This document discusses accounting for branches and divisions of a business entity. It defines branches and divisions as separate economic units from the home office, but not separate legal entities. Branches carry out sales and collections at a distance from the home office. Divisions have more autonomy than branches. The document outlines different accounting systems and ledger accounts used by branches and the home office to record transactions between them. It provides an example to illustrate the journal entries and combined financial statements for a home office and its branch.
Solutions Manual for Advanced Accounting 11th Edition by BeamsZiaPace
Full download : https://downloadlink.org/p/solutions-manual-for-advanced-accounting-11th-edition-by-beams/ Solutions Manual for Advanced Accounting 11th Edition by Beams
The document provides an overview of completing the accounting cycle for a service business. It discusses using a worksheet to facilitate preparing financial statements and closing entries. The steps to prepare a worksheet are explained, including entering the trial balance, adjustments, adjusted trial balance amounts, and financial statement columns. Sample worksheet and financial statements are presented.
Bab 4 Income Statement and Related Informationmsahuleka
The document discusses key elements and objectives related to preparing and understanding income statements, including:
- The uses and limitations of income statements in evaluating past performance and predicting future cash flows
- Components of single-step and multiple-step income statements and how they differ
- Reporting of irregular items like discontinued operations, extraordinary items, and changes in accounting principles
- Intraperiod tax allocation and where earnings per share information is reported
This document summarizes key accounting concepts related to cash, receivables, and related valuation issues. It defines cash and receivables, discusses how to recognize, measure, and present them in financial statements. Specific topics covered include cash controls, restricted cash, cash equivalents, accounts and notes receivable, allowance for doubtful accounts, present value concepts for long-term notes receivable.
The document provides an overview of key financial statements including the balance sheet, income statement, and cash flow statement. It explains that the balance sheet is a snapshot of a business's assets and liabilities on a particular day, usually the end of the financial year. Assets include non-current assets like property, plant, and equipment, as well as current assets like inventory, accounts receivable, and cash. Liabilities include current liabilities like accounts payable and non-current liabilities like long-term debt. Equity includes share capital from the sale of shares and retained earnings consisting of undistributed net profits. The balance sheet balances because every financial transaction results in an equal change to at least one asset or liability account
A corporation has several key characteristics that distinguish it from other business forms:
1. It is a separate legal entity that exists independently of its owners and can act under its own name.
2. Shareholders have limited liability, meaning they are only responsible for the amount invested and not company debts.
3. Ownership is represented by shares that can be freely transferred to other parties.
4. A corporation can exist indefinitely regardless of changes in ownership because it has a legal existence separate from its owners.
Solutions Manual for Advanced Accounting 11th Edition by BeamsZiaPace
Full download : https://downloadlink.org/p/solutions-manual-for-advanced-accounting-11th-edition-by-beams/ Solutions Manual for Advanced Accounting 11th Edition by Beams
The document provides an overview of completing the accounting cycle for a service business. It discusses using a worksheet to facilitate preparing financial statements and closing entries. The steps to prepare a worksheet are explained, including entering the trial balance, adjustments, adjusted trial balance amounts, and financial statement columns. Sample worksheet and financial statements are presented.
Bab 4 Income Statement and Related Informationmsahuleka
The document discusses key elements and objectives related to preparing and understanding income statements, including:
- The uses and limitations of income statements in evaluating past performance and predicting future cash flows
- Components of single-step and multiple-step income statements and how they differ
- Reporting of irregular items like discontinued operations, extraordinary items, and changes in accounting principles
- Intraperiod tax allocation and where earnings per share information is reported
This document summarizes key accounting concepts related to cash, receivables, and related valuation issues. It defines cash and receivables, discusses how to recognize, measure, and present them in financial statements. Specific topics covered include cash controls, restricted cash, cash equivalents, accounts and notes receivable, allowance for doubtful accounts, present value concepts for long-term notes receivable.
The document provides an overview of key financial statements including the balance sheet, income statement, and cash flow statement. It explains that the balance sheet is a snapshot of a business's assets and liabilities on a particular day, usually the end of the financial year. Assets include non-current assets like property, plant, and equipment, as well as current assets like inventory, accounts receivable, and cash. Liabilities include current liabilities like accounts payable and non-current liabilities like long-term debt. Equity includes share capital from the sale of shares and retained earnings consisting of undistributed net profits. The balance sheet balances because every financial transaction results in an equal change to at least one asset or liability account
A corporation has several key characteristics that distinguish it from other business forms:
1. It is a separate legal entity that exists independently of its owners and can act under its own name.
2. Shareholders have limited liability, meaning they are only responsible for the amount invested and not company debts.
3. Ownership is represented by shares that can be freely transferred to other parties.
4. A corporation can exist indefinitely regardless of changes in ownership because it has a legal existence separate from its owners.
Dokumen tersebut membahas tentang penggabungan usaha atau business combination yang didefinisikan sebagai penyatuan dua atau lebih perusahaan menjadi satu entitas ekonomi karena satu perusahaan mengontrol aset dan operasi perusahaan lain. Dokumen tersebut juga menjelaskan beberapa bentuk penggabungan usaha seperti merger statutori, konsolidasi statutori, dan akuisisi saham beserta skemanya.
Topic 7 Accounting For Liability And Owner Equityguest441011
This document discusses accounting for liability and owner's equity. It describes current and long-term liabilities, including how to record long-term loans and bonds payable. It also discusses accounting for loans payable by installment, such as mortgages. Finally, it defines owner's equity and factors that affect it, such as additional capital, drawings, and net income or loss.
Ch03-financial reporting and accounting standardsVivi Tazkia
The document provides an overview of the key concepts and steps covered in Chapter 3 of Intermediate Accounting (IFRS 2nd Edition) by Kieso, Weygandt, and Warfield. It outlines 8 learning objectives for the chapter, which include understanding basic accounting terminology, the double-entry system, the accounting cycle, journalizing and posting transactions, adjusting entries, and preparing financial statements. The chapter also discusses the accounting equation, T-accounts, the different types of accounts, and the accounting process from recording transactions to the adjusted trial balance.
This document summarizes accounting methods for stock investments. It discusses three levels of influence based on percentage of voting stock ownership and the corresponding accounting methods: less than 20% uses fair value (cost) method; 20-50% uses equity method; over 50% uses consolidated financial statements. The equity method adjusts the carrying value of the investment to reflect the investor's share of earnings and dividends over time. The document provides examples of applying the fair value and equity methods and addressing factors beyond ownership, such as ability to exert influence. It also covers applying the equity method to purchase price allocations.
Describe and apply the lower-of-cost-or-net realizable value rule.
Identify other inventory valuation issues.
Determine ending inventory by applying the gross profit method.
Determine ending inventory by applying the retail inventory method.
Explain how to report and analyze inventory.
The document introduces the accounting equation, which states that for any business, assets must equal liabilities plus owner's equity. Assets are the resources owned, like cash, inventory, or property. Liabilities are debts owed, such as loans or unpaid expenses. Owner's equity represents the owner's claim to assets after liabilities are paid. The accounting equation also applies to individuals and must always balance.
This document provides an overview of adjusting entries in accounting. It explains that adjusting entries are needed at the end of an accounting period to update certain account balances, such as accruing expenses that have been incurred but not recorded. It provides examples of analyzing adjusting entry scenarios involving prepaid insurance and unearned revenue to determine the appropriate debit and credit accounts and amounts. The key points are that adjusting entries use at least one income statement and one balance sheet account, and adhere to the matching principle of accrual basis accounting.
This document discusses current liabilities, provisions, and contingencies. It begins by outlining the learning objectives, which are to describe various types of current liabilities, explain classification issues related to short-term debt expected to be refinanced, identify types of employee-related liabilities, explain accounting for provisions, and identify criteria for contingent liabilities and assets. It then defines key terms like liability, current liability, and contingencies. Specific types of current liabilities are explained, such as accounts payable, notes payable, current maturities of long-term debt, and unearned revenue. The accounting treatment and examples of these items are provided.
Accounting for consolidated financial statements.pptJaafar47
This document discusses accounting for consolidated financial statements under IFRS 10. It provides an introduction to consolidation, defining consolidation as combining the financial statements of a parent and subsidiary as a single economic entity. The document then discusses consolidation in cases of wholly owned and partially owned subsidiaries, including how to record the initial business combination and prepare consolidated financial statements in subsequent periods using the equity method of accounting. Examples are provided to illustrate consolidation for both wholly owned and partially owned subsidiaries at the date of acquisition and in later periods.
The document provides statements of affairs for Mt Merapi Corp and HBD Corp. A statement of affairs shows a company's assets and how they are pledged, as well as its liabilities in order of priority. For each company, the summary lists assets and liabilities with book values, then calculates the estimated amounts available to unsecured creditors based on estimated current values and amounts pledged to secured creditors. It also calculates the percentage dividend that would be paid to unsecured creditors.
This document provides an overview of the statement of cash flows, including:
- The purpose is to show sources and uses of cash during a period. It answers where cash comes from and where it goes.
- There are three sections: operating, investing, and financing activities.
- The statement can be prepared using the indirect or direct method. The indirect method reconciles net income to cash flows.
- Key steps in the indirect method include determining cash flows from operating, investing, and financing activities based on changes in the balance sheet and income statement accounts.
- Ratios like free cash flow, cash flows to sales, and cash flows to assets can assess liquidity using statement of cash flows
"[Ringkuman]"
Dokumen tersebut membahas akuntansi untuk sekuritas dilutif dan perhitungan laba per saham. Secara khusus, dibahas mengenai akuntansi untuk obligasi konversi, saham preferen konversi, berbagi waran, dan rencana kompensasi saham. Juga dijelaskan perhitungan laba per saham untuk struktur modal yang sederhana dan kompleks.
This document provides an overview and introduction to managerial finance. It defines finance and identifies its three main areas as financial markets, financial services, and managerial finance. It also outlines seven key learning goals, such as defining finance and describing the role of the financial manager. The document discusses different business organizations, the relationship between finance, economics, and accounting. It emphasizes that the goal of a firm is to maximize shareholder wealth and examines ideas like EVA and stakeholder theory. The agency problem between managers and owners is also introduced.
Accounting for Branches and Combined Financial Statements.pptLayTekchhay2
This document discusses accounting for branches and divisions of a business entity. It defines branches and divisions as separate economic units from the home office but not separate legal entities. Branches carry out sales and collections while divisions have more autonomy. Startup costs for new branches are expensed. Branches can maintain their own accounting records or use the home office as an accounting center. Home offices allocate expenses to branches and may charge interest on capital invested. Combined financial statements are prepared to view the entity as a whole by eliminating reciprocal accounts and intracompany profits/losses.
This document discusses different types of branch accounting systems used by head offices to record branch transactions and calculate branch profits. It describes dependent and independent branches and their accounting records. The key branch accounting systems covered are:
1) Debtor system (synthetic method) where the head office opens an account for each branch to record transactions and calculate profit/loss.
2) Final account system where the head office prepares a branch trading and profit/loss account at cost price to determine branch profit/loss.
3) Stock and debtors system (analytical method) where the head office maintains detailed branch accounts including stock, debtors, and expenses to facilitate detailed analysis of branch operations.
Dokumen tersebut membahas tentang penggabungan usaha atau business combination yang didefinisikan sebagai penyatuan dua atau lebih perusahaan menjadi satu entitas ekonomi karena satu perusahaan mengontrol aset dan operasi perusahaan lain. Dokumen tersebut juga menjelaskan beberapa bentuk penggabungan usaha seperti merger statutori, konsolidasi statutori, dan akuisisi saham beserta skemanya.
Topic 7 Accounting For Liability And Owner Equityguest441011
This document discusses accounting for liability and owner's equity. It describes current and long-term liabilities, including how to record long-term loans and bonds payable. It also discusses accounting for loans payable by installment, such as mortgages. Finally, it defines owner's equity and factors that affect it, such as additional capital, drawings, and net income or loss.
Ch03-financial reporting and accounting standardsVivi Tazkia
The document provides an overview of the key concepts and steps covered in Chapter 3 of Intermediate Accounting (IFRS 2nd Edition) by Kieso, Weygandt, and Warfield. It outlines 8 learning objectives for the chapter, which include understanding basic accounting terminology, the double-entry system, the accounting cycle, journalizing and posting transactions, adjusting entries, and preparing financial statements. The chapter also discusses the accounting equation, T-accounts, the different types of accounts, and the accounting process from recording transactions to the adjusted trial balance.
This document summarizes accounting methods for stock investments. It discusses three levels of influence based on percentage of voting stock ownership and the corresponding accounting methods: less than 20% uses fair value (cost) method; 20-50% uses equity method; over 50% uses consolidated financial statements. The equity method adjusts the carrying value of the investment to reflect the investor's share of earnings and dividends over time. The document provides examples of applying the fair value and equity methods and addressing factors beyond ownership, such as ability to exert influence. It also covers applying the equity method to purchase price allocations.
Describe and apply the lower-of-cost-or-net realizable value rule.
Identify other inventory valuation issues.
Determine ending inventory by applying the gross profit method.
Determine ending inventory by applying the retail inventory method.
Explain how to report and analyze inventory.
The document introduces the accounting equation, which states that for any business, assets must equal liabilities plus owner's equity. Assets are the resources owned, like cash, inventory, or property. Liabilities are debts owed, such as loans or unpaid expenses. Owner's equity represents the owner's claim to assets after liabilities are paid. The accounting equation also applies to individuals and must always balance.
This document provides an overview of adjusting entries in accounting. It explains that adjusting entries are needed at the end of an accounting period to update certain account balances, such as accruing expenses that have been incurred but not recorded. It provides examples of analyzing adjusting entry scenarios involving prepaid insurance and unearned revenue to determine the appropriate debit and credit accounts and amounts. The key points are that adjusting entries use at least one income statement and one balance sheet account, and adhere to the matching principle of accrual basis accounting.
This document discusses current liabilities, provisions, and contingencies. It begins by outlining the learning objectives, which are to describe various types of current liabilities, explain classification issues related to short-term debt expected to be refinanced, identify types of employee-related liabilities, explain accounting for provisions, and identify criteria for contingent liabilities and assets. It then defines key terms like liability, current liability, and contingencies. Specific types of current liabilities are explained, such as accounts payable, notes payable, current maturities of long-term debt, and unearned revenue. The accounting treatment and examples of these items are provided.
Accounting for consolidated financial statements.pptJaafar47
This document discusses accounting for consolidated financial statements under IFRS 10. It provides an introduction to consolidation, defining consolidation as combining the financial statements of a parent and subsidiary as a single economic entity. The document then discusses consolidation in cases of wholly owned and partially owned subsidiaries, including how to record the initial business combination and prepare consolidated financial statements in subsequent periods using the equity method of accounting. Examples are provided to illustrate consolidation for both wholly owned and partially owned subsidiaries at the date of acquisition and in later periods.
The document provides statements of affairs for Mt Merapi Corp and HBD Corp. A statement of affairs shows a company's assets and how they are pledged, as well as its liabilities in order of priority. For each company, the summary lists assets and liabilities with book values, then calculates the estimated amounts available to unsecured creditors based on estimated current values and amounts pledged to secured creditors. It also calculates the percentage dividend that would be paid to unsecured creditors.
This document provides an overview of the statement of cash flows, including:
- The purpose is to show sources and uses of cash during a period. It answers where cash comes from and where it goes.
- There are three sections: operating, investing, and financing activities.
- The statement can be prepared using the indirect or direct method. The indirect method reconciles net income to cash flows.
- Key steps in the indirect method include determining cash flows from operating, investing, and financing activities based on changes in the balance sheet and income statement accounts.
- Ratios like free cash flow, cash flows to sales, and cash flows to assets can assess liquidity using statement of cash flows
"[Ringkuman]"
Dokumen tersebut membahas akuntansi untuk sekuritas dilutif dan perhitungan laba per saham. Secara khusus, dibahas mengenai akuntansi untuk obligasi konversi, saham preferen konversi, berbagi waran, dan rencana kompensasi saham. Juga dijelaskan perhitungan laba per saham untuk struktur modal yang sederhana dan kompleks.
This document provides an overview and introduction to managerial finance. It defines finance and identifies its three main areas as financial markets, financial services, and managerial finance. It also outlines seven key learning goals, such as defining finance and describing the role of the financial manager. The document discusses different business organizations, the relationship between finance, economics, and accounting. It emphasizes that the goal of a firm is to maximize shareholder wealth and examines ideas like EVA and stakeholder theory. The agency problem between managers and owners is also introduced.
Accounting for Branches and Combined Financial Statements.pptLayTekchhay2
This document discusses accounting for branches and divisions of a business entity. It defines branches and divisions as separate economic units from the home office but not separate legal entities. Branches carry out sales and collections while divisions have more autonomy. Startup costs for new branches are expensed. Branches can maintain their own accounting records or use the home office as an accounting center. Home offices allocate expenses to branches and may charge interest on capital invested. Combined financial statements are prepared to view the entity as a whole by eliminating reciprocal accounts and intracompany profits/losses.
This document discusses different types of branch accounting systems used by head offices to record branch transactions and calculate branch profits. It describes dependent and independent branches and their accounting records. The key branch accounting systems covered are:
1) Debtor system (synthetic method) where the head office opens an account for each branch to record transactions and calculate profit/loss.
2) Final account system where the head office prepares a branch trading and profit/loss account at cost price to determine branch profit/loss.
3) Stock and debtors system (analytical method) where the head office maintains detailed branch accounts including stock, debtors, and expenses to facilitate detailed analysis of branch operations.
This document discusses different methods for accounting for branch operations in the books of the head office, including the debtor system, final account system, and stock and debtors system. The debtor system records branch transactions through a branch account in the head office books. The final account system determines branch profit/loss through a branch trading and profit/loss account. The stock and debtors system provides more detailed information on branch assets, liabilities, debtors, and inventory movements.
The document summarizes accounting procedures for sales agencies, branches, and the head office. It discusses key features of sales agencies, which perform a small portion of functions compared to branches and have lesser autonomy. Branches carry inventory, make sales, approve credit, and make collections. The document provides journal entries for transactions between the head office and a sales agency/branch. It also discusses working papers used to combine financial statements and eliminate reciprocal accounts between the head office and branches.
This document discusses branch accounting and different systems for maintaining the accounts of dependent branches. It describes three main types of branches from an accounting perspective: dependent branches that do not keep full books, independent branches that do, and foreign branches. It then explains three systems for dependent branch accounting: the debtors system, final accounts system, and stock and debtors system. The debtors system is described in more detail, including how the branch account is prepared under the cost price and invoice price methods to determine branch profit or loss. Illustrative examples are provided.
Final accounts include trading and profit and loss accounts and a balance sheet. They are prepared at the end of an accounting year to determine the profit or loss and financial position of a company.
The trading account shows the gross profit or loss from trading activities like purchases and sales. The profit and loss account determines the net profit or loss after deducting all expenses from income. The balance sheet lists the assets, liabilities, and capital as of a certain date to show the financial position.
Preparing final accounts involves making adjustments for prepaid expenses, outstanding expenses, closing stock, depreciation, and other items to accurately reflect the company's performance and position.
The document discusses final accounts and their importance in accounting. It explains that final accounts like trading account, profit and loss account, and balance sheet are prepared from the trial balance and provide key financial information. The trading account shows gross profit or loss, while the profit and loss account provides net profit or loss. The balance sheet presents the assets and liabilities of the business at a point in time. Adjustment entries and the worksheet help ensure accurate preparation of final accounts.
Branch accounts
A branch is an extension or sub-division of a large business.
Divisions or sections, opened in various parts of a country or the world
with a view to extend business activities or to capture new market is
known as Branches. A branch is a section of an enterprise, geographically
separated from the rest of the business, controlled by a head office.
Departmental accounts are accounts relating to the different
departments or division of a business and are prepared to ascertain
the trading results of each department separately. In short, the
accounts which are prepared to know the profitability of each
department separately are called departmental accounts.
The document discusses the preparation of final accounts, which provide information on the profit/loss and financial position of a business. It describes the objectives and components of final accounts, including trading account, profit and loss account, and balance sheet. It explains the purpose of each account, the key items included on their debit and credit sides, and their importance. It also covers topics like adjustment entries, manufacturing account, and the use of a worksheet to prepare adjusted trial balance for the final accounts.
This document discusses various accounting adjustments that may be needed when preparing final financial statements. It explains that adjustments are required to ensure revenues and expenses are matched and recorded in the correct accounting period. Common adjustments mentioned include closing stock, outstanding expenses, prepaid expenses, accrued income, depreciation, bad debts, and provisions. Formulas and journal entries for recording different types of adjustments are provided.
The document discusses the preparation of final accounts, which provide key financial information about a business. It describes the objectives and components of final accounts, including the trading account, profit and loss account, balance sheet, and manufacturing account. It outlines the items and format of each account, and explains the importance and purpose of preparing a worksheet to help prevent errors in compiling the final accounts from the trial balance.
This document discusses key concepts related to share-based compensation. It defines a share-based payment transaction as one where an entity receives goods or services in exchange for its equity instruments. Share-based awards are commonly used to compensate directors, executives, and employees. Key concepts covered include grant date, vesting conditions, vesting period, exercise date, and fair value. Share-based payments can be classified as either equity-settled or cash-settled based on whether the counterparty receives equity instruments or a cash amount equal to the equity's fair value.
The document discusses financial accounting concepts like trading accounts, profit and loss accounts, and using accounting information systems. It defines trading accounts and explains their purpose is to calculate gross profit or loss. It also defines profit and loss accounts and how they are used to determine net profit. The document recommends using accounting information systems to automate financial statements for increased accuracy and efficiency over manual methods. It describes the components, benefits, and common types of accounting information systems.
In order to increase the sales, business houses are required to market their products over a larger territory and may generally split their business into certain divisions or parts, if the various certain divisions or parts, if the various parts or divisions are located in different parts of the same city as Chandni chowk, Karol bagh, Connaught place, Nehru place (in delhi) or in different cities of the same country as Calcutta, Chennai, Mumbai, Kanpur and Delhi (in india) or in different countries (in the world) as Canada, USA, England, Japan, U.S.S.R and Germany, these are known as branches, head office contracts the activities of various branches
The document discusses the three main financial statements prepared during the final accounting process:
1) The trading account determines gross profit or loss and includes only direct expenses and revenues.
2) The profit and loss account determines net profit or loss and includes indirect expenses and revenues. It begins with the trading account balance.
3) The balance sheet discloses total assets, liabilities, and capital on a given date. It includes adjustments for prepaid/accrued items and closing balances from other statements.
This document provides terminology and templates for preparing financial statements according to international standards. It includes templates for income statements, statements of financial position, and manufacturing accounts for sole proprietorships, partnerships, and limited companies. Key sections and accounts are defined, such as appropriation accounts, receipts and payments accounts, and trading versus non-trading organizations. Template line items and account headings are explained.
20 closing and work sheet accounting workbook-zaheer-swatiZaheer Swati
As previously stated, revenue increase owner’s equity and expenses and withdrawals (Drawings) by owner decrease owner’s equity, all accounts relating to expense, revenues and drawing are called temporary accounts.
ECON 2302 Project· What is a negative externality Construct a gEvonCanales257
ECON 2302 Project
· What is a negative externality? Construct a graph for the market for Steel showing the market price and quantity when the firms are dumping their industrial waste in the local waterways. What is the motivation for firms to pollute the local waterways?
· Explain how third parties are adversely affected from the pollution and how the negative externality can be internalized. Draw into the graph the appropriate shift of the supply curve which will remedy the negative externality and bring about the socially optimal level of output.
· What is a positive externality? Construct a graph for the market for vaccine shots showing the market price and quantity.
· Explain how third parties are benefiting from those who consume vaccine shots and how the positive externality can be internalized. Draw into the graph the appropriate shift of the demand curve which will remedy the positive externality.
1
Financial Statement Preparation Guidance Instructions
Financial Statement Entry Matrix (BUSN 5000)
The Financial Statement Entry Matrix below was developed in 2011 by Eddie Schwertz,
BUSN 5000 Course Lead for Webster University, to assist the online students with the
preparation of financial statements required for the Business Plan Term Project. It should be
used in conjunction with the Sample Business Plan B: Retail Business located in the Class
Resources area of the BUSN 5000 Online course and the Income Statement, Cash Flow
Statement, and Balance Sheet financial statements that follow the matrix on pages 3 to 5 of
this Word document file.
It is not possible to prepare instructions that answer all potential questions. However, an
attempt has been made to provide you with the situations you will likely most often
encounter during the preparation of the business plan for this course. It is recommended that
you print a copy of this help file for preparing the financial statements and a copy of the
Sample Business Plan B: Retail Business for reference as you use this matrix.
The Financial Statement Entry Matrix consists of four columns. The first column
identifies the financial statement item that appears on the three financial statements. In front
of each item is a bold upper-case letter. The purpose of the bold, highlighted capital letter
(e.g., A, B, C) is to assist you in locating the specific item on the financial statements and to
identify the relationships that exist between the item and the financial statements.
Note: While preparing financial statements, please remember in accounting that any
number shown in parentheses is a negative value. We recommend that you use
parentheses for negative numbers to emphasize that the number shown is a negative value.
Students should also round all figures to the nearest dollar.
2
Financial Statement Entry Matrix (BUSN 5000)
Financial Statement Item Income Statement Cash Flow Statement Balance Sheet
A. Net Sales Revenue Operating Activiti ...
Similar to accounting for branches and Combined FS(2)_(0).pptx (20)
International trade allows countries to specialize and gain from exporting goods they produce cheaply while importing goods from other countries that produce them cheaply. There are direct benefits like increased income and indirect benefits like technology transfer. However, international trade can also negatively impact poorer countries if it prices out their domestic industries or leads to deterioration in their terms of trade. Trade agreements and economic integration aim to liberalize trade but have both costs and benefits that are debated. Governments use policies like tariffs and quotas to protect domestic industries from foreign competition and further other goals. Regional economic integration involves countries reducing barriers to create free trade areas, customs unions, common markets or unions with deeper coordination of economic policies.
The document discusses several theories of interest rate determination:
1. The classical theory argues that interest rates are determined by the supply of savings and demand for investment, where the equilibrium rate balances the two.
2. The liquidity preference theory views interest as the price of money, with rates set by demand for and supply of money in the economy.
3. The loanable funds theory sees rates as set by demand for and supply of credit in the economy from savers, borrowers, and foreign actors.
Micro Theory of Consumer Behavior and Demand.pptxJaafar47
This document provides an overview of microeconomics and consumer theory. It discusses:
1) Consumer behavior can be understood by examining preferences, budget constraints, and how preferences and constraints determine choice.
2) Utility is the satisfaction from consuming goods and is subjective. There are two approaches to measuring utility - cardinal and ordinal.
3) In cardinal utility theory, utility is measured in utils and has assumptions like diminishing marginal utility. In ordinal utility theory, utility is ranked and shown through indifference curves.
4) Consumer equilibrium occurs when marginal utility per dollar spent is equal across goods, or when marginal utility equals price for a single good. The consumer maximizes utility subject to their budget.
This document provides an overview of comparative statistics. It begins by defining comparative statistics as the comparison of different equilibrium positions associated with changes in exogenous variables or parameters of an economic model. It then provides examples of how comparative statistics can be used to analyze how changes in things like taxes, government spending, or weather would affect equilibrium outcomes. The document walks through examples of comparative statistics analyses for a simple market model and national income model. It discusses techniques for models with explicit solutions versus general functional forms. Finally, it outlines some limitations of comparative statistics, such as ignoring adjustment processes and time dynamics.
This document outlines the key functions and activities of commercial banks. It discusses commercial banks' primary functions of receiving deposits through various account types like demand deposits, savings accounts, and fixed deposits. It also covers commercial banks' important role in credit creation by lending out deposits and maintaining required reserves. An example is provided to illustrate how the money multiplier allows commercial banks to generate additional deposits and effectively create credit in the banking system.
This document discusses different types of adult learning, including formal education, non-formal education, and informal learning. It distinguishes between education and training, noting that training focuses on developing specific skills for present jobs while education prepares individuals for future challenges. The document then discusses teaching versus training functions. It introduces andragogy, the theory of adult learning, tracing its historical development and outlining Malcolm Knowles' assumptions about adult learners. Finally, it contrasts the roles of teachers and facilitators, defining a facilitator as someone who guides participants to explore their own knowledge and experiences rather than taking a position themselves.
This document discusses different types of adult learning, including formal education, non-formal education, and informal learning. It distinguishes between education and training, noting that training focuses on developing specific skills for present jobs while education prepares individuals for future challenges. The document then discusses teaching versus training functions. It introduces andragogy, the theory of adult learning, tracing its historical development and outlining Malcolm Knowles' assumptions about adult learners. Finally, it contrasts the roles of teachers and facilitators, defining a facilitator as someone who guides participants to explore their own knowledge and experiences rather than taking a position themselves.
The National Bank of Ethiopia (NBE) was established in 1963 through proclamation to serve as Ethiopia's central bank. It was granted autonomy and tasked with key central banking functions like monetary policy, managing reserves, supervising other banks, and issuing currency. In 1976, a new proclamation expanded the NBE's role in accordance with Ethiopia's socialist policies at the time. The NBE remains the central bank of Ethiopia today, guiding monetary policy and overseeing the financial system.
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
BONKMILLON Unleashes Its Bonkers Potential on Solana.pdfcoingabbar
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accounting for branches and Combined FS(2)_(0).pptx
1. Accounting for Branches and
Combined Financial Statements
Chapter 2
1
Accounting for Branches
2. Accounting for Branches 2
Objectives of this Chapter
To learn the accounting and
reporting for segments (i.e.,
branches and division) of a
business entity.
3. Accounting for Branches 3
Branches and Divisions
Branches and divisions are separate
economic and accounting entities
from their home office. However, they
are not separate legal entities from
their home office.
4. Accounting for Branches 4
Branches and Divisions (contd.)
Branch: a business unit located at
some distance from the home office.
This unit carries merchandise
obtained from the home office, makes
sales, approves customers’ credit,
makes collections from its customers,
and remits cash received.
5. Accounting for Branches 5
Branches and Divisions (contd.)
Divisions: a segment of a business
entity which generally has more
autonomy than a branch. Accounting
for a division not operated as a
separate corporation (i.e., subsidiary
company) is similar to that of
branches.
6. Accounting for Branches 6
Branches and Divisions (contd.)
Divisions: Accounting for a division
operated as a separate corporation is
different from that of branches which
requires consolidated financial
statements .
7. Accounting for Branches 7
Start-up Costs of Opening New
Branches
Based on Statement of Position 98-5
(SOP 98-5) “Reporting on the Costs
of Start-up Activities”, all start-up
costs, including costs associated with
organizing a branch or division
should be expensed in the
accounting period in which the costs
are incurred.
8. Accounting for Branches 8
Accounting System for a Branch
Two alternative systems:
1. The branch does not maintain a
complete set of accounting
records.
The home office serves only as
an accounting and control center
for the branches.
9. Accounting for Branches 9
Accounting System for a Branch (contd.)
2. The branch maintains a complete
set of accounting records
consisting of journal entries and
ledger accounts. Financial
statements are prepared by the
branch account and forwarded to
the home office.
10. Accounting for Branches 10
Accounting System for a Branch (contd.)
This chapter focuses on the second
system that the branch maintains its
own accounting records.
11. Accounting for Branches 11
Reciprocal Ledger Accounts Used by the
Branch and Home Office
Home Office Ledger Account:
This account is used by the branch to account for
all transactions with the home office.
It is credited for all cash, merchandise or other
assets provided by the home office to the branch.
It is debited for all cash, merchandise, or other
assets sent by the branch to the home office or to
other branches.
12. Accounting for Branches 12
Reciprocal Ledger Accounts Used by the
Branch and Home Office (contd.)
Home Office Ledger Account:
This account represents the net
investment by the home office in the
branch.
At the end of a period, the balance of
Income Summary account of a branch
is closed to the Home Office account.
13. Accounting for Branches 13
Reciprocal Ledger Accounts Used by the
Branch and Home Office (contd.)
Investment in Branch Ledger Account:
This account is a reciprocal ledger account
(to Home Office account) used by the home
office to account for any transactions with
the branches. It is debited for cash,
merchandise and services provided to the
branch by the home office and for the net
income reported by the branch.
14. Accounting for Branches 14
Reciprocal Ledger Accounts Used by the
Branch and Home Office (contd.)
Investment in Branch Ledger Account:
It is credited for cash, or other assets
received from the branch, and for net
losses reported by the branch.
15. Accounting for Branches 15
Acquisition of Plant Assets Used in
Branch
If a plant asset is acquired by the
home office for a branch’s usage
and the accounting record for the
plant asset is maintained by the
home office, the accounting
treatments are:
16. Accounting for Branches 16
Acquisition of Plant Assets Used in
Branch (contd.)
For the home office: debit a plant
asset account: branch, credit
cash or a liability account.
For the branch: no entry.
17. Accounting for Branches 17
Acquisition of Plant Assets Used in
Branch (contd.)
If a plant asset is acquired by a
branch for its usage but the
accounting record for this plant
asset is maintained by the home
office, the accounting treatments
are:
18. Accounting for Branches 18
Acquisition of Plant Assets Used in
Branch (contd.)
For the branch: debit Home Office
and credit cash or a liability account.
For the home office: debit a plant
asset account: branch, and credit
Investment in Branch account.
19. Accounting for Branches 19
Expense Incurred by Home Office
and Allocated to Branches
The home office may acquire plant
assets and insurance for these assets.
These plant assets are carried in the
home office accounting record but used
by branches.
The home office may pay some taxes on
behalf of branches, and arrange for
advertising that benefits all branches.
20. Accounting for Branches 20
Expense Incurred by Home Office
and Allocated to Branches (contd.)
These expenses are usually allocated
to branches in determining net income
of branches.
These expenses include depr.
expense for the plant assets
purchased by home office but used by
branches.
21. Accounting for Branches 21
Expense Incurred by Home Office
and Allocated to Branches (contd.)
If the home office chooses to allocate
these expenses to branches, the
accounting treatments are:
a. For the home office: debit Investment
in Branch account, credit expense
account.
b. For the branch: debit expense
account, credit Home Office account.
22. Accounting for Branches 22
Interest Charged by the Home office on
the Capital Invested in Branches
When the home office serves only as an
accounting and control center without
any sales, most or all of its expenses
may be allocated to the branches.
In additional, the home office may
charge each branch interest on the
capital invested in each branch.
23. Accounting for Branches 23
Interest Charged by the Home office on
the Capital Invested in Branches (contd.)
Such interest revenue recognized by
the home office should be offset with
the interest expense recognized by the
branches in the combined financial
statements.
24. Accounting for Branches 24
Alternative Methods of Billing
Merchandise Shipments to Branches
Three alternative methods are available to
the home office in billing the merchandise
shipped to the branches:
a. billed at the home office cost,
b. billed at a percentage above the home
office cost, and
c. billed at the branch’s retail selling
price.
25. Accounting for Branches 25
Billed at the home office cost:
Strength: widely used because of its
simplicity
Weakness: attributes all gross profits
of the business to the branches.
26. Accounting for Branches 26
Billed at a percentage above home
office cost:
Strength: is able to allocate a
reasonable gross profit to the home
office.
Weakness: the net income reported by
the branch may be understated and the
ending inventories at branch are
overstated for the enterprise as a
whole.
27. Accounting for Branches 27
Billed at a percentage above home
office cost: (contd.)
Thus, for the combined financial
statement, the home office must
eliminate the excess of billed prices
over cost (intracompany profits).
28. Accounting for Branches 28
Billed at branch retail selling prices:
Strength: to increase the internal
control over inventories at branches.
Weakness: no gross profit assigned to
the branches and the branch’s net loss
will equal its operating expenses.
29. Accounting for Branches 29
Separate Financial Statements for Branch and
for Home Office (for internal use only)
Separate financial statements for
branches should be prepared so that
management can evaluate the
performance of each branch.
The branch’s financial statements may
be revised by the home office to include
the allocated expenses incurred by the
home office.
30. Accounting for Branches 30
Separate Financial Statements for Branch and
for Home Office (for internal use only) (contd.)
Also, the financial statements of
branches should be revised to
eliminate any intracompany profits on
merchandise shipments or interest
charge on capital investments.
31. Accounting for Branches 31
Combined financial Statements for Home
Office and Branch (for external use)
For investors, the home office and
branches are a single business entity.
Thus, combined financial statements
should be prepared for external users.
A four-column work sheet paper is
used to facilitate the preparation of the
combined financial statement.
32. Accounting for Branches 32
Combined financial Statements for Home
Office and Branch (for external use)(contd.)
In preparing the combined financial
statements, the following accounts
should be eliminated:
a. Reciprocal ledger accounts
b. Any intracompany profits or losses.
33. Accounting for Branches 33
Combined financial Statements for Home
Office and Branch (for external use)(contd.)
c. Any receivables and payables
between the home office and the
branch (or between two branches).
The rest of accounts are just summed
together for the combined financial
statements.
34. Accounting for Branches 34
Combined financial Statements for Home
Office and Branch (for external use)(contd.)
Example I: Journal entries for
operations of a branch when
merchandise is billed at the cost of the
home office with a perpetual inventory
system.
35. Accounting for Branches 35
Combined financial Statements for Home Office and Branch
(for external use)(contd.)
Example I: (contd.)
Assume that Ethiopian Pharmaceutical
Agency(EPSA) bills merchandise to
Adama Branch at home office cost
and that Adama Branch maintains
complete accounting records and
prepares financial statements.
Both the home office and the branch
use the perpetual inventory system.
Equipment used at the branch is
carried in the home office records.
36. Accounting for Branches 36
Combined financial Statements for Home Office and Branch
(for external use)(contd.)
Example I: (contd.)
Expenses, such as advertising and
insurance, incurred by the home office
on behalf of the branch, are billed to
the branch.
Transactions and events during the
first year (2000) of operations of
Adama Branch are summarized below
(start-up costs are disregarded):
37. Accounting for Branches 37
Combined financial Statements for Home Office and Branch
(for external use)(contd.)
Example I: (contd.)
1. Cash of $1,000 was forwarded by the
home office to Adama Branch.
2. Merchandise with a home office cost of
$60,000 was shipped by the home office to
Adama Branch.
3. Equipment was acquired by Adama Branch
for $500, to be carried in the home office
accounting records. (Other plant assets for
Adama Branch generally are acquired by
the home office.)
38. Accounting for Branches 38
Combined financial Statements for Home Office and Branch
(for external use)(contd.)
Example I: (contd.)
4. Credit sales by Adama Branch amounted
to $80,000; the branch’s cost of the
merchandise sold was $45,000.
5. Collections of trade accounts receivable by
Adama Branch amounted to $62,000.
6. Payments for operating expenses by
Adama Branch totaled $20,000.
39. Accounting for Branches 39
Combined financial Statements for Home Office and Branch
(for external use)(contd.)
Example I: (contd.)
7. Cash of $37,500 was remitted by Adama
Branch to the home office.
8. Operating expenses incurred by the home
office and charged to Adama Branch
totaled $3,000.
40. Accounting for Branches 40
Combined financial Statements for Home Office and Branch
(for external use)(contd.)
Example I: (contd.)
These transactions and events are
recorded by the home office and by Adama
Branch as follows:
Home Office Accounting
Records Journal Entries:
Adama Branch Accounting
Records Journal Entries:
1.Investment in Adama
Branch 1,000
Cash 1,000
Cash 1,000 Home Office 1,000
41. Accounting for Branches 41
Combined financial Statements for Home Office and Branch
(for external use)(contd.)
Example I: (contd.)
Home Office Accounting
Records Journal Entries:
Adama Branch Accounting
Records Journal Entries:
2. Investment in Adama
Branch 60,000
Inventories 60,000
Inventories 60,000 Home Office 60,000
3. Equipment: Adama
Branch 500
Home Office 500
Investment in Adama
Branch 500
Cash 500
42. Accounting for Branches 42
Combined financial Statements for Home Office and Branch
(for external use)(contd.)
Example I: (contd.)
Home Office Accounting
Records Journal Entries:
Adama Branch Accounting
Records Journal Entries:
4. None Trade Accounts
Receivable 80,000
Cost of Goods Sold 45,000
Sales 80,000
Inventories 45,000
43. Accounting for Branches 43
Combined financial Statements for Home Office and Branch
(for external use)(contd.)
Example I: (contd.)
Home Office Accounting
Records Journal Entries:
Adama Branch Accounting
Records Journal Entries:
5. None Cash 62,000
Trade
Account
Receivable 62,000
6. None Operating
Expenses 20,000
Cash 20,000
44. Accounting for Branches 44
Combined financial Statements for Home Office and Branch
(for external use)(contd.)
Example I: (contd.)
Home Office Accounting
Records Journal Entries:
Adama Branch Accounting
Records Journal Entries:
7. Cash 37,500 Home Office 37,500
Investment in Adama
Branch 37,500
Cash 37,500
8. Investment in Adama
Branch 3,000
Operating
Expenses 3,000
Operating
Expenses 3,000
Home Office 3,000
45. Accounting for Branches 45
Combined financial Statements for Home Office and Branch
(for external use)(contd.)
Example I: (contd.)
Two Reciprocal Ledger Accounts (prior to adjusting
and closing entries):
Investment in Adama Branch
Date Explanation Debit Credit Balance
2000 Cash sent to branch
Merchandise billed to
branch at home office cost
Equipment acquired by
branch, carried in home
office accounting records
Cash received from branch
Operating expenses billed
to branch
1,000
60,000
3,000
500
37,500
1,000 dr
61,000 dr
60,500 dr
23,000 dr
26,000 dr
46. Accounting for Branches 46
Combined financial Statements for Home Office and Branch
(for external use)(contd.)
Example I: (contd.)
Home Office
Date Explanation Debit Credit Balance
2000 Cash received from home
office
Merchandise received from
home office
Equipment acquired
Cash sent to home office
Operating expenses billed
by home office
500
37,500
1,000
60,000
3,000
1,000 cr
61,000 cr
60,500 cr
23,000 cr
26,000 cr
47. Accounting for Branches 47
Working Paper for Combined financial
Statements--Example I
The following working paper for
combined financial statements serves
three purposes:
1) to eliminate any intracompany profits
or losses,
2) to eliminate the reciprocal accounts, &
3) to combine ledger accounts balances
of home office and branches.
48. Accounting for Branches 48
Working Paper for Combined financial
Statements--Example I (contd.)
Assume that the Adama Branch’s
ending inventories of $15,000 at the
end of 2000 had been verified, the
following work sheet is based on the
transactions and With additional
assumed data for the home office trial
balance.
49. Accounting for Branches 49
Working Paper for Combined financial
Statements--Example I (contd.)
All the year-end adjusting entries
except the home office entries had
been made.
The working paper begins with the
adjusted trial balance of the home office
and Adama Branch.
Income taxes are ignored in this
illustration.
50. Accounting for Branches 50
Working Paper for Combined financial
Statements--Example I (contd.)
EPSA working paper for combined
Financial Statements of Home office
and Adama Branch.
For Year Ended December 31,2000
(Perpetual Inventory System: Billing at
Cost)
51. Accounting for Branches 51
Working Paper for Combined financial
Statements--Example I (contd.)
-0-
-0-
-0-
Totals
87,000
12,000
75,000
Net Income (to
statement of retained
earnings below)
113,000
23,000
90,000
Operating expenses
280,000
45,000
235,000
Cost of goods sold
(480,000)
(80,000)
(400,000)
Sales
Income Statement
Dr (Cr)
Dr (Cr)
Dr(Cr)
Dr (Cr)
Adama
Branch
Home
Office Combined
Eliminations
Adjusted Trial Balances
52. Accounting for Branches 52
Working Paper for Combined financial
Statements--Example I (contd.)
-0-
Totals
117,000
Retained earnings,
Dec.31,2000 (to
balance sheet below)
40,000
40,000
Dividends declared
(87,000)
(12,000)
(75,000)
Net(income) (from
incomes statement
above)
(70,000)
(70,000)
Retained earnings, Jan.
1, 2000
Dr (Cr)
Dr (Cr)
Dr(Cr)
Dr (Cr)
Adama
Branch
Home
Office
Combined
Eliminations
Adjusted Trial Balances
Statement of Retained
Earnings
53. Accounting for Branches 53
Working Paper for Combined financial
Statements--Example I (contd.)
(10,000)
(10,000)
Accumulated
depreciation of
equipment
(a) (26,000)
26,000
Investment in Adama
Branch
60,000
15,000
45,000
Inventories
57,000
18,000
39,000
Trade accounts
receivable (net)
30,000
5,000
25,000
Cash
Dr (Cr)
Dr (Cr)
Dr(Cr)
Dr (Cr)
Adama
Branch
Home
Office
Combined
Eliminations
Adjusted Trial Balances
Balance Sheet
Equipment 150,000 150,000
54. Accounting for Branches 54
Working Paper for Combined financial
Statements--Example I (contd.)
-0-
-0-
-0-
-0-
Totals
(117,000)
Retained earnings
(from statement of
retained earnings
above)
(150,000)
(150,000)
State Capital
(a) (26,000)
(26,000)
Home Office
(20,000)
(20,000)
Trade accounts payable
Dr (Cr)
Dr (Cr)
Dr(Cr)
Dr (Cr)
Adama
Branch
Home
Office
Combined
Eliminations
Adjusted Trial Balances
Balance Sheet
(contd.)
(a) To eliminate reciprocal ledger account balances
* the elimination appears in the working paper only
55. Accounting for Branches 55
Combined Financial Statements --
Example I
EPSA
Income Statement
For Year Ended December 31, 2000
$ 87,000
Net Income
113,000
Operating expenses
$ 200,000
Gross margin on sales
280,000
Cost of goods sold
$ 480,000
Sales
56. Accounting for Branches 56
Combined Financial Statements --
Example I (contd.)
EPSA
Statement of Retained Earnings
For Year Ended December 31, 2000
$ 117,000
Retained earnings, end of year
40,000
Less: Dividends
$ 157,000
Subtotal
87,000
Add: Net income
$ 70,000
Retained earnings, beginning of year
57. Accounting for Branches 57
Combined Financial Statements --
Example I (contd.)
EPSA
Balance Sheet
December 31, 2000
$287,000
Total assets
140,000
10,000
Less: Accumulated depreciation
$150,000
Equipment
60,000
Inventories
57,000
Trade accounts receivable (net)
$ 30,000
Cash
Assets
58. Accounting for Branches 58
Combined Financial Statements --
Example I (contd.)
EPSA
Balance Sheet (contd.), December 31, 2000
$287,000
Total liabilities & stockholders’
equity
267,000
117,000
Retained earnings
$150,000
State Capital
Equity
$20,000
Trade accounts payable
Liabilities
Liabilities & Stockholders’ Equity
59. Accounting for Branches 59
Home Office Adjusting and Closing Entries and
Branch Closing Entries Performed on 12/31/2000
(perpetual inventory system):
Home Office Accounting
Records Adjusting and Closing
Entries:
Adama Branch Accounting
Records Closing Entries:
None Sales 80,000
Cost of Goods
Sold 45,000
Operating
Expenses 23,000
Income
Summary 12,000
60. Accounting for Branches 60
Home Office Adjusting and Closing Entries and
Branch Closing Entries Performed on 12/31/2000
(perpetual inventory system): (contd.)
Home Office Accounting
Records Adjusting and
Closing Entries:
Adama Branch Accounting
Records Closing Entries:
Investment in Adama
Branch 12,000
Income
Summary 12,000
Income: Adama
Branch 12,000
Home Office 12,000
Income: Adama
Branch 12,000
None
Income
Summary 12,000
61. Accounting for Branches 61
Example II :
Billing of Merchandise to Branches at Prices
above Home Office Cost
Similar information as in the previous
example, except that the home office
bills merchandise shipped to Adama
branch at 50% markup of the cost.
Thus, the shipment of merchandise
costing $60,000 will be recorded at the
home office and branch as follows:
62. Accounting for Branches 62
Example II
Billing of Merchandise to Branches at Prices
above Home Office Cost (contd.)
Journal entries for shipments to branch at
prices above home office cost (perpetual
inventory system):
Home Office Accounting
Records Journal Entries:
Adama Branch Accounting
Records Journal Entries:
Investment in Adama
Branch 90,000 Inventories 90,000
Inventories 60,000 Home Office 90,000
Allowance for
Overvaluation of
Inventories: Adama
Branch 30,000
63. Accounting for Branches 63
Thus, the balances of both the
Investment in Adama Branch
account and Home Office account
will be $56,000, instead of $26,000
due to the inventory mark up of
$30,000.
Billing of Merchandise to Branches at Prices
above Home Office Cost (contd.)
64. Accounting for Branches 64
EPSA
Flow of Merchandise for Adama Branch During 2000
Billing of Merchandise to Branches at Prices
above Home Office Cost (contd.)
$22,500
$45,000
$67,500
Cost of goods
sold
7,500
15,000
22,500
Less: Ending
inventories
$30,000
$60,000
$90,000
Add: Shipments
from home office $30,000
$60,000
$90,000
Beginning
inventories
Markup (50% of
Cost;33 1/3 % of
Billed Price)
Home
Office
Cost
Billed
Price
Available for sale
65. Accounting for Branches 65
Working Paper for Example II
EPSA
Working paper for combined Financial
Statements of Home office and Adama
Branch
For Year Ended December 31,2000
(Perpetual Inventory System: Billing
above Cost)
66. Accounting for Branches 66
Working Paper for Example II (contd.)
-0-
-0-
-0-
Totals
87,000
(b) 22,500
(10,500)
75,000
Net Income(loss)
113,000
23,000
90,000
Operating expenses
280,000
(a) (22,500)
67,500
235,000
Cost of goods sold
(480,000)
(80,000)
(400,000)
Sales
Income Statement
Dr (Cr)
Dr (Cr)
Dr(Cr)
Dr (Cr)
Adama
Branch
Home
Office Combined
Eliminations
Adjusted Trial Balances
67. Accounting for Branches 67
Working Paper for Example II (contd.)
-0-
Totals
117,000
Retained earnings,
Dec.31,2000 (to
balance sheet below)
40,000
40,000
Dividends declared
(87,000)
10,500
(75,000)
Net(income) loss (from
incomes statement
above)
(70,000)
(70,000)
Retained earnings, Jan.
1, 2000
Dr (Cr)
Dr (Cr)
Dr(Cr)
Dr (Cr)
Adama
Branch
Home
Office
Combined
Eliminations
Adjusted Trial Balances
Statement of Retained
Earnings
(b) (22,500)
68. Accounting for Branches 68
Working Paper for Example II (contd.)
150,000
150,000
Equipment
(c) (56,000)
56,000
Investment in Adama
Branch
60,000
(a) (7,500)
22, 500
45,000
Inventories
57,000
18,000
39,000
Trade accounts
receivable (net)
30,000
5,000
25,000
Cash
Dr (Cr)
Dr (Cr)
Dr(Cr)
Dr (Cr)
Adama
Branch
Home
Office
Combined
Eliminations
Adjusted Trial Balances
Balance Sheet
Allowance for
overvaluation of
inventories: Adama
Branch (30,000) (a) 30,000
69. Accounting for Branches 69
Working Paper for Example II (contd.)
-0-
-0-
-0-
-0-
Totals
(117,000)
Retained earnings(from
statement of retained
earnings above)
(150,000)
(150,000)
Common stock, $10 par
(c) 56,000
(56,000)
Home Office
(10,000)
(10,000)
Trade accounts payable
Dr (Cr)
Dr (Cr)
Dr(Cr)
Dr (Cr)
Adama
Branch
Home
Office
Combined
Eliminations
Adjusted Trial Balances
Balance Sheet
(contd.)
Accumulated
depreciation
(20,000) (20,000)
70. Accounting for Branches 70
Branch Closing Entries and Home office
Adjusting and Closing Entries (when billing at
above the cost)
Branch Closing Entries--The closing
entries for the branch at the end of 2000 are
as follows:
Sales 80,000
Income Summary 10,500
Cost of Goods Sold 67,500
Operating Expenses 23,000
To close revenue and
expense ledger accounts
71. Accounting for Branches 71
Branch Closing Entries and Home office
Adjusting and Closing Entries (when billing at
above the cost) (contd.)
Home Office 10,500
Income Summary 10,500
To close the net loss in the
Income Summary account to
the Home Office account
72. Accounting for Branches 72
Branch Closing Entries and Home office
Adjusting and Closing Entries (when billing at
above the cost) (contd.)
After the closing entries, the Home
Office ledger account should have a
balance of $45,500.
Note: Home Office balance prior to the
closing entries equals $56,000.
$56,000-net loss of $10,500 = $45,500
(net loss decreases Home Office credit
balance).
73. Accounting for Branches 73
Branch Closing Entries and Home office
Adjusting and Closing Entries (when billing at
above the cost) (contd.)
Home Office Adjusting and Closing Entries
Income: Adama Branch 10,500
Investment in Adama
Branch
10,500
To record net loss reported by
branch
74. Accounting for Branches 74
Branch Closing Entries and Home office
Adjusting and Closing Entries (when billing at
above the cost) (contd.)
Allowance for Overvaluation
of Inventories: Adama Branch 22,500
Realized Gross Profit:
Adama Branch Sales 22,500
To reduce allowance to
amount by which ending
inventories of branch exceed
cost.
Home Office Adjusting and Closing Entries
(contd.)
75. Accounting for Branches 75
Branch Closing Entries and Home office
Adjusting and Closing Entries (when billing at
above the cost) (contd.)
Home Office Adjusting and Closing Entries
(contd.)
Realize Gross Profit: Adama
Branch Sales
22,500
Income: Adama Branch 10,500
Income Summary 12,000
To close branch net loss and
realized gross profit to Income
Summary ledger account .
76. Accounting for Branches 76
Branch Closing Entries and Home office
Adjusting and Closing Entries (when billing at
above the cost) (contd.)
After posting the above entries, the account
balance for the following accounts is:
Investment in Adama Branch =45,500(debit)*
Allowance for Overvaluation of
Inventories: Adama Branch
=7,500(credit)**
Realized Gross Profit: Adama
Branch
= 0
Income: Adama Branch = 0
* Balance prior to the above entries equals $56,000. $56,000- 10,500
(net loss of the branch reduces the debit balance of the Investment
account) = $45,500.
** $30,000-22,500 = $7,500.
77. Accounting for Branches 77
Branch Closing Entries and Home office
Adjusting and Closing Entries (when billing at
above the cost) (contd.)
Similar working paper eliminations will
be prepared for the following year (i.e.,
year 2000) when continuing with the
perpetual inventory system with a price
markup.
78. Accounting for Branches 78
Periodic Inventory System
When a periodic inventory system is
adopted, inventory account cannot be
used for the shipments of merchandise
between the home office and the
branch.
Accounts such as “Shipments to
Adama Branch” (used by the home
office) and “Shipments from Home
Office” (used by the branch) are used.
79. Accounting for Branches 79
Periodic Inventory System (contd.)
Example:
Example:
Continue with the EPSA Company for a
second year of operations (2000) but using
the periodic inventory system for both the
home office and Adama Branch.
The beginning inventories for 2000 were
carried by Adama Branch at $22,500 (home
office cost is $15,000 due to a 50% markup
by the home office).
80. Accounting for Branches 80
Periodic Inventory System (contd.)
Example: (contd.)
Assume that during 2000, the home office
shipped merchandise to Adama Branch that
cost $80,000 and Adama was billed at
$120,000.
During 2000, Adama Branch sold $150,000
merchandise that was billed at $112,500.
The journal entries to record the shipments
and sales at a price above home office cost
under the periodic inventory system are as
follows:
81. Accounting for Branches 81
Periodic Inventory System (contd.)
Example: (contd.)
Home Office Accounting
Records Journal Entries:
Adama Branch Accounting
Records Journal Entries:
Investment in Adama
Branch 90,000
Shipments from Home
Office 120,000
Home Office 120,000
Shipments to Adama
Branch 80,000
Allowance for
Overvaluation of
Inventories: Adama
Branch 40,000
None Cash (or Trade Accounts
Receivable) 150,000
Sales 150,000
82. Accounting for Branches 82
The branch inventories at the end of 2000 amounted to
$30,000. The flow of merchandise for Adama Branch of year
2000 summarized below:
EPSA COMPANY
Flow of Merchandise for Adama Branch During 2000
Periodic Inventory System (contd.)
Example: (contd.)
Available for sale
$37,500
$75,000
$112,500
Cost of goods
sold
(10,000)
(20,000)
(30,000)
Less: Ending
inventories
$47,500
$95,000
$142,500
Add: Shipments
from home office 40,000
80,000
120,000
Beginning
inventories
Markup (50% of
Cost;33 1/3 % of
Billed Price)
Home
Office
Cost
Billed
Price
$22,500 $15,000 $7,500
83. Accounting for Branches 83
Periodic Inventory System (contd.)
Example: (contd.)
The activities for the branch for 2000 are reflected
in the following two home office ledger accounts
and the reciprocal Home Office ledger account of
the branch: Investment in Adama Branch
Date Explanation Debit Credit Balance
2000 Balance, Dec. 31, 2000
Merchandise billed to branch
at markup of 50% above
home office cost, or 33 1/3
% of billed price
Cash received from branch
Operating expenses billed to
branch
120,000
4,500
113,000
45,500 dr
165,500dr
52,500 dr
57,000 dr
84. Accounting for Branches 84
Periodic Inventory System (contd.)
Example: (contd.)
Allowance for Overvaluation of Inventories:
Adama Branch
Date Explanation Debit Credit Balance
2000 Balance, Dec. 31,
2000
7,500 cr
Makeup on
merchandise
shipped to branch
during 2000 (50% of
cost) 40,000 47,500 cr
85. Accounting for Branches 85
Periodic Inventory System (contd.)
Example: (contd.)
Home Office
Date Explanation Debit Credit Balance
2000 Balance, Dec. 31,
2000 45,500 cr
Merchandise
receivable from
home office 120,000 165,500 cr
Cash sent to home
office 113,000 52,500 cr
Operating expenses
billed by Home office 4,500 57,000 cr
86. Accounting for Branches 86
Periodic Inventory System (contd.)
Example: (contd.)
(a) To eliminate reciprocal ledger accounts
for merchandise shipments.
(b) To reduce beginning inventories of
branch to cost
(c) To reduce ending inventories of branch to
cost.
(d) To increase income of home office by
portion of merchandise markup that was
realized by branch sales.
(e) To eliminate reciprocal ledger account
balances.
87. Accounting for Branches 87
Periodic Inventory System (contd.)
Example: (contd.)
The working paper for combined financial
statements under the periodic inventory
system is as follows:
Income Statement
Adjusted Trial Balances
Eliminations Combined
Home
Office
Adama
Branch
Dr (Cr) Dr (Cr) Dr (Cr) Dr (Cr)
Sales (500,000) (150,000) (650,000)
Inventories, Dec. 31,
2000 45,000 22,500 (b) (7,500) 60,000
Purchases 400,000 400,000
Shipments to Adama
Branch (80,000) (a) 80,000
88. Accounting for Branches 88
Periodic Inventory System (contd.)
Example: (contd.)
Income Statement
(contd.)
Adjusted Trial Balances
Eliminations Combined
Home
Office
Adama
Branch
Dr (Cr) Dr (Cr) Dr (Cr) Dr (Cr)
Shipments from home
office 120,000 (a)(120,000)
Inventories, Dec.
31,2000 (70,000) (30,000) (c) 10,000 (90,000)
Operating expenses 120,000 27,500 147,500
Net Income( to
statement of retained
earnings below) 85,000 10,000 (d) 37,500 132,500
Totals -0- -0- -0-
89. Accounting for Branches 89
Periodic Inventory System (contd.)
Example: (contd.)
Statement of
Retained Earnings
Adjusted Trial Balances
Eliminations Combined
Home
Office
Adama
Branch
Dr (Cr) Dr (Cr) Dr (Cr) Dr (Cr)
Retained earnings,
Dec. 31, 2000 (117,000) (117,000)
Net Income (from
income statement
above) (85,000) (10,000) (d) (37,500) (132,500)
Dividends declared 60,000 27,500 60,000
Retained earnings,
Dec. 31, 2000 (to
balance sheet below) 85,000 10,000 189,500
Totals -0-
90. Accounting for Branches 90
Periodic Inventory System (contd.)
Example: (contd.)
Balance Sheet
Adjusted Trial Balances
Eliminations Combined
Home
Office
Adama
Branch
Dr (Cr) Dr (Cr) Dr (Cr) Dr (Cr)
Cash 30,000 9,000 39,000
Trade accounts
receivable (net) 64,000 28,000 92,000
Inventories, Dec. 31,
2000 70,000 30,000 (c) (10,000) 90,000
Allowance for
overvaluation of
inventories : Adama
Branch (47,500)
(a) 40,000
(b) 7,500
Investment in Adama
Branch 57,000 (e) (57,000)
91. Accounting for Branches 91
Periodic Inventory System (contd.)
Example: (contd.)
Balance Sheet
(contd.)
Adjusted Trial Balances
Elimination
s
Combined
Home
Office
Adama
Branch
Dr (Cr) Dr (Cr) Dr (Cr) Dr (Cr)
Equipment 158,000 158,000
Accumulated
depreciation of
equipment (15,000) (15,000)
Trade Account payable (24,500) (24,500)
Home office (57,000) (e) 57,000
Common stock, $10 par (150,000) (150,000)
Retained earnings
(from statement of
retained earnings
above)
(189,500)
Totals -0- -0- -0- -0-
92. Accounting for Branches 92
Periodic Inventory System (contd.)
Example: (contd.)
(a) To eliminate reciprocal ledger accounts
for merchandise shipments.
(b) To reduce beginning inventories of
branch to cost
(c) To reduce ending inventories of branch to
cost.
(d) To increase income of home office by
portion of merchandise markup that was
realized by branch sales.
(e) To eliminate reciprocal ledger account
balances.
93. Accounting for Branches 93
Branch Closing Entries and Home Office Adjusting
and Closing entries for the home office (with billing at
above the cost and using a periodic inventory system):
Branch Closing Entries:
(1)Inventory (ending) 30,000
Cost of Goods Sold 112,500*
Inventory (beg.) 22,500
Shipments from
Home Office 120,000
CGS=22,500+120,000-30,000
94. Accounting for Branches 94
Branch Closing Entries and Home Office Adjusting
and Closing entries for the home office (with billing at
above the cost and using a periodic inventory system):(contd.)
(2)Sales 150,000
CGS 112,500
Operating expenses 27,500
Income Summary 10,000
(3) Income Summary 10,000
Home Office 10,000
95. Accounting for Branches 95
Branch Closing Entries and Home Office Adjusting
and Closing entries for the home office (with billing at
above the cost and using a periodic inventory system):(contd.)
Home Office Adjusting (1 and 2) and
Closing Entries (3) :
(1) Investment in Branch 10,000
Income: Adama Branch 10,000
(2) Allowance for Overvaluation
of Inventories 37,500
Realized Gross Profit :
Adama Branch 37,500
96. Accounting for Branches 96
Branch Closing Entries and Home Office Adjusting
and Closing entries for the home office (with billing at
above the cost and using a periodic inventory system):(contd.)
(3) Realized Gross Profit 37,500
Income: Adama Branch 10,000
Income Summary 47,500
97. Accounting for Branches 97
Branch Closing Entries and Home Office Adjusting
and Closing entries for the home office (with billing at
above the cost and using a periodic inventory system):(contd.)
Balances of Investment in Adama
Branch, Allowance for Overvaluation of
Inventories, Realized Gross Profit,
Income: Adama Branch and Home
Office accounts after the above
adjusting and closing entries are:
98. Accounting for Branches 98
Branch Closing Entries and Home Office Adjusting
and Closing entries for the home office (with billing at
above the cost and using a periodic inventory system):(contd.)
Investment in Adama Branch
= $67,000 (dr.) (57,000+10,000)
Allowance for Overvaluation of
Inventories
= $10,000 (cr.) (47,500 -37,500)
99. Accounting for Branches 99
Branch Closing Entries and Home Office Adjusting
and Closing entries for the home office (with billing at
above the cost and using a periodic inventory system):(contd.)
Realized Gross Profit
= $0 (37,500- 37,500)
Income: Adama Branch
= $0 (10,000-10,000)
Home Office (a reciprocal account of
Investment)
= $67,000 (cr.) (57,000+10,000)
100. Accounting for Branches 100
Reconciliation of Reciprocal
Accounts
At the end of an accounting period, the
balance of the Investment in Branch
account in the records of the home
office may be different from that of the
Home Office account of the branch.
This is because some transactions may
have been recorded by the home office
but not the branch office.
101. Accounting for Branches 101
Reconciliation of Reciprocal Ledger
Accounts (contd.)
Example Assume that the home
office and branch accounting
records of Mercer Company
contain the following data on
12/31/00
102. Accounting for Branches 102
Reconciliation of Reciprocal
Accounts (contd.)
Date Explanation Debit Credit Balance
2000
Nov. 30 Balance 62,500 dr
Dec. 10 Cash received from
branch 20,000 42,500 dr
27 Collection of branch
trade accounts
receivable
1,000 41,500 dr
29 Merchandise
shipped to branch 8,000 49,500 dr
Investment in Branch
(in accounting records of Home office)
103. Accounting for Branches 103
Reconciliation of Reciprocal
Accounts (contd.)
Date Explanation Debit Credit Balance
2000
Nov. 30 Balance 62,500 cr
Dec. 7 Cash sent to home
office 20,000 42,500 cr
28 Acquired equipment 3,000 39,500 cr
30 Collection of home
office trade accounts
receivable
2,000 41,500 cr
Home Office
(in accounting records of Branch)
104. Accounting for Branches 104
Reconciliation of Reciprocal Ledger
Accounts (contd.)
The following adjusting entries are
recorded prior to the preparation of the
working paper for the combined
financial statements (assuming a
perpetual inventory system)
105. Accounting for Branches 105
Reconciliation of Reciprocal Ledger
Accounts (contd.)
For Arvin Branch:
1.Home Office 1,000
Trade Accounts
Receivable 1,000
2.Inventory 8,000
Home Office 8,000
106. Accounting for Branches 106
Reconciliation of Reciprocal Ledger
Accounts (contd.)
For Mercer Home Office:
1.Equipment: Brach 3,000
Investment in Branch:
3,000
2.Investment in Branch: 2,000
Trade Accounts Receivable 2,000
107. Accounting for Branches 107
Reconciliation of Reciprocal Ledger
Accounts (contd.)
The balance of Investment in Branch
account at the home office equals:
$ 49,500 (dr.)
- 3,000 (cr.)
+ 2,000 (dr.)
$ 48,500 (dr.)
108. Accounting for Branches 108
Reconciliation of Reciprocal
Accounts (contd.)
After posting the above adjusting
entries:
The balance of Home Office account at
Branch equals:
$ 41,500 (cr.)
- 1,000 (dr.)
+ 8,000 (cr.)
$ 48,500 (cr.)
109. Accounting for Branches 109
Transactions between Branches
When it is necessary to transfer
merchandise or assets from one branch
to another branch, Home Office Ledger
account is used by the branches.
The home office will transfer the
inventory (or assets) from investment in
one branch to another branch.
Any excess freight costs incurred for
the transfer between branches should
be expensed.
110. Accounting for Branches 110
Transactions between Branches
(contd.)
Example:
1) The home office in Addis shipped
merchandise costing birr 8,000 to Dukem
Branch and paid freight costs of birr 500.
2) A week later, the home office instructed
Dukem Branch to transfer this merchandise
to Sabata Branch. Dukem paid birr 400 for
the transfer. If the merchandise had been
shipped directly from the home office to
Sabata, the freight costs would have been
birr 600.
111. Accounting for Branches 111
Transactions between Branches
(contd.)
Journal entries for these transactions are:
In Accounting Records of Home Office:
1)
Investment in Dukem Branch 8,500
Inventory 8,000
Cash 500
2)
Investment in Sabata Branch 8,600
Excess Freight Expense 300
Investment in Dukem Branch 8,900
112. Accounting for Branches 112
Transactions between Branches
(contd.)
In Accounting Records of Dukem Branch:
1)
Inventories 8,500
Home Office 8,500
2)
Home Office 8,900
Inventories 8,500
Cash 400
113. Accounting for Branches 113
Transactions between Branches
(contd.)
In Accounting Records of Sabata
Branch:
Inventories 8,600
Home Office 8,600