Branch Accounts

Meaning of Branch Accounts: 

• Branch Accounts refer to accounts maintained by the branch offices of a business entity. 
• The main objective of branch accounts is to provide a consolidated view of the accounts maintained by multiple branches of the same business. 
• Branch accounts provide the business entity with a consolidated view of the financial status of its multiple branches.

Objects of Branch Accounts:

The main objects of branch accounts are to:

1. Facilitate the compilation of combined accounts of the branch offices.
2. Provide information regarding the financial position of the branch offices.
3. Facilitate the preparation of combined balance sheet and profit and loss account of the business entity.

Types of Branches:

There are two types of branches:

1. Dependent Branches: Dependent branches are branches which are directly supervised and controlled by the head office of the business entity.
2. Independent Branches: Independent branches are branches which are not under the direct supervision and control of the head office.

Dependent Branches

Meaning:

Dependent branches are branches which are directly supervised and controlled by the head office of the business entity. The branch office of a business entity is considered to be a dependent branch when it is under the direct control and supervision of the head office.

Accounting Treatment in Respect of Dependent Branches:

The accounting treatment in respect of dependent branches is as follows:

1. All transactions of the branch office are recorded in the books of account maintained by the head office.
2. The branch office is treated as a part of the head office.
3. All the assets and liabilities of the branch office are included in the books of the head office.

Preparation of Branch Accounts:

The preparation of branch accounts includes the following:

1. Debtors System: The debtors system is a method of accounting which involves the recording of all transactions related to the sales made by the branch office in the books of the head office.
2. Stock and Debtors System: The stock and debtors system is a system of accounting which involves the recording of all transactions related to the purchase and sale of goods by the branch office in the books of the head office.
3. Wholesale Branch System: The wholesale branch system is a system of accounting which involves the recording of all transactions related to the purchase and sale of goods by the branch office in the books of the head office.
4. Final Accounts System: The final accounts system is a system of accounting which involves the preparation of the final accounts of the branch office in the books of the head office.

Independent Branches

Meaning:

Independent branches are branches which are not under the direct supervision and control of the head office. The branch office of a business entity is considered to be an independent branch when it is not under the direct control and supervision of the head office.

Accounting Treatment:

The accounting treatment in respect of independent branches is as follows:

1. All transactions of the branch office are recorded in the books of account maintained by the branch office.
2. The branch office is treated as a separate legal entity.
3. All the assets and liabilities of the branch office are included in the books of the branch office.

Adjustment Entries in the Books of Head Office and Branch:

The adjustment entries in the books of head office and branch include the following:

1. Adjustment entries for goods sent from head office to branch.
2. Adjustment entries for goods received from branch to head office.
3. Adjustment entries for goods received from head office to branch.
4. Adjustment entries for goods sent from branch to head office.

Incorporation of Branch Trial Balance in Head Office Books:

The incorporation of branch trial balance in the books of the head office involves the following steps:

1. Preparation of a trial balance of the branch office.
2. Transfer the trial balance of the branch office to the books of the head office.
3. Adjust the trial balance of the branch office in the books of the head office.
4. Prepare the combined trial balance of the head office and branch office.