X company has its branch at Lucknow goods are invoice to this branch a...
Branch Account in the Books of Head OfficeParticulars Amount (in Rupees)Opening Balance 0Goods supplied to branch (invoice price) 38,000Profit on goods supplied (20% of 38,000) 7,600Total 45,600Less: Goods returned by customer 200Net sales 45,400Add: Cash sales 24,800Total cash received 70,200Less: Cash discount allowed to customers 400Total credit sales 11,200Total sales 81,000Less: Cost of goods sold (invoice price) 38,000Gross profit on sales 43,000Less: Rent paid by head office 1,800Less: Salary expenses paid by head office 200Net profit 40,000Note: The branch account is prepared to record the transactions of the branch in the books of the head office. The profit on goods supplied is calculated at 20% of the invoice price and added to the cost of goods sold to arrive at the total sales. The expenses incurred by the head office on behalf of the branch are deducted from the gross profit on sales to arrive at the net profit of the branch. The cash sales and credit sales are recorded separately, and the cash discount allowed to customers is deducted from the total cash received. The goods returned by the customer are deducted from the net sales.