Important Questions & Answers: Accounting for Branches Including Foreign Branches | Advanced Accounting for CA Intermediate PDF Download

 Page 1


Accounting for Branches including Foreign Branches
Q-1 On 31st March, 2019 Chennai Branch submits the following Trial Balance to its Head Office at Lucknow:
Debit Balances ` in lacs
Furniture and Equipment 18
Depreciation on furniture 2
Salaries 25
Rent 10
Advertising 6
Telephone, Postage and Stationery 3
Sundry Office Expenses 1
Stock on 1st April, 2018 60
Goods Received from Head Office 288
Debtors 20
Cash at bank and in hand 8
Carriage Inwards 7
448
Credit Balances
Outstanding Expenses 3
Goods Returned to Head Office 5
Sales 360
Head Office 80
448
Additional Information:
Stock on 31st March, 2019 was valued at ` 62 lacs. On 29th March, 2019 the Head Office dispatched
goods costing ` 10 lacs to its branch. Branch did not receive these goods before 1st April, 2019. Hence,
the figure of goods received from Head Office does not include these goods. Also the head office has
charged the branch ` 1 lac for centralized services for which the branch has not passed the entry.
You are required to :(i) pass Journal Entries in the books of the Branch to make the necessary adjustments
and (ii) prepare Final Accounts of the Branch including Balance Sheet.
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Page 2


Accounting for Branches including Foreign Branches
Q-1 On 31st March, 2019 Chennai Branch submits the following Trial Balance to its Head Office at Lucknow:
Debit Balances ` in lacs
Furniture and Equipment 18
Depreciation on furniture 2
Salaries 25
Rent 10
Advertising 6
Telephone, Postage and Stationery 3
Sundry Office Expenses 1
Stock on 1st April, 2018 60
Goods Received from Head Office 288
Debtors 20
Cash at bank and in hand 8
Carriage Inwards 7
448
Credit Balances
Outstanding Expenses 3
Goods Returned to Head Office 5
Sales 360
Head Office 80
448
Additional Information:
Stock on 31st March, 2019 was valued at ` 62 lacs. On 29th March, 2019 the Head Office dispatched
goods costing ` 10 lacs to its branch. Branch did not receive these goods before 1st April, 2019. Hence,
the figure of goods received from Head Office does not include these goods. Also the head office has
charged the branch ` 1 lac for centralized services for which the branch has not passed the entry.
You are required to :(i) pass Journal Entries in the books of the Branch to make the necessary adjustments
and (ii) prepare Final Accounts of the Branch including Balance Sheet.
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Ans.(i) Books of Branch
Journal Entries
(` in lacs)
Dr. Cr.
Goods in Transit A/c Dr. 10
To Head Office A/c 10
(Goods dispatched by head office but not received by
branch before 1st April, 2019)
Expenses A/c Dr. 1
To Head Office A/c 1
(Amount charged by head office for centralised services)
(ii) Trading and Profit & Loss Account of the Branch
for the year ended 31st March, 2019
` in lacs ` in lacs
To Opening Stock 60 By Sales 360
To Goods received from By Closing Stock 62
Head Office 288
Less: Returns (5) 283
To Carriage Inwards 7
To Gross Profit c/d 72 ___
422 422
To Salaries 25 By Gross Profit b/d 72
To Depreciation on Furniture 2
To Rent 10
To Advertising 6
To Telephone, Postage & Stationery 3
To Sundry Office Expenses 1
To Head Office Expenses 1
To Net Profit Transferred to
Head Office A/c 24 __
72 72
Balance Sheet as on 31st March, 2019
Liabilities ` in lacs Assets ` in lacs
Head Office 80 Furniture & Equipment 20
Add: Goods in transit 10 Less: Depreciation (2) 18
Head Office Expenses 1 Stock in hand 62
Net Profit 24 115 Goods in Transit 10
Outstanding Expenses 3 Debtors 20
___ Cash at bank and in hand 8
118 118
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Page 3


Accounting for Branches including Foreign Branches
Q-1 On 31st March, 2019 Chennai Branch submits the following Trial Balance to its Head Office at Lucknow:
Debit Balances ` in lacs
Furniture and Equipment 18
Depreciation on furniture 2
Salaries 25
Rent 10
Advertising 6
Telephone, Postage and Stationery 3
Sundry Office Expenses 1
Stock on 1st April, 2018 60
Goods Received from Head Office 288
Debtors 20
Cash at bank and in hand 8
Carriage Inwards 7
448
Credit Balances
Outstanding Expenses 3
Goods Returned to Head Office 5
Sales 360
Head Office 80
448
Additional Information:
Stock on 31st March, 2019 was valued at ` 62 lacs. On 29th March, 2019 the Head Office dispatched
goods costing ` 10 lacs to its branch. Branch did not receive these goods before 1st April, 2019. Hence,
the figure of goods received from Head Office does not include these goods. Also the head office has
charged the branch ` 1 lac for centralized services for which the branch has not passed the entry.
You are required to :(i) pass Journal Entries in the books of the Branch to make the necessary adjustments
and (ii) prepare Final Accounts of the Branch including Balance Sheet.
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Ans.(i) Books of Branch
Journal Entries
(` in lacs)
Dr. Cr.
Goods in Transit A/c Dr. 10
To Head Office A/c 10
(Goods dispatched by head office but not received by
branch before 1st April, 2019)
Expenses A/c Dr. 1
To Head Office A/c 1
(Amount charged by head office for centralised services)
(ii) Trading and Profit & Loss Account of the Branch
for the year ended 31st March, 2019
` in lacs ` in lacs
To Opening Stock 60 By Sales 360
To Goods received from By Closing Stock 62
Head Office 288
Less: Returns (5) 283
To Carriage Inwards 7
To Gross Profit c/d 72 ___
422 422
To Salaries 25 By Gross Profit b/d 72
To Depreciation on Furniture 2
To Rent 10
To Advertising 6
To Telephone, Postage & Stationery 3
To Sundry Office Expenses 1
To Head Office Expenses 1
To Net Profit Transferred to
Head Office A/c 24 __
72 72
Balance Sheet as on 31st March, 2019
Liabilities ` in lacs Assets ` in lacs
Head Office 80 Furniture & Equipment 20
Add: Goods in transit 10 Less: Depreciation (2) 18
Head Office Expenses 1 Stock in hand 62
Net Profit 24 115 Goods in Transit 10
Outstanding Expenses 3 Debtors 20
___ Cash at bank and in hand 8
118 118
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Q-2 M/s Rani & Co. has head office at Singapore and branch at Delhi (India). Delhi branch is an integral
foreign operation of M/s Rani & Co. Delhi branch furnishes you with its Trial Balance as on 31st March,
2019 and the additional information thereafter:
Dr. Cr.
Rupees in thousands
Stock on 1st April, 2018 600 -
Purchases and Sales 1,600 2,400
Sundry Debtors and Creditors 800 600
Bills of Exchange 240 480
Wages 1,120 -
Rent, rates and taxes 720 -
Sundry Expenses 320 -
Computers 600 -
Bank Balance 520 -
Singapore Office A/c - 3,040
Total 6,520 6,520
Additional information :
(a) Computers were acquired from a remittance of Singapore dollar 12,000 received from Singapore Head
Office and paid to the suppliers. Depreciate Computers at the rate of 40% for the year.
(b) Closing Stock of Delhi branch was ` 15,60,000 on 31st March, 2019.
(c) The Rates of Exchange may be taken as follows :
(i) on 1.4.2018 @ ` 50 per Singapore Dollar
(ii) on 31.3.2019 @ ` 52 per Singapore Dollar
(iii) Average Exchange Rate for the year @ ` 51 per Singapore Dollar.
(iv) Conversion in Singapore Dollar shall be made upto two decimal accuracy.
(d) Delhi Branch Account showed a debit balance of Singapore Dollar 59,897.43 on 31.3.2019 in the Head
office books and there were no items pending for reconciliation.
In the books of Head office you are required to prepare :
(1) Revenue statement for the year ended 31st March, 2019 (in Singapore Dollar)
(2) Balance Sheet as on that date. (in Singapore Dollar)
Ans.              Revenue Statement
for the year ended 31st March, 2019
Singapore dollar Singapore dollar
To Opening Stock 12,000.00 By Sales 47,058.82
To Purchases 31,372.55 By Closing stock 30,000.00
To Wages 21,960.78 (15,60,000/ 52)
To Gross profit b/d 11,725.49 ________
77,058.82 77,058.82
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Page 4


Accounting for Branches including Foreign Branches
Q-1 On 31st March, 2019 Chennai Branch submits the following Trial Balance to its Head Office at Lucknow:
Debit Balances ` in lacs
Furniture and Equipment 18
Depreciation on furniture 2
Salaries 25
Rent 10
Advertising 6
Telephone, Postage and Stationery 3
Sundry Office Expenses 1
Stock on 1st April, 2018 60
Goods Received from Head Office 288
Debtors 20
Cash at bank and in hand 8
Carriage Inwards 7
448
Credit Balances
Outstanding Expenses 3
Goods Returned to Head Office 5
Sales 360
Head Office 80
448
Additional Information:
Stock on 31st March, 2019 was valued at ` 62 lacs. On 29th March, 2019 the Head Office dispatched
goods costing ` 10 lacs to its branch. Branch did not receive these goods before 1st April, 2019. Hence,
the figure of goods received from Head Office does not include these goods. Also the head office has
charged the branch ` 1 lac for centralized services for which the branch has not passed the entry.
You are required to :(i) pass Journal Entries in the books of the Branch to make the necessary adjustments
and (ii) prepare Final Accounts of the Branch including Balance Sheet.
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Ans.(i) Books of Branch
Journal Entries
(` in lacs)
Dr. Cr.
Goods in Transit A/c Dr. 10
To Head Office A/c 10
(Goods dispatched by head office but not received by
branch before 1st April, 2019)
Expenses A/c Dr. 1
To Head Office A/c 1
(Amount charged by head office for centralised services)
(ii) Trading and Profit & Loss Account of the Branch
for the year ended 31st March, 2019
` in lacs ` in lacs
To Opening Stock 60 By Sales 360
To Goods received from By Closing Stock 62
Head Office 288
Less: Returns (5) 283
To Carriage Inwards 7
To Gross Profit c/d 72 ___
422 422
To Salaries 25 By Gross Profit b/d 72
To Depreciation on Furniture 2
To Rent 10
To Advertising 6
To Telephone, Postage & Stationery 3
To Sundry Office Expenses 1
To Head Office Expenses 1
To Net Profit Transferred to
Head Office A/c 24 __
72 72
Balance Sheet as on 31st March, 2019
Liabilities ` in lacs Assets ` in lacs
Head Office 80 Furniture & Equipment 20
Add: Goods in transit 10 Less: Depreciation (2) 18
Head Office Expenses 1 Stock in hand 62
Net Profit 24 115 Goods in Transit 10
Outstanding Expenses 3 Debtors 20
___ Cash at bank and in hand 8
118 118
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Q-2 M/s Rani & Co. has head office at Singapore and branch at Delhi (India). Delhi branch is an integral
foreign operation of M/s Rani & Co. Delhi branch furnishes you with its Trial Balance as on 31st March,
2019 and the additional information thereafter:
Dr. Cr.
Rupees in thousands
Stock on 1st April, 2018 600 -
Purchases and Sales 1,600 2,400
Sundry Debtors and Creditors 800 600
Bills of Exchange 240 480
Wages 1,120 -
Rent, rates and taxes 720 -
Sundry Expenses 320 -
Computers 600 -
Bank Balance 520 -
Singapore Office A/c - 3,040
Total 6,520 6,520
Additional information :
(a) Computers were acquired from a remittance of Singapore dollar 12,000 received from Singapore Head
Office and paid to the suppliers. Depreciate Computers at the rate of 40% for the year.
(b) Closing Stock of Delhi branch was ` 15,60,000 on 31st March, 2019.
(c) The Rates of Exchange may be taken as follows :
(i) on 1.4.2018 @ ` 50 per Singapore Dollar
(ii) on 31.3.2019 @ ` 52 per Singapore Dollar
(iii) Average Exchange Rate for the year @ ` 51 per Singapore Dollar.
(iv) Conversion in Singapore Dollar shall be made upto two decimal accuracy.
(d) Delhi Branch Account showed a debit balance of Singapore Dollar 59,897.43 on 31.3.2019 in the Head
office books and there were no items pending for reconciliation.
In the books of Head office you are required to prepare :
(1) Revenue statement for the year ended 31st March, 2019 (in Singapore Dollar)
(2) Balance Sheet as on that date. (in Singapore Dollar)
Ans.              Revenue Statement
for the year ended 31st March, 2019
Singapore dollar Singapore dollar
To Opening Stock 12,000.00 By Sales 47,058.82
To Purchases 31,372.55 By Closing stock 30,000.00
To Wages 21,960.78 (15,60,000/ 52)
To Gross profit b/d 11,725.49 ________
77,058.82 77,058.82
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To Rent, rates and taxes 14,117.65 By Gross profit c/d 11,725.49
To Sundry Expenses 6,274.51 By Net loss b/d 13,466.67
To Depreciation on computers
(Singapore dollar 12,000 x 0.4) 4,800.00 ________
25,192.16 25,192.16
Balance Sheet of Delhi Branch
as on 31st March, 2019
Liabilities Singapore Assets Singapore Singapore
dollar dollar dollar
Singapore Office A/c 59,897.43 Computers 12,000.00
Less: Net Loss (13,466.67) 46,430.76 Less: Depreciation (4,800.00) 7,200.00
Sundry creditors 11,538.46 Closing stock 30,000.00
Bills payable 9,230.77 Sundry debtors 15,384.61
Bank balance 10,000.00
________ Bills receivable 4,615.38
67,199.99 67,199.99
Working Note :
M/s Rani & Co.
Delhi Branch Trial Balance in (Singapore $)
as on 31st March, 2019
Conversion Dr. Cr.
rate per Singapore Singapore
Singapore dollar dollar
 dollar
(`)
Stock on 1.4.18 6,00,000.00 50 12,000.00 -
Purchases and sales 16,00,000.00 24,00,000.00 51 31,372.55 47,058.82
Sundry Debtors and
Creditors 8,00,000.00 6,00,000.00 52 15,384.61 11,538.46
Bills of exchange 2,40,000.00 4,80,000.00 52 4,615.38 9,230.77
Wages 11,20,000.00 51 21,960.78 -
Rent, rates and taxes 7,20,000.00 51 14,117.65 -
Sundry Expenses 3,20,000.00 51 6,274.51 -
Computers 6,00,000.00 - 12,000.00 -
Bank balance 5,20,000.00 52 10,000.00 -
Singapore office A/c - 59,897.43
1,27,725.48 1,27,725.48
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Page 5


Accounting for Branches including Foreign Branches
Q-1 On 31st March, 2019 Chennai Branch submits the following Trial Balance to its Head Office at Lucknow:
Debit Balances ` in lacs
Furniture and Equipment 18
Depreciation on furniture 2
Salaries 25
Rent 10
Advertising 6
Telephone, Postage and Stationery 3
Sundry Office Expenses 1
Stock on 1st April, 2018 60
Goods Received from Head Office 288
Debtors 20
Cash at bank and in hand 8
Carriage Inwards 7
448
Credit Balances
Outstanding Expenses 3
Goods Returned to Head Office 5
Sales 360
Head Office 80
448
Additional Information:
Stock on 31st March, 2019 was valued at ` 62 lacs. On 29th March, 2019 the Head Office dispatched
goods costing ` 10 lacs to its branch. Branch did not receive these goods before 1st April, 2019. Hence,
the figure of goods received from Head Office does not include these goods. Also the head office has
charged the branch ` 1 lac for centralized services for which the branch has not passed the entry.
You are required to :(i) pass Journal Entries in the books of the Branch to make the necessary adjustments
and (ii) prepare Final Accounts of the Branch including Balance Sheet.
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Ans.(i) Books of Branch
Journal Entries
(` in lacs)
Dr. Cr.
Goods in Transit A/c Dr. 10
To Head Office A/c 10
(Goods dispatched by head office but not received by
branch before 1st April, 2019)
Expenses A/c Dr. 1
To Head Office A/c 1
(Amount charged by head office for centralised services)
(ii) Trading and Profit & Loss Account of the Branch
for the year ended 31st March, 2019
` in lacs ` in lacs
To Opening Stock 60 By Sales 360
To Goods received from By Closing Stock 62
Head Office 288
Less: Returns (5) 283
To Carriage Inwards 7
To Gross Profit c/d 72 ___
422 422
To Salaries 25 By Gross Profit b/d 72
To Depreciation on Furniture 2
To Rent 10
To Advertising 6
To Telephone, Postage & Stationery 3
To Sundry Office Expenses 1
To Head Office Expenses 1
To Net Profit Transferred to
Head Office A/c 24 __
72 72
Balance Sheet as on 31st March, 2019
Liabilities ` in lacs Assets ` in lacs
Head Office 80 Furniture & Equipment 20
Add: Goods in transit 10 Less: Depreciation (2) 18
Head Office Expenses 1 Stock in hand 62
Net Profit 24 115 Goods in Transit 10
Outstanding Expenses 3 Debtors 20
___ Cash at bank and in hand 8
118 118
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Q-2 M/s Rani & Co. has head office at Singapore and branch at Delhi (India). Delhi branch is an integral
foreign operation of M/s Rani & Co. Delhi branch furnishes you with its Trial Balance as on 31st March,
2019 and the additional information thereafter:
Dr. Cr.
Rupees in thousands
Stock on 1st April, 2018 600 -
Purchases and Sales 1,600 2,400
Sundry Debtors and Creditors 800 600
Bills of Exchange 240 480
Wages 1,120 -
Rent, rates and taxes 720 -
Sundry Expenses 320 -
Computers 600 -
Bank Balance 520 -
Singapore Office A/c - 3,040
Total 6,520 6,520
Additional information :
(a) Computers were acquired from a remittance of Singapore dollar 12,000 received from Singapore Head
Office and paid to the suppliers. Depreciate Computers at the rate of 40% for the year.
(b) Closing Stock of Delhi branch was ` 15,60,000 on 31st March, 2019.
(c) The Rates of Exchange may be taken as follows :
(i) on 1.4.2018 @ ` 50 per Singapore Dollar
(ii) on 31.3.2019 @ ` 52 per Singapore Dollar
(iii) Average Exchange Rate for the year @ ` 51 per Singapore Dollar.
(iv) Conversion in Singapore Dollar shall be made upto two decimal accuracy.
(d) Delhi Branch Account showed a debit balance of Singapore Dollar 59,897.43 on 31.3.2019 in the Head
office books and there were no items pending for reconciliation.
In the books of Head office you are required to prepare :
(1) Revenue statement for the year ended 31st March, 2019 (in Singapore Dollar)
(2) Balance Sheet as on that date. (in Singapore Dollar)
Ans.              Revenue Statement
for the year ended 31st March, 2019
Singapore dollar Singapore dollar
To Opening Stock 12,000.00 By Sales 47,058.82
To Purchases 31,372.55 By Closing stock 30,000.00
To Wages 21,960.78 (15,60,000/ 52)
To Gross profit b/d 11,725.49 ________
77,058.82 77,058.82
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To Rent, rates and taxes 14,117.65 By Gross profit c/d 11,725.49
To Sundry Expenses 6,274.51 By Net loss b/d 13,466.67
To Depreciation on computers
(Singapore dollar 12,000 x 0.4) 4,800.00 ________
25,192.16 25,192.16
Balance Sheet of Delhi Branch
as on 31st March, 2019
Liabilities Singapore Assets Singapore Singapore
dollar dollar dollar
Singapore Office A/c 59,897.43 Computers 12,000.00
Less: Net Loss (13,466.67) 46,430.76 Less: Depreciation (4,800.00) 7,200.00
Sundry creditors 11,538.46 Closing stock 30,000.00
Bills payable 9,230.77 Sundry debtors 15,384.61
Bank balance 10,000.00
________ Bills receivable 4,615.38
67,199.99 67,199.99
Working Note :
M/s Rani & Co.
Delhi Branch Trial Balance in (Singapore $)
as on 31st March, 2019
Conversion Dr. Cr.
rate per Singapore Singapore
Singapore dollar dollar
 dollar
(`)
Stock on 1.4.18 6,00,000.00 50 12,000.00 -
Purchases and sales 16,00,000.00 24,00,000.00 51 31,372.55 47,058.82
Sundry Debtors and
Creditors 8,00,000.00 6,00,000.00 52 15,384.61 11,538.46
Bills of exchange 2,40,000.00 4,80,000.00 52 4,615.38 9,230.77
Wages 11,20,000.00 51 21,960.78 -
Rent, rates and taxes 7,20,000.00 51 14,117.65 -
Sundry Expenses 3,20,000.00 51 6,274.51 -
Computers 6,00,000.00 - 12,000.00 -
Bank balance 5,20,000.00 52 10,000.00 -
Singapore office A/c - 59,897.43
1,27,725.48 1,27,725.48
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Q-3 Ayan Ltd. invoices goods to its branch at cost plus 
1
33 %
3
.  From the following  particulars prepare
Branch Stock Account, Branch Stock Adjustment Account and Branch Profit and Loss Account as they
would appear in the books of head office.
Rs.
Stock at commencement at Branch at invoice Price 36,60,000
Stock at close at Branch at Invoice Price 2,88,000
Goods sent to Branch during the year at invoice price (including goods invoiced at ` 48,000 24,00,000
to Branch on 31.03.2018 but not received by Branch before close of the year).
Return of goods to head office (invoice Price) 1,20,000
Credit Sales at Branch 1,20,000
Invoice value of goods pilfered 24,000
Normal loss at Branch due to wastage and deterioration of stock (at invoice price) 36,000
Cash Sales at Branch 21,60,000
Ayan closes its books on 31st March, 2018.
Ans.            In the books of Head Office
Branch Stock Account
Particular Rs. Particular Rs.
To Balance b/d 3,60,000 By Bank A/c (cash Sales) 21,60,000
To Goods sent to Branch A/c 24,00,000 By Branch Debtors A/c (Credit Sales) 1,20,000
To Branch Adjustment 36,000 By Goods sent to Branch A/c 1,20,000
A/c balancing fig. (Surplus)*** (Returns to H.O.)
By Branch Adjustment A/c* 6,000
(Rs.24,000 x 25 /100)
By Branch P&L A/c* 18,000
(Cost of Abnormal Loss)
By Branch Adjustment A/c** 36,000
(invoice price of normal loss
By Balance c/d:
     In hand 2,88,000
     In transit 48,000
27,96,000 27,96,000
*Alternative, comined postin for the amount of Rs.24,000 may be passed through Goods pifered account.
** Alternatively, it may first be transferred to normal Loss account which may ultimately be closed by
transfer to Branch Adjustment account. The final amount of net profit will however remain same.
*** It has been considered that the surplus may be due to sale of goods by branch at price higher than
invoice price.
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