The document discusses branch accounting for business firms, detailing the types of branches, specifically dependent and independent branches, and their transaction processes. It explains the accounting methods used for dependent branches, notably the debtors or direct method, with illustrative journal entries for various transactions involving the head office and branches. Additionally, it covers how to resolve missing figures through memorandum accounts for stock, debtors, and petty cash.

1. Mahesh Chandra Sharma
Associate Professor
Department of Commerce
Shaheed Bhagat Singh Eve. College
(University of Delhi) India

2. Brach Accounting
 A business firm may open branches in the same city or in
other cities of the country to expand its business.
 Branches are controlled by a central office, often called
Head Office (HO).
 Branch accounting is concerned with recording trading
transactions at branches, transactions between the Head
Office and a Branch and ascertaining profits earned or loss
incurred by a branch.

3. Types of Branches
Types of Branches
Domestic or Home Branches
(Branches within the country)
Dependent Branches Independent Branches
Foreign Branches
(Branches outside
the country)

4. Dependent Branches
 These branches sell only those goods which are
supplied by the HO.
 Goods supplied to branches for sale may be invoiced
at (a) cost, (b) selling price or (c) at invoice price
 All branch expenses are directly paid by the HO.
 Branch managers may be allowed to incur petty
expenses out of the petty cash supplied by the HO.
 Branches are allowed to sell goods on cash basis. Some
branches may be allowed to sell goods on credit basis.
 Branches are instructed to remit the amount of cash
sales and collection from debtors to the HO on daily
basis.

5. Accounting for Dependent Branches
 Accounting by Branches
Such branches do not maintain complete accounting for
their transactions, except few essential books such as Cash
Book, Sales Book, Stock Register, etc.
 Accounting by HO
Accounts for branch transactions are maintained in HO
books. Branches supply the necessary information to the
HO.

6. Accounting Methods
for Dependent Branches
 Debtors or Direct Method
 Stock and Debtors Method
 Final Account Method
 Wholesale Branch Method
 Note: In this presentation Debtors Method has been
explained. For other methods, see my other
presentations.

7. Debtors or Direct Method
 Under this method, HO opens only one account for
every branch, called “Branch Account”.
 Branch Account is a combination of Personal Account
(of a Branch as a debtor) and nominal account (as it is
prepared to ascertain profit or loss made by the
Branch).

8. Debtors Method:
Journal Entries in the Books of Head Office
Date Particulars Amt.
(Dr.)
Amt.
(Cr.)
(1) For recording opening balances of assets at the
Branch (for example Branch at Agra)
Agra Branch A/c Dr. Xx
To Branch Stock A/c * X x
To Branch Debtors A/c X x
To Branch Cash /Petty Cash A/c X x
To Branch Fixed Asset A/c** X x
* Branch stock may be recorded at cost or invoice price.
** Separate Account for each fixed asset by its name like, Furniture,
Computer, etc.

9. Journal Entries in the Books of HO (Contd.)
Date Particulars Amt.
(Dr.)
Amt.
(Cr.)
*Note: Branch Stock may be recorded at Cost or at Invoice Price. If it is recorded
at Invoice Price, then for loading (Invoice Price − Cost Price) on opening
stock, a following entry will be passed.
(2) Stock Reserve A/c Dr. Xx
To Agra Branch A/c X x
(For loading on opening stock)
(3) For recording opening balance of branch liability, if
any:
Agra Branch A/c Dr. Xx
To Branch Liability A/c Xx

10. Journal Entries in the Books of HO (Contd.)
Date Particulars Amt.
(Dr.)
Amt.
(Cr.)
(4) For goods supplied by HO to Branch at Cost or at
Invoice price
Agra Branch A/c Dr. Xx
To Goods Sent to Branch A/c Xx
Note: If Goods are supplied by HO to Branch at Invoice price, then for loading
(Invoice Price − Cost Price):
(5) Goods Sent to Branch A/c Dr. Xx
To Agra Branch A/c Xx

11. Journal Entries in the Books of HO (Contd.)
Date Particulars Amt.
(Dr.)
Amt.
(Cr.)
(6) When goods is returned by Branch to HO:
Goods Sent to Branch A/c Dr. Xx
To Agra Branch A/c Xx
Note: If Goods are supplied by HO to Branch are recorded at Invoice price,
then for loading on Goods returned by Branch:
(7) Agra Branch A/c Dr. Xx
To Goods Sent to Branch A/c Xx
(8) For branch expenses paid by HO Xx
Agra Branch A/c Dr. Xx
To Bank A/c Xx

12. Journal Entries in the Books of HO (Contd.)
Date Particulars Amt.
(Dr.)
Amt.
(Cr.)
(9) For cash remitted by HO to Branch for petty
expenses
Xx
Agra Branch A/c Dr. Xx
To Bank A/c Xx
(10) Cash received from Branch
Bank A/c Dr. Xx
To Agra Branch A/c Xx

13. Journal Entries in the Books of HO (Contd.)
Date Particulars Amt.
(Dr.)
Amt.
(Cr.)
(11) For recording Closing balances of assets at the Branch :
Branch Stock A/c * Dr. Xx
Branch Debtors A/c Dr. Xx
Branch Petty Cash A/c Dr. Xx
Branch Fixed Asset A/c (After Depreciation) Dr. Xx
To Agra Branch A/c X x
*Note: Branch Stock may be recorded at Cost or at Invoice Price. If it is recorded
at Invoice Price, then for loading (Invoice Price − Cost Price) on Closing
stock, a following entry will be passed.

14. Journal Entries in the Books of HO (Contd.)
Date Particulars Amt.
(Dr.)
Amt.
(Cr.)
*Note: Branch Stock may be recorded at Cost or at Invoice Price. If it is recorded
at Invoice Price, then for loading (Invoice Price − Cost Price) on Closing
stock, a following entry will be passed.
(12) Agra Branch A/c Dr. Xx
To Stock Reserve A/c X x
(13) When Branch Account discloses a profit (Balancing figure on Debit side):
Agra Branch A/c Dr. Xx
To General Profit & Loss A/c X x
Note: In case of loss, the above entry shall be reversed.

15. Journal Entries in the Books of HO (Contd.)
Date Particulars Amt.
(Dr.)
Amt.
(Cr.)
(14) To close the “Goods Sent to Branch A/c”:
Goods Sent to Branch A/c Dr. Xx
To Trading A/c X x

16. Goods-in-Transit
Date Particulars Amt.
(Dr.)
Amt.
(Cr.)
Sometimes Goods sent by HO to branch is not received by the branch at
the time closing accounts. Such goods is called ‘Goods-in-Transit”. The
HO will pass the following entry for it:
Goods –in-Transit A/c Dr. Xx
To Branch A/c X x
Next Year: The above entry is reversed.
Branch A/c Dr. Xx
To Goods –in-Transit A/c X x

17. Branch Account at Cost (Format)
Dr. Cr.
Particulars Amount Particulars Amt.
To Balance b/d By Balance b/d
Br Stock Branch Liability
Br Debtors
Br Cash/Petty Cash
By Goods Sent to Branch A/c
(Goods returned by Br.)
Br Fixed Assets By Bank (Cash remitted by Br.)
To Goods Sent to Branch A/c To General P & L A/c (Loss)
To Bank (Cash remitted for
expenses)
By Balance c/d
Br Stock
To Bank (Cash remitted for
Petty Expenses
Br Debtors
Br Cash/Petty Cash
To General P & L A/c (Profit) Br Fixed Assets
To Balance b/d
Branch Liability

18. Branch Account at Invoice (Format)
When Goods Sent to Branch is recorded at Invoice price, following
additional entries are to be made
Dr. Cr.
Particulars Amount Particulars Amt.
By Balance b/d
Stock Reserve
To Goods Sent to Branch A/c
(Loading on Goods
returned by Branch)
By Goods Sent to Branch A/c
(Loading on Goods Sent
to Branch)
To Balance c/d
Stock Reserve

19. Finding Missing Figures
When any information relating ‘Goods Sent to Branch’ , ‘Branch Stock’ and
Branch Sales is missing, a Memorandum Branch Stock A/c should be
prepared.
Memorandum Branch Stock A/c (At Invoice Price)
Dr. Cr.
Particulars Amount Particulars Amt.
To Balance b/d (Op.) By Sales
To Goods Sent to Branch A/c Cash Sales
To Sales Return Credit Sales
To Surplus (BF) By Goods Returned to HO
By Normal Loss of Goods
By Abnormal Loss of Goods
By Shortage of Goods (BF)
By Balance c/d (Clo.)

20. Finding Missing Figures (Contd.)
Notes to Memorandum Branch Stock A/c:
 If out of the abovementioned items, only one item is
missing, then it will be balancing figure.
 If all the abovementioned items are given, then
balancing figure on the Debit side will be assumed
“Surplus” and balancing figure on the Credit side will
be assumed “Shortage of Goods.”
 Any type of Normal or Abnormal Loss, Shortage or
Surplus is not recorded in the Branch A/c.

21. Finding Missing Figures
When any information relating ‘Branch Debtors, Credit Sales, Cash
Received from Debtors is missing a Memorandum Branch Debtors A/c
Should be prepared.
Memorandum Branch Debtors A/c
Dr. Cr.
Particulars Amount Particulars Amt.
To Balance b/d (Op.) By Cash Received
To Credit Sales By Sales Return
By Bad Debts
By Allowances
By Discount Allowed
By Balance c/d (Clo.)
XXX XXX

22. Finding Missing Figures (Contd.)
Notes to Memorandum Branch Debtors A/c:
 If out of the abovementioned items, only one item is
missing, then it will be balancing figure. For example :
Opening or Closing Debtors, Credit Sales, Cash
received from Debtors, etc.
 Bad Debts, Discount Allowed, Allowances are not
recorded in Branch A/c.

23. Finding Missing Figures
When any information relating ‘Petty Cash’ or ‘Petty Expenses’ is missing a
Memorandum Branch Petty Cash A/c should be prepared.
Memorandum Branch Petty Cash A/c
Dr. Cr.
Particulars Amount Particulars Amt.
To Balance b/d (Op.) By Petty Expenses paid
To Cash sent to Branch for
Petty Cash
By Balance c/d (Clo.)
XXX XXX

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