The simplest method of branch accounting is for the head office to operate a singlebranch account for each branch. A company has two one branch at kerala and head office in mumbai. The Statements. STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30.06.2012. 03 May 2011 "Consolidate" it self means merging of 2 or more P&L A/cs.Hence when there is a single P&L A/c it is not said that it is a consolidated P&L A/c. Such items as these are called outstandings. The branch account itself is a temporary nominal ledger account. At the branch, no account is kept of the balance due to or by any other branch. 5.5 Worked Example. Consolidated Balance Sheet & P& L A/c is thus nothing but merging of Balance Sheets and P&L A/cs and this can be possible when separate accounts of Holding Company & of its Subsidiaries' a/cs have been prepared CAclub expert to take part in this query . The necessity for it arises in the following manner: The general ledger of "A" branch on a given date will show a balance at debit of "B" branch of, say, $42,765.18. In order to monitor the level of indebtedness the head office current account and branch current accounts are maintained by the head office and branch respectively. The head office only provides capital and the branch carries on their business activities. The balancing figure in the selling price column is either abnormal loss or abnormal gain made by the branch. ( Log Out / The main office of the business organization is regarded as the head office and all the other outlets where it operates its business are considered as branches of the organization. The following particulars relate to the half year ended 30. In the adjustment between the two branches account would also have to be taken of "B's" outstandings. The accounts with other branches are all contained in the single net item: "Balance due to (or due by) head office." When the first system is followed the branches adjust with each other the differences shown in their balances on any given day. Thus it happens, on a given date, that the branch balance sheet shows, say, $72,615.40 at debit of head office. Branch expenses which records the expense account, Branch profit and loss account which records net profit made by the branch, Expenses of the branch paid by the head office, Profit of the branch transferred to the head office books. Branch Accounts are prepared in order to achieve the following objectives; 5.3 Accounting for Centrally controlled branches; Here all the accounts are maintained at the head office by the head office accountant. The adjustment of the branch accounts at head office is a delicate and complicated operation, requiring close and accurate attention and much patience. Respected sir, Can u please help me about the below transaction related to branch account. In head office, a branch ledger is kept, showing the net balance due to or due by head office for each branch. The balancing figure is off set in the head office purchases. Example one (Question Two BCOM Internal May, 2012) a) i) Explain why current accounts under branch accounts may not have the same balances carried down. ii) Explain what the balances carried down on the current account mean. India's largest network for finance professionals, when we prepare company baance sheet we make consolidate profit and loss A/C but in case of firm we prepare branch profit and loss A/C seprately and head office profit and loss A/C seprately what is the reason behind it please tell me. "Consolidate" it self means merging of 2 or more P&L A/cs.Hence when there is a single P&L A/c it is not said that it is a consolidated P&L A/c. The balancing figure in the branch inventory account is the abnormal loss or abnormal gain made by the branch, 5.3 Definition of autonomous branches. Balance carried down on the branch account indicates the level of investment made by the head office in the branch. the sale bill of kerala raised by mumbai branch with VAT @4.04%, but the company purchased goods from mumbai VAT 5%. The adjustment consists in reconciling these two apparently contrary amounts. The statements containing the responding entries are used to tick off the others and to discover which are outstanding. This records goods sent to branch at cost. b) Be Cool Ltd. with a head office in Kampala operates a branch in Mbarara. The following list of balances has been extracted from the books of the branch and head office respectively. Prepare the statement of comprehensive income for the head office and for branch and the combined to ascertain the profitability made by the branch. The difference happens because entries made at one branch have not been responded to by the other. The adjustments are all made on the basis of the balance due to or by "head office." The Balance Sheet, The Statements. Thus, both can discover what entries have not been responded to.