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 presentation will give you an idea about merchant banking and it's origin. You can understand the meaning, advantages and disadvantages of marchant banking and also discussed the functions of marchant banks.
Preference shares represent partial ownership in a company and carry preferential rights to dividends and assets. Preference shareholders receive dividends first before common shareholders and do not have voting rights. Preference shares can be redeemed either through company profits, issuing new shares, or a combination. When redeemed through profits, an equivalent amount must be transferred to a capital redemption reserve account.
The document outlines 9 principles of sound lending that banks should follow which are safety, liquidity, return or profitability, diversification, object of loan, security, margin money, national interest, and character of the borrower. The principles emphasize ensuring the safety of funds, maintaining liquidity so loans can be converted to cash without loss, earning a reasonable return while not sacrificing safety or liquidity, diversifying investments across industries and borrowers, only lending for productive purposes, requiring adequate security and margin on secured loans, complying with national priorities, and carefully examining the character and creditworthiness of borrowers.
The document provides an overview of the key components of a bank's balance sheet, including assets and liabilities. It discusses the various line items under assets (such as cash, investments, advances) and liabilities (such as capital, reserves, deposits, borrowings). It also summarizes the components of a bank's profit and loss statement and provides details on liquidity management, asset liability management and interest rate risk management. The document is intended as a presentation on managing a bank's assets, liabilities, liquidity and interest rate risk.
Role and Status of Cooperative Banks In IndiaShreya Mathur
This document discusses cooperative banks in India. It provides background on cooperative banks, noting that they are owned and operated by their members and focus on serving local communities. The document outlines the history and regulations governing cooperative banks in India. It then describes the roles of different types of cooperative banks, including primary cooperative credit societies, central cooperative banks, and state cooperative banks. The summary highlights the focus of cooperative banks on rural areas and agriculture as well as their importance in providing credit to those sectors in India.
The document discusses the role and challenges of social banking. Social banks aim to allocate money in a transparent way according to social and environmental criteria rather than profit maximization. They serve as intermediaries between depositors and borrowers in the real economy. However, social banks face challenges from inconsistent customer demands, low interest rates, and maintaining their uniqueness while larger banks adopt sustainability strategies. The document calls for reforms such as separating retail and investment banking to address issues in the conventional financial sector.
Commercial banks have several key objectives including mobilizing savings through various accounts, granting loans and advances, and providing treasury and payment services. They have advantages like numerous locations for accessibility, offering competitive prices on products and services, and providing a wide range of financial offerings. Canara Bank is a major public sector bank in India with over 5000 branches that offers various banking and financial services and has received several awards for its performance and initiatives.
The document discusses non-performing assets (NPAs) in the Indian banking system. It defines NPAs and outlines the different categories of assets based on their performance - standard, sub-standard, doubtful, and loss assets. Gross and net NPAs are also defined. The rise of NPAs can be attributed to both internal and external factors. Banks employ both preventive and curative strategies to manage their NPAs, such as restructuring loans, pursuing debt recovery, and using asset reconstruction companies. Tables show trends in NPAs for public sector banks, private banks, and all scheduled commercial banks from 2006-2007 to 2010-2011.
This presentation will give you an idea about merchant banking and it's origin. You can understand the meaning, advantages and disadvantages of marchant banking and also discussed the functions of marchant banks.
Preference shares represent partial ownership in a company and carry preferential rights to dividends and assets. Preference shareholders receive dividends first before common shareholders and do not have voting rights. Preference shares can be redeemed either through company profits, issuing new shares, or a combination. When redeemed through profits, an equivalent amount must be transferred to a capital redemption reserve account.
The document outlines 9 principles of sound lending that banks should follow which are safety, liquidity, return or profitability, diversification, object of loan, security, margin money, national interest, and character of the borrower. The principles emphasize ensuring the safety of funds, maintaining liquidity so loans can be converted to cash without loss, earning a reasonable return while not sacrificing safety or liquidity, diversifying investments across industries and borrowers, only lending for productive purposes, requiring adequate security and margin on secured loans, complying with national priorities, and carefully examining the character and creditworthiness of borrowers.
The document provides an overview of the key components of a bank's balance sheet, including assets and liabilities. It discusses the various line items under assets (such as cash, investments, advances) and liabilities (such as capital, reserves, deposits, borrowings). It also summarizes the components of a bank's profit and loss statement and provides details on liquidity management, asset liability management and interest rate risk management. The document is intended as a presentation on managing a bank's assets, liabilities, liquidity and interest rate risk.
Role and Status of Cooperative Banks In IndiaShreya Mathur
This document discusses cooperative banks in India. It provides background on cooperative banks, noting that they are owned and operated by their members and focus on serving local communities. The document outlines the history and regulations governing cooperative banks in India. It then describes the roles of different types of cooperative banks, including primary cooperative credit societies, central cooperative banks, and state cooperative banks. The summary highlights the focus of cooperative banks on rural areas and agriculture as well as their importance in providing credit to those sectors in India.
The document discusses the role and challenges of social banking. Social banks aim to allocate money in a transparent way according to social and environmental criteria rather than profit maximization. They serve as intermediaries between depositors and borrowers in the real economy. However, social banks face challenges from inconsistent customer demands, low interest rates, and maintaining their uniqueness while larger banks adopt sustainability strategies. The document calls for reforms such as separating retail and investment banking to address issues in the conventional financial sector.
Commercial banks have several key objectives including mobilizing savings through various accounts, granting loans and advances, and providing treasury and payment services. They have advantages like numerous locations for accessibility, offering competitive prices on products and services, and providing a wide range of financial offerings. Canara Bank is a major public sector bank in India with over 5000 branches that offers various banking and financial services and has received several awards for its performance and initiatives.
The document discusses non-performing assets (NPAs) in the Indian banking system. It defines NPAs and outlines the different categories of assets based on their performance - standard, sub-standard, doubtful, and loss assets. Gross and net NPAs are also defined. The rise of NPAs can be attributed to both internal and external factors. Banks employ both preventive and curative strategies to manage their NPAs, such as restructuring loans, pursuing debt recovery, and using asset reconstruction companies. Tables show trends in NPAs for public sector banks, private banks, and all scheduled commercial banks from 2006-2007 to 2010-2011.
Issue of debentures by N. Bala Murali Krishnabala13128
The document discusses debentures, which are instruments issued by a company to raise funds through loans. It defines debentures and explains why companies issue them instead of shares. It then describes the different types of debentures based on security, redemption, negotiability, convertibility, priority, and coupon/interest rate. The document also covers the accounting treatment for issuing debentures for cash, premium, discount, as collateral, or for consideration other than cash. It discusses oversubscription of debentures and conditions for redemption. Finally, it provides journal entries for recording interest payment on debentures.
This document discusses universal banking in India. Universal banking combines commercial banking, investment banking, insurance, and other financial activities under one roof. In India, the Narsimham Committee Report and S.H. Khan Committee Report in 1998 advised consolidating the banking industry through mergers and integrating financial activities, suggesting universal banking. Some large domestic financial institutions in India have been permitted to become universal banks, such as ICICI in 2000. Universal banking allows for economies of scale, profitable diversification, better resource utilization, easy marketing using existing brand names, and one-stop shopping convenience for customers. However, it also presents challenges such as different regulatory requirements for banks versus other financial institutions, lack of expertise in long-term lending, and
Commercial banks in India play an important role in economic development by providing capital, credit, and financial services. They accelerate capital formation, provide financing to agriculture, industry and infrastructure, help monetize the rural economy by expanding branches, and implement monetary policy. Nationalization of banks in 1969 and 1980 aimed to ensure credit allocation aligned with development priorities and expand access to agricultural communities. The structure of the Indian banking system includes public sector banks, private sector banks, foreign banks, regional rural banks, and cooperative banks. Commercial banks perform key functions like accepting deposits, advancing loans, discounting bills, and providing agency and general services.
The document discusses various emerging trends in financial services such as personalized banking options like ATMs, mobile banking, e-banking, credit/debit cards, and electronic fund transfer systems like NEFT, RTGS, and IMPS. It provides details on the ATM system including services available, free transaction limits, safety guidelines, and complaint procedures. It also explains the processes, eligibility criteria, and transaction charges for NEFT, RTGS, and mobile-based IMPS funds transfers. Additionally, it mentions that HSBC introduced the first ATM and SBI the first floating ATM in India, and covers the domestic Rupay card scheme.
This document provides an overview of core banking presented by P.R. Kulkarni, Managing Director of Fluent Consultants Pvt. Ltd. It defines core banking as connecting branch computers to a central computer at a data center to record all branch transactions in real-time at a single location. The document outlines numerous advantages of core banking for banks, customers, branches and various bank departments. It also discusses components, software selection, hardware selection, data center requirements, connectivity, security considerations, costs and risks of implementing a core banking system.
In this presentation we will deal with Insurance organizations, their operational structure, insurer’s function and key business terms used in this sector.
To know more about Welingkar School’s Distance Learning Program and courses offered, visit:
http://www.welingkaronline.org/distance-learning/online-mba.html
The document discusses accounting concepts related to provisions and reserves. It defines a provision as an amount written off to account for depreciation or known liabilities. Provisions for doubtful debts are created by debiting the profit and loss account and crediting the provision for doubtful debts account. Reserves are amounts appropriated from profits that are not meant to cover specific liabilities and help strengthen a company's financial position. The key differences between provisions and reserves are that provisions directly impact taxable profits while reserves do not, and provisions are for certain liabilities while reserves strengthen the balance sheet. Revenue and capital reserves are also discussed along with their uses.
The document discusses a seminar on financial inclusion and the role of the Reserve Bank of India (RBI) in fostering financial inclusion in India. It provides an introduction to the topic, defines financial inclusion, discusses the need for financial inclusion and objectives of the study. It then outlines the methodology, steps taken by RBI including policy initiatives to encourage banks and achievements of banks in expanding access to financial services. The conclusion states that RBI has played a supportive role in creating regulations and supporting banks' financial inclusion efforts.
Credit control is an important function of the Reserve Bank of India to maintain monetary stability. There are two types of credit control methods - quantitative and qualitative. Quantitative methods regulate the total volume of credit through tools like bank rate, open market operations, and variable reserve ratios. Qualitative methods regulate the flow of credit through techniques like fixation of margins, regulation of consumer credit, direct action, rationing of credit, and moral suasion. These methods help control and regulate the flow of credit in the economy.
The document provides an overview of the Indian banking system. It discusses the structure of the system, which includes the Reserve Bank of India (central bank), scheduled commercial banks (public sector banks, private sector banks, foreign banks, regional rural banks, cooperative banks), and their roles. It also summarizes the primary functions of banks, which are accepting various types of deposits from the public and granting loans and advances. Secondary functions of banks include performing agency functions like funds transfer and collection services, as well as general utility functions.
This document provides an introduction to cooperative banks. It defines a cooperative bank as a financial institution that is owned and controlled by its members, who are both customers and owners. Cooperative banks take deposits and lend money, especially in rural areas for farming, cattle, and personal financing. They differ from stockholder banks and follow prudent banking regulations. Cooperative banks are owned and managed democratically by their members on principles of cooperation, self-help and mutual assistance.
The document discusses the three main categories of finance: public finance, corporate finance, and personal finance. Public finance involves the government's role in the economy through taxation, spending, and stabilization policies. Corporate finance focuses on maximizing shareholder value and profitability through investment, financing, and dividend decisions. Personal finance encompasses individuals' and households' financial planning, including budgeting, protection, taxes, investments, retirement, and estate planning.
Commercial banks perform the primary functions of accepting deposits, granting loans, and creating credit. They earn profits from the spread between the interest paid on deposits and the higher interest received from loans. Deposits include current accounts, savings accounts, and fixed deposits. Loans include overdraft facilities, term loans, money at call, and consumer credit. Banks also perform secondary functions such as clearing of cheques, agency services like collecting payments and buying/selling securities, and general utility services including locker facilities, traveler's cheques, and business information.
This document discusses various types of bank deposits and accounts in India. It describes fixed deposits, which have a fixed maturity period and pay high interest. Savings deposits are for personal savings and have fewer restrictions than current accounts. Recurring deposits require fixed monthly installments. Current accounts are for business purposes and do not earn interest. The document also outlines key know your customer (KYC) guidelines for banks related to customer identification, transaction monitoring, and risk management.
Behavioral finance is the study of how psychology impacts financial decision-making and markets. It developed in response to anomalies observed in conventional finance theories which assume rational decision-making. Behavioral finance draws on insights from psychology and microeconomic theory to understand irrational behaviors like herding, overconfidence, and loss aversion. It aims to better explain market phenomena like bubbles, crashes, and the high average returns of stocks relative to predicted risk levels. The scope of behavioral finance includes understanding market anomalies, identifying investor personalities, analyzing the effects of biases, and developing tools to hedge against behavioral risks. Its objectives are to critically examine standard finance theories, protect stakeholders, and develop more tailored investment advice and products.
This document provides an overview of mutual funds, including their meaning, operation, advantages, limitations, and types. A mutual fund pools money from investors and invests it in stocks, bonds, and other securities. This allows average investors to participate in financial markets while benefiting from diversification and professional management. The main types of mutual funds are open-ended funds, closed-ended funds, interval funds, actively managed funds, and passively managed funds investing in debt, equity, or hybrid securities.
This document outlines the key functions of commercial banks which include accepting deposits, advancing loans, credit collection, investing funds, and providing agency services. It describes the primary, secondary, and general utility functions of banks. The primary functions are accepting deposits through savings, current, and fixed deposit accounts, and advancing loans through various types of loans like cash credit, overdraft, demand loans, and bill discounting. Secondary functions involve credit collection, foreign exchange dealings, and acting as trustees. General utility services include locker facilities, traveler's checks, credit information, and underwriting services.
The document provides an overview of microfinance concepts, principles, characteristics, and best practices. It discusses that microfinance aims to provide financial access to low-income groups through loans, savings, and other services. Key principles include understanding the market, streamlined operations, repayment incentives, and sustainable interest rates. Characteristics are collateral-free and small loans with flexible terms. Best practices are effective management systems, financial sustainability, and involving clients.
This document provides information about the evolution of core banking systems from earlier total branch automation systems. It describes how core banking allows for real-time sharing of customer information and processing of transactions across branches through centralized data centers and networking. The core banking system provides many benefits like centralized accounting, product monitoring, introduction of new technology-based services, and improved customer service by allowing customers access to their accounts from any branch.
Today, we are having a fairly well developed banking system with different classes of banks – public sector banks, foreign banks, private sector banks – both old and new generation, regional rural banks and co-operative banks with the Reserve Bank of India as the fountain Head of the system.
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.
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
Issue of debentures by N. Bala Murali Krishnabala13128
The document discusses debentures, which are instruments issued by a company to raise funds through loans. It defines debentures and explains why companies issue them instead of shares. It then describes the different types of debentures based on security, redemption, negotiability, convertibility, priority, and coupon/interest rate. The document also covers the accounting treatment for issuing debentures for cash, premium, discount, as collateral, or for consideration other than cash. It discusses oversubscription of debentures and conditions for redemption. Finally, it provides journal entries for recording interest payment on debentures.
This document discusses universal banking in India. Universal banking combines commercial banking, investment banking, insurance, and other financial activities under one roof. In India, the Narsimham Committee Report and S.H. Khan Committee Report in 1998 advised consolidating the banking industry through mergers and integrating financial activities, suggesting universal banking. Some large domestic financial institutions in India have been permitted to become universal banks, such as ICICI in 2000. Universal banking allows for economies of scale, profitable diversification, better resource utilization, easy marketing using existing brand names, and one-stop shopping convenience for customers. However, it also presents challenges such as different regulatory requirements for banks versus other financial institutions, lack of expertise in long-term lending, and
Commercial banks in India play an important role in economic development by providing capital, credit, and financial services. They accelerate capital formation, provide financing to agriculture, industry and infrastructure, help monetize the rural economy by expanding branches, and implement monetary policy. Nationalization of banks in 1969 and 1980 aimed to ensure credit allocation aligned with development priorities and expand access to agricultural communities. The structure of the Indian banking system includes public sector banks, private sector banks, foreign banks, regional rural banks, and cooperative banks. Commercial banks perform key functions like accepting deposits, advancing loans, discounting bills, and providing agency and general services.
The document discusses various emerging trends in financial services such as personalized banking options like ATMs, mobile banking, e-banking, credit/debit cards, and electronic fund transfer systems like NEFT, RTGS, and IMPS. It provides details on the ATM system including services available, free transaction limits, safety guidelines, and complaint procedures. It also explains the processes, eligibility criteria, and transaction charges for NEFT, RTGS, and mobile-based IMPS funds transfers. Additionally, it mentions that HSBC introduced the first ATM and SBI the first floating ATM in India, and covers the domestic Rupay card scheme.
This document provides an overview of core banking presented by P.R. Kulkarni, Managing Director of Fluent Consultants Pvt. Ltd. It defines core banking as connecting branch computers to a central computer at a data center to record all branch transactions in real-time at a single location. The document outlines numerous advantages of core banking for banks, customers, branches and various bank departments. It also discusses components, software selection, hardware selection, data center requirements, connectivity, security considerations, costs and risks of implementing a core banking system.
In this presentation we will deal with Insurance organizations, their operational structure, insurer’s function and key business terms used in this sector.
To know more about Welingkar School’s Distance Learning Program and courses offered, visit:
http://www.welingkaronline.org/distance-learning/online-mba.html
The document discusses accounting concepts related to provisions and reserves. It defines a provision as an amount written off to account for depreciation or known liabilities. Provisions for doubtful debts are created by debiting the profit and loss account and crediting the provision for doubtful debts account. Reserves are amounts appropriated from profits that are not meant to cover specific liabilities and help strengthen a company's financial position. The key differences between provisions and reserves are that provisions directly impact taxable profits while reserves do not, and provisions are for certain liabilities while reserves strengthen the balance sheet. Revenue and capital reserves are also discussed along with their uses.
The document discusses a seminar on financial inclusion and the role of the Reserve Bank of India (RBI) in fostering financial inclusion in India. It provides an introduction to the topic, defines financial inclusion, discusses the need for financial inclusion and objectives of the study. It then outlines the methodology, steps taken by RBI including policy initiatives to encourage banks and achievements of banks in expanding access to financial services. The conclusion states that RBI has played a supportive role in creating regulations and supporting banks' financial inclusion efforts.
Credit control is an important function of the Reserve Bank of India to maintain monetary stability. There are two types of credit control methods - quantitative and qualitative. Quantitative methods regulate the total volume of credit through tools like bank rate, open market operations, and variable reserve ratios. Qualitative methods regulate the flow of credit through techniques like fixation of margins, regulation of consumer credit, direct action, rationing of credit, and moral suasion. These methods help control and regulate the flow of credit in the economy.
The document provides an overview of the Indian banking system. It discusses the structure of the system, which includes the Reserve Bank of India (central bank), scheduled commercial banks (public sector banks, private sector banks, foreign banks, regional rural banks, cooperative banks), and their roles. It also summarizes the primary functions of banks, which are accepting various types of deposits from the public and granting loans and advances. Secondary functions of banks include performing agency functions like funds transfer and collection services, as well as general utility functions.
This document provides an introduction to cooperative banks. It defines a cooperative bank as a financial institution that is owned and controlled by its members, who are both customers and owners. Cooperative banks take deposits and lend money, especially in rural areas for farming, cattle, and personal financing. They differ from stockholder banks and follow prudent banking regulations. Cooperative banks are owned and managed democratically by their members on principles of cooperation, self-help and mutual assistance.
The document discusses the three main categories of finance: public finance, corporate finance, and personal finance. Public finance involves the government's role in the economy through taxation, spending, and stabilization policies. Corporate finance focuses on maximizing shareholder value and profitability through investment, financing, and dividend decisions. Personal finance encompasses individuals' and households' financial planning, including budgeting, protection, taxes, investments, retirement, and estate planning.
Commercial banks perform the primary functions of accepting deposits, granting loans, and creating credit. They earn profits from the spread between the interest paid on deposits and the higher interest received from loans. Deposits include current accounts, savings accounts, and fixed deposits. Loans include overdraft facilities, term loans, money at call, and consumer credit. Banks also perform secondary functions such as clearing of cheques, agency services like collecting payments and buying/selling securities, and general utility services including locker facilities, traveler's cheques, and business information.
This document discusses various types of bank deposits and accounts in India. It describes fixed deposits, which have a fixed maturity period and pay high interest. Savings deposits are for personal savings and have fewer restrictions than current accounts. Recurring deposits require fixed monthly installments. Current accounts are for business purposes and do not earn interest. The document also outlines key know your customer (KYC) guidelines for banks related to customer identification, transaction monitoring, and risk management.
Behavioral finance is the study of how psychology impacts financial decision-making and markets. It developed in response to anomalies observed in conventional finance theories which assume rational decision-making. Behavioral finance draws on insights from psychology and microeconomic theory to understand irrational behaviors like herding, overconfidence, and loss aversion. It aims to better explain market phenomena like bubbles, crashes, and the high average returns of stocks relative to predicted risk levels. The scope of behavioral finance includes understanding market anomalies, identifying investor personalities, analyzing the effects of biases, and developing tools to hedge against behavioral risks. Its objectives are to critically examine standard finance theories, protect stakeholders, and develop more tailored investment advice and products.
This document provides an overview of mutual funds, including their meaning, operation, advantages, limitations, and types. A mutual fund pools money from investors and invests it in stocks, bonds, and other securities. This allows average investors to participate in financial markets while benefiting from diversification and professional management. The main types of mutual funds are open-ended funds, closed-ended funds, interval funds, actively managed funds, and passively managed funds investing in debt, equity, or hybrid securities.
This document outlines the key functions of commercial banks which include accepting deposits, advancing loans, credit collection, investing funds, and providing agency services. It describes the primary, secondary, and general utility functions of banks. The primary functions are accepting deposits through savings, current, and fixed deposit accounts, and advancing loans through various types of loans like cash credit, overdraft, demand loans, and bill discounting. Secondary functions involve credit collection, foreign exchange dealings, and acting as trustees. General utility services include locker facilities, traveler's checks, credit information, and underwriting services.
The document provides an overview of microfinance concepts, principles, characteristics, and best practices. It discusses that microfinance aims to provide financial access to low-income groups through loans, savings, and other services. Key principles include understanding the market, streamlined operations, repayment incentives, and sustainable interest rates. Characteristics are collateral-free and small loans with flexible terms. Best practices are effective management systems, financial sustainability, and involving clients.
This document provides information about the evolution of core banking systems from earlier total branch automation systems. It describes how core banking allows for real-time sharing of customer information and processing of transactions across branches through centralized data centers and networking. The core banking system provides many benefits like centralized accounting, product monitoring, introduction of new technology-based services, and improved customer service by allowing customers access to their accounts from any branch.
Today, we are having a fairly well developed banking system with different classes of banks – public sector banks, foreign banks, private sector banks – both old and new generation, regional rural banks and co-operative banks with the Reserve Bank of India as the fountain Head of the system.
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.
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
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.
accounting for branches and Combined FS(2)_(0).pptxJaafar47
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.
1) Branch accounting involves keeping separate accounts for each branch location of a company to provide transparency into each branch's transactions, cash flows, financial position, and performance.
2) There are two main types of branches - dependent branches, which have their accounts maintained by headquarters, and independent branches, which maintain their own separate double-entry bookkeeping systems.
3) Independent branches are treated as separate accounting units, recording their own transactions, preparing trial balances, and forwarding these to headquarters to incorporate into consolidated financial statements for the whole company.
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTESKumarJayaraman3
This document discusses different types of branch accounting. It defines branch accounting as maintaining separate accounts for each operating location or branch of a business to optimize transparency, cash flow, and analyze each branch's performance. There are four main types of branches discussed: dependent branches which don't maintain their own books and are managed by the head office; independent branches which maintain their own books; foreign branches which maintain books in local currency that get converted to head office currency; and home branches which have full control over their own books. The document outlines advantages like understanding each branch's profits/losses and cash position, and disadvantages like extra costs and potential delays.
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.
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.
This document discusses different types and features of branch accounting. It describes dependent branches, independent branches, and foreign branches. Dependent branches maintain minimal records and remit cash to the head office, while independent branches have full accounting functions. Foreign branches maintain accounts in the local currency. The document also discusses the stock and debtors method of branch accounting and describes wholesale branches that sell directly to consumers.
This document discusses different types and features of branch accounting. It describes dependent branches, independent branches, and foreign branches. Dependent branches maintain minimal records and remit cash to the head office, while independent branches have full accounting functions. Foreign branches maintain accounts in the local currency. The document also discusses the stock and debtors method of branch accounting and describes wholesale branches that sell directly to consumers.
This document provides definitions and examples of key accounting terms. It defines real accounts as accounts for assets and liabilities like furniture, land, and machinery accounts. Nominal accounts record incomes and expenses like salary, commission, and telephone expenses accounts. Personal accounts debit the receiver and credit the giver. Real accounts debit what comes in and credit what goes out, while nominal accounts debit expenses and losses and credit incomes and revenues.
Here are the steps to solve this problem:
1. Prepare a Trading and Profit and Loss Account for 2019 showing the net trading profit.
2. Calculate depreciation on machinery and fixtures & fittings based on given rates.
3. Deduct drawings and add interest on capital to calculate net profit for distribution.
4. Distribute net profit between partners based on their profit sharing ratio.
5. Prepare Balance Sheet as on 31st Dec 2019 showing assets, liabilities and capital of partners.
6. Calculate capital of each partner by adding/deducting their share of profit/loss, interest and drawings.
Let me know if you need help with the actual calculations. Solving partnership problems involves
Presentation on Final Accounts- SOMS, TUDebojit Deb
This document provides an overview of key concepts related to final accounts, including manufacturing account, trading account, profit and loss account, and balance sheet. It discusses the purpose and treatment of various adjustments that must be considered when preparing final accounts, such as prepaid expenses, accrued income, depreciation, and provisions. The document also explains common transactions like insurance claims, appropriation of profit to reserves, and manager's commission. Overall, it serves as a guide to understanding the accounting process for finalizing financial statements at the end of an accounting period.
This document provides an overview of key concepts related to final accounts, including manufacturing account, trading account, profit and loss account, and balance sheet. It discusses the purpose and treatment of various adjustments that must be considered when preparing final accounts, such as prepaid expenses, accrued income, depreciation, and provisions. The document also explains common transactions like insurance claims, appropriation of profit to reserves, and manager's commission. Overall, it serves as a guide to understanding the accounting process for finalizing financial statements at the end of an accounting period.
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.
ACCOUNTING FOR BUSINESS.II DEPARTMENTAL ACCOUNTS.KumarJayaraman3
Departmental accounting involves keeping separate bookkeeping records for each division or department within a company. This allows managers to evaluate the costs, revenues, and profitability of individual departments. Departmental accounting provides several key benefits, including facilitating interdepartmental comparisons, evaluating the success or failure of departments, assisting with expansion and downsizing decisions, and encouraging competitive spirit among employees. There are two main methods for departmental accounting - separate departmental accounting books or using columnar books with separate columns for each department.
This document discusses trading accounts, profit and loss accounts, and balance sheets. It provides definitions and explanations of each type of financial statement:
- Trading accounts are used to determine gross profit or loss from buying and selling activities. It considers direct revenues and expenses to calculate profit.
- Profit and loss accounts show net profit or loss over an accounting period. It takes the gross profit/loss from the trading account and deducts various business expenses to determine net profit.
- Balance sheets present the overall financial position of a business by listing assets on the left side and liabilities on the right side. It is prepared after trading and profit and loss accounts to analyze the company's financial status.
The document discusses various accounting methods used for branch accounts, including the stock and debtors system, debtors system, final account system, and wholesale branch system. It provides the format and accounting treatment for various branch accounts, such as the branch account, memorandum debtors account, branch stock account, branch adjustment account, and branch expenses account. The purpose is to present the basic aspects of accounting for branch transactions and encourage more people to become entrepreneurs.
This material is a part of PGPSE / CSE study material for the students of PGPSE / CSE students. PGPSE is a free online programme for all those who want to be social entrepreneurs / entrepreneurs This material is a part of PGPSE / CSE study material for the students of PGPSE / CSE students. PGPSE is a free online programme for all those who want to be social entrepreneurs / entrepreneurs
The accounting cycle is a series of steps repeated every reporting period to record business transactions and close the books. It involves recording transactions in daybooks, posting to ledgers, extracting a trial balance, and drawing up financial statements. Transactions are first recorded in daybooks like sales, purchases, cash according to their nature. These are then posted to ledgers including the sales, purchases, and general ledgers. A trial balance is then extracted from ledger balances to check the double entry system. Finally, closing entries are made to transfer income and expense accounts to the profit and loss statement.
1. BRANCH ACCOUNTS
OBJECTIVE TYPE QUESTIONS
BRANCH
ACCOUNTIN
G
Branch
: A branch is a
separate segment of
a business. In order
2. to increase the sales,
business houses
arerequires to market
their products over a
larger territory and
may generally split
their business
intocertain divisions
or parts. These
various parts or
3. divisions may be
located in different
part of the samecity
or in different cities
of the same country
or in different
countries in the
world. These are
known asbranches.
The head office
4. controls the
activities of various
branches.
Branch accounting
: Branch accounting
is the process
through which the
accounting system of
a branchis
maintained.
5. Objectives of
branch accounting
: The main objects of
branch accounts are
dependent on the
nature of the
business and specific
need of a particular
branch. The
objectives of
7. To ascertain the
financial position of
each branch
separately on a
particular date.3.
To know the cash &
goods requirements
of the various
branches.4.
8. To evaluate the
progress and
performances of
each branch5.
To calculate
commission for
payment to the
managers, if based
9. on profits of
branch.6.
To give concrete
suggestions for the
improvement in the
working of the
various branches.7.
10. To meet the
requirements of
specific enactments
as all branches of a
company must keep
theaccounts for audit
purpose.
Types of Branches:
i.
11. F
rom accounting
point of view the
following are the
main types of
branches:
a)
Dependent Branch
(Branch not
12. keeping full system
of accounting)b)
Independent
Branch (Branch
keeping full system
of accounting)c)
Foreign Brancha)
13. Dependent Branch
(Branch not
keeping full system
of accounting).
The following are
the main features of
such branches:I.
Such branches sell
only those goods
14. which are received
from the head office
and are notusually
allowed to make
purchases in the
open market except
with the express
permissionof the
head office.II.
15. Goods are supplied
by the head office to
such branches either
at cost price or at
invoiceprice.III.
All expenses of the
branch such as rent,
salary of staff,
advertisement etc.,
16. are paid by thehead
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IV.
Petty expenses such
as cartage,
entertainment,
freights etc. are paid
17. by the
branchmanager out
of petty cash book
balance. Such book
is maintained at the
branch either
assimple petty cash
book or on imprest
system.V.
18. The amount received
from cash sales or
cash received from
debtors is either
remitted tothe head
office daily or
deposited in the
account of the head
office in some local
bank.VI.
19. The branch manager
is normally expected
to sell the goods for
cash only but he may
beauthorized to sell
goods on credit as
well.
Accounting records
for branch:
20. The branch with the
above features, do
not keep proper set
of books of
accounts. In order
tosupply the
requisite accounting
information to the
head office at
regular interval, each
22. It is maintained with
a view to keep a
record of all goods
received from the
head office,or
returns made to the
head office during
that period, sales
made at the branch
during the
23. period,breakages and
losses of goods and
balances of stock
available in hand at
the close of the
accountingperiod.
Cash Book:
It is maintained to
keep records of cash
transactions such as
24. cash sales, receipts
fromdebtors, & cash
remitted to head
office from time to
time.
Petty Cash Book:
It is maintained to
record small paymen
of expenses such as
carriage,
29. The degree of
control sought to
be exercised
y
The nature and
volume of business
transactions
y
30. The special
circumstances
under which the
branch is operating
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The following are
the main ways in
which the head
34. This system is also
called synthetic
methods, is
adopted generally
in those
brancheswhich are
fairly small in size.
Under this system,
the head office
35. opens a
separateaccount
for each branch in
order to record all
transactions
relating to the
branch.
Thisaccount is a
nominal account in
36. nature and is
prepared to
calculate profit and
loss foreach
branch. The goods
supplied by the
head office to the
branch may be
either at costprice
37. or at cost plus
profit. The
following are the
journal entries
which are passed
in thebooks of the
head office to
record branch
transactions.
38. Transactions Debit
Credit
1) When goods are
sent to branch
Branch A/c Goods
sent to branch A/c2)
F
or return of goods to
H.O. Goods Sent to
39. Branch A/c Branch
A/c3)
F
or transferring the
balance of goods
sent to branchA/c
Goods Sent to
Branch A/c
Purchases (in
Trading Concerns)or
40. Trading A/c (in mfg.
concern)4) When
cheque or draft is
sent for branch
expenses Branch A/c
Bank A/c5) When
cheque or draft is
received for
remittance Bank A/c
Branch A/c6)
41. F
or closing balances
of Assets Branch
Asset A/c Branch
A/c7)
F
or beginning
balances of assets
next year Branch
42. A/c Branch Assets
A/c8)
F
or closing balances
of liabilities A/c
Branch A/c Branch
Liabilities A/c9)
F
or opening balances
of liabilities A/c nest
44. or Branch Loss
General Profit &
Loss A/c Branch A/c
It should be
carefully noted that
sales, discounts,
bad debts,
expenses paid by
branch andreturn
45. from debtors to the
branch are not
direct transactions
between the branch
and the headoffice,
and therefore they
are not taken care
off while preparing
for the Branch
46. Account in
thebooks of the
head office
according to this
system.Moreover,
losses due to
pilferages, wastage
and other losses of
stock due to
47. normal orabnormal
reasons are also
completely ignored
under this method.
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48. The main defect of
this method is that
it does not provide
full information for
analysis of
branchprofit &
loss. To overcome
this problem, a
separate Branch
49. Trading & Profit
and Loss
Accounthas to be
prepared, which is,
of course, a
memorandum
account not
forming a part of
the fullsystem of
51. for remittance and
closing balances of
branchassets. The
difference between
the two sides will
be profit or loss of
the branch.Branch
account (In the
books of the head
52. office) will appear
as under after
posting of
theentries.
Branch
Accocunt(IN H.O.
BOOKS)
53. Treatment of of
Certain Branch
Transactions1)
Branch Expenses
paid by the branch
out of Petty Cash.
Such expenses will
be deducted fromthe
branch cash and at
54. the close reduced
balance of cash will
be shown on the
credit side of
thebranch account.
Such expenses need
not be shown in the
branch account. If
such expenses arere-
imbursed by the
55. head office to the
branch (if the petty
cash is maintained
on imprestsystem),
then these must be
debited to the branch
account. However,
same opening and
closingbalances of
petty cash will be
56. shown on the debit
and credit side
respectively of the
branchaccount.
2)
Depreciation of
Fixed assets.
This is not shown in
the branch account.
57. But the closing
balanceof the fixed
assets will be shown
on the credit side of
the branch account
after deduction of
theamount of
depreciation.
58. To Branch Cash in
Hand By Branch
Liabilities A/cTo
Branch Stock By
Bank (Remittances
by the branch i.e.
,To Branch Debtors
cash sales + cash
received from
debtorsTo Branch
62. (Loss)*Balancing
figure is either or
loss
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3
)
Credit sales, bad
debts, sales returns,
allowances, and
65. 4)
Goods in transit.
Goods in transit is
the difference
between goods sent
by head office
andreceived by the
branch. Such goods
will be shown either
66. on the both sides of
the branch accountor
will be ignored
totally while
preparing the branch
account.
5)
Purchase of fixed
asset by the branch.
67. If the branch has
purchased any fixed
assets, then onone
hand branch account
will be credited by
the head office and
on the other the
remittancefrom the
branch will be
reduced by the
68. amount. If branch
has purchased the
asset on creditbasis
and liability arising
from such purchase
will be shown on the
debit side of branch
account.
6)
69. Sale of Fixed Asset.
If the sale is for
cash, cash
remittance will
increase from the
branch butasset will
reduce in value to be
shown on the credit
side of the branch
account as this
71. price i.e. cost plus
somepercentage of
profit, the branch
manager is
required to sell the
goods at invoice
price only.Goods
are marked on
invoice price to
73. profitmade, so that
the branch manger
may not start a
rival and
competitive
business withthe
concern.II.
74. In order to have
effective control
on stock i.e. stock
at any time must
be equal toopening
stock plus goods
received from the
head office minus
75. sales made at the
branch.
Accounting
Adjustments
required in Head
Office Books
The branch records
are not in any way
affected due to
76. invoicing of goods
at cost plus
profit.But, in order
to calculate the
profit or loss made
by branch, some
accounting
adjustments,
asstated below, are
77. required to be
passed in the
books of the HO
for eliminating the
profitelement
included in (i)
branch opening
stock, (2) goods
sent to branch less
78. returns made
bybranch to head
office and
(3)branch closing
stock.I.
F
or adjustment of
excess price of the
86. plus 25%. If the
cost is Rs. 100,
profit is Rs. 25,
and thenselling
price would be Rs.
125. The ratio of
profit to selling is
25/125 or 1/5. The
adjustments forthe
87. difference or the
excess price in
value between the
invoice price and
cost price
thereforewill be
made on the basis
of 1/5 of the
invoice price. If
88. the percentage is
given on sale price
as25% on sale
price, then suppose
the sale price is Rs.
100, the profit will
be Rs. 25.
Therefore,cost will
be Rs. 75. So the
90. According to this
system, the profit
or loss made by the
branch is
determined by
preparing
Branch Trading
& Profit Loss
91. Account at cost
price
. It should be
carefully noted that
allexpenses
whether paid by
the head office or
by the branch are
debited to the
92. Trading andProfit
& Loss Account
prepared for the
branch.The profit
or loss as disclosed
by this account
isexactly same as
that of the branch
account prepared
93. according to
Debtor/ Synthetic
system. Itshould be
further noted that
the branch trading
and profit loss
account is only a
memorandumacco
unt not forming
94. part of the full
accounting system.
If the branch
account is also
prepared
inaddition to the
Branch Trading &
Profit and Loss
A/c, then such a
95. branch account
will be treatedas a
personal account
and not considered
in the nature of a
nominal account
under the
debtorsystem.
Then Branch
96. account under such
circumstances, will
show a debit
balance which will
beequal to net
worth or net asset
available at branch
at the end of the
accounting period.
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Stock and
Debtors System
There is yet
another method of
calculating profit
98. and loss of a
branch which is
popularly knownas
or
Analytical
Method.
99. It is an elaborate
method of keeping
branchaccounts
and is considered
very useful where
the branch
turnover is
sufficiently large
andwhere a greater
100. degree of control is
sought to be
exercised by the
head office over
the
branch.According
to this system,
instead of opening
one branch
101. account, as is done
in case of
debtorssystem,
separate accounts
are opened for
various
transactions at
branch. According
to thissystem, a
102. separate ledger for
each branch will
have to be
maintained at head
office for
keepingaccounts
such as Branch
Stock, Branch
Debtors, and
103. Goods Sent to
Branch, Branch
Expenses,and
Branch Assets etc.
Branch Cash or
petty Cash
Account may
sometimes be
required to
104. bemaintained if the
branch is permitted
to use the available
cash for making
certain
payments.Preparati
on of Branch Stock
Account will
however, vary
105. from branch to
branch depending
uponthe method of
charging goods
sent to branch.
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109. Pro-forma Invoice Price
Head office may send goods to branch either at "cost" or at "pro-forma invoice price".
In previous section of this chapter we have discussed accounting treatment for a
dependent branch to which the goods are sent to branch at cost price. In the
forthcoming section we will discuss the accounting treatment for the dependent
branch to which goods are sent at pro-forma invoice price. The treatment is slightly
different but before discussing the accounting treatment we must know what pro-
forma invoice price is and why head office prefers to send goods at pro-forma invoice
price.
Pro-forma invoice price is higher than the cost price. Adding a reasonable profit in the
cost makes the price equal to the pro-forma invoice price. Here we must know what is
selling price? Selling price is the price at which goods are sold to the customers. So the
selling price will be higher than the pro-forma invoice price in normal circumstances.
Difference between cost and pro-forma invoice price is known as loading and the
difference between cost and the selling price is the profit in real terms.
Head office usually sends goods to its branches at the pro-forma invoice price to keep
its profit margin secret from the branch managers. Had the cost been known to the
branch manager he would have been in a position to determine the exact profits
enjoyed by the head office, which may induce the branch manager to confront the
business as a competitor. Moreover by sending goods to the branches at pro-forma
invoice price, the head office can dictate pricing policy to its branches, as well as save
work at the branch because prices have already been decided. Sending goods at pro-
forma invoice price is generally done where goods are of standard type, pre-packed
and unlikely to fluctuate in price.
Here it is worth mentioning that "pro-forma invoice" is name of the document which
is sent to branches along with the goods sent; in this document description and
quantity of the goods sent is written along with the price. Therefore the price
appearing on the pro-forma invoice is named as pro-forma invoice price.
The document which is sent to the customers to evident the sales of goods to them is
known as "invoice"; this document discloses the quantity, description and selling
price of the goods sold, along with the settlement terms. Technically speaking "selling
price" may also be termed as "invoice price", but "invoice price" and "pro-forma
invoice price" are different. It is a common error that often people do not care while
using the terminology and confuse "invoice price" with the "pro-forma invoice price".
110. The method of preparing Branch a/c while goods are sent at pro-forma invoice price is
the same with the exception that the accounting entries relating to the goods sent to
and goods returned from the branch are recorded at pro-forma invoice price and a
reverse adjustment is required with the amount of loading (difference between cost
and pro-forma invoice price).
Remember; the accounting entries for opening and closing stocks are recorded at cost
price. Do not record stocks at pro-forma invoice price.
Rationale; an accountant is supposed to record accounting entries evidenced by a
source document. Goods sent to branch are evidenced through "pro-forma invoice"
therefore price mentioned on the document cannot me ignored while recording this
56
111.
112. Advance Financial Accounting (FIN-611)
VU
transaction. Whereas, valuation of opening and closing stocks is not reported through
pro-forma invoice therefore to make it simple stocks are accounted for at cost.
Accounting Entries in the Books of Head Office
11. For opening balances of assets at the branch
Branch a/c
Branch assets a/c (individual accounts)
12. For opening balances of liabilities at the branch
Branch liabilities a/c (individual accounts)
Branch a/c
13. For goods sent to the branch (at pro-forma invoice price)
Branch a/c
Goods sent to branch a/c
14. For return of goods by the branch (at pro-forma invoice price)
Goods sent to branch a/c
Branch a/c
15. For reversal of loading on (net) goods set to branch (with the amount of loading)
Goods sent to branch a/c
Branch a/c
16. For remittance of cash or cheque to the branch
Branch a/c
Cash/Bank a/c
17. For cash or cheque received from the branch
Cash/Bank a/c
Branch a/c
18. For closing balances of assets at the branch
Branch asset a/c (individual accounts)
Branch a/c
19. For closing balances of liabilities at the branch
Branch a/c
Branch liabilities a/c (individual accounts)
20. For closing goods sent to branch account.
Goods sent to branch a/c
Purchases a/c
115. Advance Financial Accounting (FIN-611)
VU
21. For closing branch account into the profit and loss account
Incase of profit
Branch a/c
Profit & loss a/c
Incase of loss
Profit & loss a/c
Branch a/c
22. For abnormal loss (should always be accounted for at cost)
Abnormal loss a/c
(at cost)
Branch a/c
Insurance claim a/c (claim admitted)
Profit & loss a/c
(balance if not admitted by the insurance company)
Abnormal loss a/c (cost of the abnormal loss)
Note: No accounting entry is required for normal losses.
Solved Problem # 1
Excellent Garments of Multan has a branch at Lahore. Goods are supplied to the
branch at cost. The expenses of the branch are paid from Multan and the branch keeps
a sales journal and the debtors' ledger only. From the following information supplied
by the branch, prepare a Branch Account in the books of the head office. Goods are
sent to branch at pro-forma invoice price which is cost plus 20%. (All figures in
rupees)
Opening Stock (at Pro-forma invoice) 28,800 Closing Debtors
9,150
Closing Stock (at Pro-forma invoice)
21,600 Opening Debtors
?
Goods received from HO (at Pro-forma invoice)
40,320
Bad Debt
140
Credit Sales
116. 41,000
Expenses paid by Head office
10,400
Cash Sales
17,500
Cash received from Debtors
37,900
Pilferage of goods by the employees (Normal Loss) 2,000
Solution: (Debtors System)
In the books of Head Office (Multan)
Lahore Branch Account
Particulars
Rs.
Particulars
Rs.
Opening Stock
24,000
Cash Received from Branch
17,500
Opening Debtors
6,200
Cash Received from Debtors
37,900
Cash sent to Branch
10,400
Goods sent to Branch
6,720
Goods sent to Branch a/c 40,320
(loading)
18,000
General Profit & Loss a/c 8,360
Closing Stock
9,160
(Profit)
Closing Debtors
119. Advance Financial Accounting (FIN-611)
VU
Working:
Debtors Account
Particulars
Rs.
Particulars
Rs.
Op. Debtors (Balancing 6,200
Cash Received from Debtors
37,900
fig)
41,000
Bad Debts
140
Sales (credit)
Cl. Debtors c/f
9,160
47,200
47,200
Opening stock at cost
28,800 x 100/120 = 24,000 (pro-forma invoice x % of cost by % of pro-forma invoice)
Closing stock at cost
21,600 x 100/120 = 18,000 (pro-forma invoice x % of cost by % of pro-forma invoice)
Loading on goods sent to branch (net)
Rupees
Goods sent to branch (at pro-forma invoice)
40,320
Less Goods returned by branch (at pro-forma invoice)
0
Net goods sent
(at pro-forma invoice)
40,320
40,320 x 20/120 = 6,720 (pro-forma invoice x % of loading by % of pro-forma invoice)
Income Statement System
120. The head office may also prepare an Income Statement to find out the profits of
branch. Such Income Statement is merely a memorandum; the only reason for
preparing the statement is to have full information of all transactions which are
ignored in Debtor System (already discussed in the previous section). While preparing
the Income Statement of the branch we shall be using all those skills which we have
learned in the single entry system of accounting during conversion of single entry into
double entry.
We know very well that in Income Statement incomes and expenses are measured on
the basis of accrual concept and the profits are measured according to the matching
concept. So the cost of goods sold will be determined keeping in view that the goods
sent to branch are equivalent to purchases of the branch and should be included at
cost. Obviously the opening and closing stocks can not be measured at a value that is
above its cost.
Above problem can be solved through Income Statement System as well. Following
121. Fill in the Blanks:
1. The system of operating at several places through one’s own
establishments is called .
2. The main establishment located at the main place of activity is
called the and the subsidiary establishment located at various
places are called .
3. Branches may be divided into 3 categories, branches, branches
and foreign branches.
4. Goods supplied to Dependent Branches by the Head Office may
be either at or at price.
5. The One Account System or Debtors System is generally adopted
when the branch is fairly in size.
6. Branch Account is a in nature and is prepared in the Head Office
Books.
7. Under Debtors System, bad debts and discounts allowed in the
Branch Account.
8. Under the Debtors System the debtors (at close) are shown on
the of the Branch Account after adjusting bad debts, discount
allowed etc.
9. Under Debtors System fixed assets is shown on the credit side
only after the amount of depreciation, if any.
10. Under the Debtors System, the Head Office will record all
the transactions relating to the branch in the Branch Account
through and relationship between the Branch and the Head Office.
11. Under the Debtors System, the Reserve for Doubtful Debts
/Reserve for Discount on Debtors, should be from closing Debtors
and only the good closing debtors will be recorded in the Branch
Account.
12. Actual petty expenses incurred by the branch will in the
Branch Account under the Debtors System.
(Answers: 1 - Branch Organization; 2 - Head Office, Branches; 3 -
122. Dependent, Independent; 4 - Cost, Invoice; 5 - Small; 6 - Nominal
Account; 7 - Do not figure or not taken, shown; 8 - Credit side; 9 -
Deducting; 10 - Debtors, Creditors;
11 - Deducted; 12 - Not be recorded)
State whether the following Statements are ‘True’ or ‘False’:
1. Under Debtors System, bad debts and discount allowed figure in the
Branch Account.
2. Under Debtors System, Debtors at close are shown on the Debit Side
of the Branch Account after adjusting for Bad Debts, discount allowed
etc.
3. Under Debtors System, Depreciation is not shown in the Branch
Account.
4. Reserve for Bad Debts and Reserve for Discount on Debtors will be
recorded separately in the Branch account under the Debtors system.
5. Actual petty expenses incurred by the Branch Account under the
Debtors system will not be recorded in the Branch Account.
6. Sales Returns will not appear directly in the Branch Account under the
Debtors System.
7. Branch Account under Debtors System is a Real Account.
8. Under Debtors System Branch Account is debited with losses like bad
debts, discounts allowed and depreciation.
9. When the Branch Manager is allowed petty cash on Imprest System,
the amount remitted by Head Office to reimburse the actual expenses
will be debited to the Branch Account.
10. Branch Account is a nominal account in nature and is prepared in
the Branch Books.
(Answers:
False – 1, 2, 4, 7, 8, 10
True – 3, 5, 6, 9)
123. Indicate the correct answers:
1. Under Debtors System, the Debtors at close are shown
(i) On the credit side of the Head Office Account
(ii) On the debit side of the Branch account
(iii) On the credit side of the Branch account after adjusting for bad
debts, discount allowed etc.
(iv) Are not shown in the Branch account
2. Under Debtors System treatment of Reserve for Bad debts is
(i) Shown it on the credit side of Branch a/c
(ii) It is not shown in Branch a/c
(iii) It is deducted from the Branch Debtors and the good Branch
debtors are shown in the Branch account
(iv) It is shown on the debit side of the general Profit and Loss account
3. The treatment of petty expenses made by the Debtors System is as
follows
(i) It is not recorded in the Branch account
(ii) It is shown on the debit side of the Branch account
(iii) It is shown on the general Profit and Loss account of Head Office
(iv) Only the closing balance of Petty Cash (Opening balance plus
amount reduced from Head Office less petty expenses) will appear
in the credit side of the Branch account
4. The Head Office sends goods at cost and instructs the branch to sell
the goods at a profit of 20% on selling price. What is the total sales, if:
Opening stock at Rs.36,000, Goods sent to branch Rs.6,00,000,
Closing stock Rs.60,000
(i) Rs.6,00,000
(ii) Rs.7,20,000
(iii) Rs. 6,72,000
(iv) None of the above
5. Furniture on 1/04/2005 – Rs.20,000; Furniture sold on 1/10/2005 –
Rs.9,000 (book value on 1/10/2005 – Rs.9,500); Furniture purchased
on 1/10/2005 – Rs.17,000; Depreciation on Furniture – 10% p.a.
From the above information, the value of Furniture shown on the
Credit side of Branch Account under Debtors System will be
(i) Rs.27,000
(ii) Rs.24,200
(iii) Rs.23,850
124. (iv) None of the above
6. Under Debtors System, the Branch Account is
(i) Real Account
(ii) Nominal Account
(iii) Personal Account
(iv) None of the above
7. Stock Reserve in relation on opening Stock appears (under the Debtors
System)
(i) On the debit side of the Branch Account
(ii) On the credit side of the Branch Account
(iii) On the Credit side of Head Office Account
(iv) None of the above
8. Stock reserve in relation to closing stock appears (under the Debtors
System)
(i) On the debit side of the Branch Account
(ii) On the credit side of the Branch Account
(iii) On the debit side of Head Office Account
(iv) None of the above
9. The cash and credit sales of the branch are Rs.5,000 and Rs.15,000
respectively. The amount collected from debtors is Rs.10,000. The
amount to be credited to Branch Account under the Debtors System
will be
(i) Rs.20,000 (ii) Rs.15,000 (iii) Rs.10,000 (iv) Rs.25,000
10. The opening balance of Petty Cash at the Branch is Rs.2,000,
amount received from the Head Office for Petty Expenses is Rs.10,000,
the closing balance of Petty Cash is Rs. 3,000;
Which of the following is the right answer under the Debtors System?
(i) Rs.9,000 on the Debit side of the Branch Account as Petty
Expenses
(ii) Rs.3,000 on the Credit side of the Branch Account as Petty
Cash
(iii) Rs.7,000 on the Credit side of the Branch Account as Petty
Cash Expenses.
(iv) None of the above.
(Answers: 1-(iii); 2-(iii); 3-(iv); 4-(ii); 5-(ii); 6-(ii); 7-(ii); 8-(i); 9-(ii); 10-
(ii) )
125. Followings are the main differences between branch and department:
1. Branches are separated from the main organization. Departments are
attached with the main organization under a single roof.
2. Branches are the outcome of tough competition and expansion of business.
Departments are the result of fast human life.
3. Branches are geographically separated. Departments are not separated rather
existed under a same roof.
4. Branches are of different types like dependent, independent and foreign.
There is no such classification in department because all are common under the
126. same roof.
5. Allocation of branch common expenses does not arise. Allocation of
departmental common expenses is a tough job.
6. To find out the net result of the organization, the reconciliation of different
branch account is a main job.In departmental accounting, no reconciliation is
necessary because there is a central account division.