[A] Stock & Debtors Method

Problem 1.

Concept & Co., with its Head Office at Mumbai has a branch at Nagpur. Goods are invoiced to the Branch at 1 cost plus 33 % . The following information is given in respect of the branch for the year ended 31st March, 3 2006: Particulars ` Goods sent to Branch (Invoice price) 4,80,000 Stock at Branch on 1.4.2005 (Invoice price) 24,000 Cash sales 1,80,000 Return of goods by customers to the Branch 6,000 Branch expenses (paid in cash) 53,500 Branch debtors balance on 1.4.2005 30,000 Discount allowed 1,000 Bad debts 1,500 Collection from Debtors 2,70,000 Branch debtors cheques returned dishonoured 5,000 Stock at Branch on 31.3.2006 (Invoice price) 48,000 Branch debtors balance on 31.3.2006 36,500 Prepare, under the Stock and Debtors system, the following Ledger Accounts in the books of the Head Office: (i) Nagpur Branch Stock Account (ii) Nagpur Branch Debtors Account (iii) Nagpur Branch Adjustment Account Also compute shortage of Stock at Branch, if any. [May – 2006]

Solution Dr. Branch Stock Account [Invoice price] Particulars ` Particulars ` To Balance b/d 24,000 By Bank A/c (Cash Sales) 1,80,000 To Goods Sent to Branch A/c 4,80,000 By Branch Debtors (Credit Sales) 2,80,000 To Branch Debtors (Return) 6,000 By Abnormal Loss: By Adjustment 500 By P/L A/c 1,500 2,000 By Balance c/d 48,000 5,10,000 5,10,000

Dr. Nagpur Branch Debtors Account Particulars ` Particulars ` To Balance b/d 30,000 By Branch cash 2,70,000 To Branch cash (Dishonour of By Branch Stock A/c (return) 6,000 cheques) 5,000 By Branch Bad Debts 1,500 To Branch Stock A/c Credit sales 2,80,000 By Branch Discount allowed 1,000 (b.f.) By Balance c/d 36,500 3,15,000 3,15,000

Topper’s Institute Branch 5.2 Dr. Nagpur Branch Adjustment Account Particulars ` Particulars ` To Branch Stock A/c – Abnormal 500 By opening Stock Reserve A/c Loss (` 24,000×25%) 6,000 To Closing Stock Reserve 12,000 By Goods Sent to Branch A/c (`48,000×25%) (` 4,80,000 × 25%) 1,20,000 To Gross Profit (c/d) (transfer to P/L 1,13,500 A/c) 1,26,000 1,26,000

Goods sent to Branch A/c Particulars ` Particulars ` To Shop stock 100% 3,60,000 By Branch stock (133.33%) 4,80,000 To Branch adjustment A/c (33.33%) 1,20,000 4,80,000 4,80,000

Branch P/L A/c Particulars ` Particulars ` To Abnormal Loss (cost) 1,500 By G.P. 1,13,500 To Branch Bad debt 1,500 To Branch discount 1,000 To Branch expenses 53,500 To Net profit (transfer to Gen. P/L ) 56,000 1,13,500 1,13,500

Problem 2. P.O. Ltd. Calcutta, started a branch in Bombay on 1st April, 1983 to which goods were sent at 20% above cost. The branch does not maintain double entry books of account and necessary accounts relating to branch are maintained in H.O. Following further details are given for year ended on 31st March, 1984 Cost of goods sent to Branch 50,000 Goods received by Branch till 31st March, 1984 at invoice price 54,000 Credit sales for the year 58,000 Debtors as on 31st March, 1984 20,800 Bed Debts and Discount written off 200 Cash remitted to H. O. 43,000 Cash in hand at Branch on 31st March, 1984 2,000 Cash remitted by H.O. to Branch during the year 3,000 Closing stock at Branch (at invoice price) 6,000 Expenses incurred at Branch 12,000 Determine the Profit or Loss of the Branch for the year ended on 31st March, 1984, according to Stock and Debtors system in the books of the Head Office.

Solution Branch Stock A/c Particulars ` Particulars ` To To To GST Branch A/c 60,000 By Branch Debtors A/c 58,000 To Branch Adj A/c (b/f) (sales above invoice 27,000 By Branch cash a/c 17,000 price) By balance c/d(60,000-54,000) 6,000 By stock in hand 6,000 870000 87000

Topper’s Institute Branch 5.3 Branch Debtors A/c Particulars ` Particulars ` To b/d xx By Branch (B. debts & dis) 200 To Branch Stock A/c 58,000 By Branch cash A/c b/f 37,000 By balance c/d 20,800 58000 58000 Branch Adjustment A/c Particulars ` Particulars ` To Stock reserve (clos) 2000 By Branch Stock A/c 27,000 To G.P. transfer to Branch P/L 35,000 By Goods sent to Branch 10,000 37,000 37000 Branch P/L A/c Particulars ` Particulars ` To Branch cash a/c (exp) 12,000 By G.P. 35,000 To Branch bad debts 200 Net profit transfer to General P/L 22,800 35,000 35,000 Branch Cash A/c Particulars ` Particulars ` To b/d xx By Cash A/c (remitted) 43,000 To Branch Debtors A/c 37,000 By Branch expenses 12,000 To H.O Cash A/c 3,000 By Bal. c/d 2000 To Branch Stock A/c (Cash sales (b/f) 17,000 57,000 57,000

Goods sent to Branch A/c Particulars ` Particulars ` To Shop stock (100%) 50,000 By Branch Stock A/c (120%) 60,000 To Branch Adjusted A/c 20% 10,000 60,000 60,000

Problem 3. Dreams Unlimited opened a Branch at Delhi on 1st April, 200I. The goods were sent by the Head Office to the Branch and invoiced at selling price of the Branch which was 125% of the cost price of the head office. The following are the particulars relating to the transactions of Delhi Branch: ` Goods sent to branch (at cost to Head Office) 2,80,000 Sales: Cash 1,25,000 Credit 1,75,000 Cash collected from Debtors 1,56,000 Discounts allowed 4,000 Returns from Debtors 5,000 Cash sent to branch for: Wages 3,000 Freight 11,000 Other Expenses 6,000 20,000 Spoiled cloth in bales written off at invoice price 500 Closing Stock 55,500 Ascertain the profit or loss for the Delhi Branch for the year ended 31st March, 2002 after preparing Branch Stock Account and Branch Debtors Account.

Topper’s Institute Branch 5.4

Solution Delhi Branch Stock Account Particulars ` Particulars ` To Goods Sent to Branch A/c 3,50,000 By Branch Debtors A/c 1,25,000 To Branch Debtors A/c –– Returns 5,000 By Branch Cash A/c (Cash Sales 1,75,000 To Branch Adjustment A/c (Surplus) 1,000 By Branch Adjustment A/c 100 By Branch Profit & Loss Ac (Cost of spoiled cloth) 400

By Balance c/d 55,500

3,56,000 3,56,000 Dr. Delhi Branch Debtors Account Cr. Particulars ` Particulars ` To Branch Stock A/c (Cr. sales) 1,75,000 By Cash A/c 1,56,000 By Discounts A/c 4,000 By Branch Stock A/c (Returns) 5,000 By Balance c/f 10,000 1,75,000 1,75,000 Dr. Delhi Branch Adjustment Account Cr. Particulars ` Particulars ` To Branch Stock A/c-Loading 100 By Goods sent to Branch A/c 70,000 To Wages (treated as Direct) 3,000 [` 3,50,000 x 25/125] To Freight (treated as Direct) 11,000 By Branch Stock A/c (above invoice 1,000 To Closing Stock Reserve A/c price)  25  55,500   11,100  125  To Gross Profit transferred -to Branch P and L A/c 45,800 71,000 71,000 Dr. Delhi Branch Profit & Loss Account Cr. Particulars ` Particulars ` To Expenses 6,000 By Branch Adjustment A/c 45,800 To Discounts 4,000 (Gross Profit) To Branch Stock A/c [Cost of Spoiled cloth] 400

To P and L A/c (Net Profit) 35,400 45,800 45,800

Branch Cash A/c Particulars ` Particulars ` To Branch stock 1,25,000 By Cash A/c To Branch debtor 1,56,000 (sent to H.O.) 2,81,000 To Cash A/c By expense (sent by H.O.) - Wages 3,000 - Wages 3,000 - Freight 11,000 - Freight 11,000 - Other expense 6,000 - Other expense 6,000 3,01,000 3,01,000

Topper’s Institute Branch 5.5

Problem 4.

Bombay traders Ltd. sends goods to its madras Branch at cost plus 25 percent. The following particulars are available in respect of the branch for the year ended 31st March 1988. ` Opening stock at branch at cost to branch(I.P of H.O) 80,000 Goods sent to branch at invoice price 12,00,000 Loss in transit at invoice price 15,000 Pilferage at invoice price 6,000 Sales 12,19,000 Expenses 60,000 Closing stock at branch at cost to branch 40,000 Recovered from insurance company against loss in transit 10,000 Show ledger Accounts in the head office books for: (a) Branch stock account (c) Goods sent to branch account (b) Branch adjustment account (d) Branch profit and loss account

Solution Branch Stock Particulars ` Particulars ` To Balance b/d 80,000 By loss in transit 15,000 To GST B A/c 12,00,000 By pilferage 6,000 By sales 12,19,000 By balance c/d 40,000 12,80,000 12,80,000 Branch Adjustment A/c Particulars ` Particulars ` To loss in transit 3,000 By Stock reserve (op) 16,000 To pilferage 1,200 By GSTB A/c 2,40,000 To Stock Reserve (clos) 8,000 To Branch P/L A/c 2,43,800 25,6000 25,6000 Goods sent to Branch Particulars ` Particulars ` To Branch Adj. A/c 2,40,000 By Branch stock A/c 12,00,000 To Purchase (b/f) 9,60,000 12,00,000 12,00,000

Branch P/L A/c ` ` To loss in transit 12,000 By Branch Adj A/c To pilferage 4,800 By Ins claim 10,000 To Exp 60,000 By Adj A/c 2,43,8000 To Profit 1,77,000 2,53,800 2,53,800

Problem 5. Martin & Co. is a retail organisation with a number of branch shops. All accounts are kept at the head office, and goods sent to branches are recorded at cost plus the expected mark up of 33 1/3 percent. The accounting system is designed to give the head office as much control as possible over the branch stocks. At the Calcutta branch at 1st April 1995, goods costing ` 1,200 in stock, but some of these costing ` 150, Had

Topper’s Institute Branch 5.6 been reduced in selling price to ` 160. The balances of the Calcutta debtors accounts totalled ` 920 at the same date. The following information relates to the Calcutta branch for the year to 31st March, 1996 at the end of that year: ` Goods sent to branch (cost) 18,600 Cash sales (including all the goods marked down at the beginning of the year and others costing ` 1,800 sold for half of the normal selling price) 16,060 Cash received from debtors 6,280 Goods returned by branch debtor direct to head office (selling price) 80 Bad debts written off 30 Closing stock of goods at selling price 2,400 Closing total of debtors balances 830 You are required to prepare the relevant accounts for the Calculate branch, and calculate the branch profit for the year.

Solution Dr. (i) Goods Sent to Branch Account Cr. Particulars ` Particulars ` To Branch Adjustment A/c(Loading on 6,200 By Branch Stock 24,800 goods sent) By Branch Adjustment 20 To Shop stock A/c 18,600 By Shop Stock A/c 60 To Br. Debtor A/c 80 100 80  133.33% 24,880 24,880

Dr. (ii) Branch Stock Account Cr. Particulars ` Particulars ` To balance b/d 1,200 By Cash (Cash sales) 16,060 400 By Branch Debtors (Credit sales) 6,300 (40) 1,560 By Branch Adjustment 600 To Goods sent to Branch A/c. 24,800 By Branch P/L A/c 600 (18,600+6,200) By Abnormal loss (B. f.) 400 By Balance c/d 2,400 26,360 26,360 Dr. (iii) Branch Debtors Account Cr. Particulars ` Particulars ` To Balance b/d 920 By Cash 6,280 To Branch Stock A/c By Bad Debts 30 (Credit sales Bal. Fig.) 6,300 By Goods Sent to Br. A/c 80 (Sales Returns) By Balance c/d. 830 7,220 7,220 Dr. (iv) Branch Profit and Loss Account Cr. Particulars ` Particulars ` To Bad Debts 30 By Gross Profit b/d 5,240 To Abnormal loss (Cost of Loss) (400-100) 300 To Branch Stock (Loss) 600 To Net profit transfer to General P/L A/c 4,310

5,640 5,240

Topper’s Institute Branch 5.7 Dr. (v) Branch Adjustment Account Cr. Particulars ` Particulars ` To Branch Stock A/c 600 By Branch Stock Reserve 360 (Markdown on sales at loss) (Loading on opening stock) 6,200 To Goods Sent to Branch A/c 20 By Goods sent to Branch A/c (Loading on Returns) To Branch Stock Reserve 600 (Loading on closing stock) To Shortage of Stock 100 (Loading on shortage) To Gross profit b/d 5,240 6,560 6,560 Dr. (vi) Shortage of Stock Account Cr. Particulars ` Particulars ` To Branch stock A/c 400 By Branch Adjustment A/c 100 (Loading) By Branch P/L A/c (Cost) 300 400 400

Working Note:

(i) Cost = 1,800 + Mark up 1/3 = 600 Normal S.P 2,400 Actual S.P. = ½ × 2,400 = 1,200 Discount 1,200

Profit (Loading) Cost 600 600 Bal. fig.

Branch P/L A/c

Working Note: Cost (1200)

Cost – 150 Cost – 1050 + MUP (1/3) 50 + MUP (1/3) 350 200 1,400 Reduced by 40 Balance Value 160 1,560

Problem 6. Sumana Ltd. invoices goods to its various branches at cost and the branches sell for cash as well as on credit. From the following particulars, prepare the necessary ledger accounts in the books of head office: Particulars ` Particulars ` Stock, 1st January 10,000 Allowance to customers 400 Stock, 31st December 8,000 Bad debts 600 Debtors, 1st January 14,000 Returns from Customers 1,000 Debtors, 31 December 15,000 Remittance by Branch 46,000 Cash, 1st January 400 Wages and Salaries 4,000

Topper’s Institute Branch 5.8 Goods sent to Branch 30,000 Rent and Taxes 2,000 Goods returned by Branch 2,000 Normal loss of goods due to wastage 500 Cash Sales 30,000 Abnormal loss due to pilferage 1,500 Credit Sales 25,000 Cash remitted to Branch 4,500

Solution Branch A/c Particulars ` Particulars ` To Balance b/d By Goods sent to Br. 2,000 - Stock 10,000 By cash A/c 46,000 - Debtor 14,000 (To H.O.) - Cash 400 By Balance c/d To goods sent to Branch 30,000 - Stock 8,000 To Cash A/c 4,500 - Debtor 15,000 To net Profit 17,000 - Cash A/c (W/N) 4,900 75,900 75,900 Branch Cash A/c Particulars ` Particulars ` To Balance b/d 400 By cash A/c 46,000 To Branch Stock 30,000 By wages and salary 4,000 To cash A/c 4,500 By Rent & tax 2,000 To Branch Deb. 22,000 By Balance c/d 4,900

56,900 56,900 Branch Debtor A/c Particulars ` Particulars ` To Balance b/d 14,000 By Discount 400 To Mom. Branch stock 25,000 By bad debt 600 By Br. Stock 1,000 By Cash A/c 22,000 By Balance c/d 15,000 39,000 39,000 Branch Stock A/c Particulars ` Particulars ` To Balance b/d 10,000 By Branch Cash A/c 30,000 To Branch debtor 1,000 By Br. Debtor 25,000 To goods sent to Br. 30,000 By Good Sent to Br. 2,000 To wages 4,000 By Abnormal loss 1,500 To gross/profit 21,500 By Balance c/d 8,000 41,000 66,500 Branch P/L A/c Particulars ` Particulars ` To Rent & tax 2,000 By Gross Profit 21,500 To Abnormal loss 1,500 To Bad debts 600 To allowance 400 To net Profit 17,000 21,500 21,500

Problem.7 Give Journal Entries in the books of Branch A to rectify or adjust the following. : (i) Head Office expenses ` 3,500 allocated to the Branch, but not recorded in the Branch Books.

Topper’s Institute Branch 5.9 (ii) Depreciation of branch assets, whose accounts are kept by the Head Office not provided for ` 1,500. (iii) Branch paid ` 2,000 as salary to a H.O. Inspector, but the amount paid has been debited by the Branch to Salaries account. (iv) Head Office collected ` 10,000 directly from a customer on behalf of the Branch, but no intimation to this effect has been received by the Branch. (v) A remittance of ` 15,000 sent by the Branch has not yet been received by the Head Office. (vi) Branch A incurred advertisement expenses of ` 3,000 on behalf of Branch B. [Nov – 2004] Solution In the books of branch A Journal Entries Date Particulars ` ` (i) Expenses A/c Dr. 3,500 To Head office A/c 3,500 (Being H.O. expenses allocated to branch) (ii) Depreciation A/c Dr. 1,500 To Head Office A/c 1,500 (Being the depreciation charged) (iii) Head office A/c Dr. 2,000 To Salaries A/c 2,000 (Being the rectification of salary A/c which is paid on behalf of H.O.) (iv) Head office A/c Dr. 10,000 To Debtors A/c 10,000 (Being adjustment of Amount, collected from branch debtors) (v) Cash in transit A/c Dr. - - To H.O. A/c (vi) Head Office A/c Dr. 3,000 To Cash A/c 3,000 (Being the advertisement expenditure incurred by Branch A of Branch B.)

Problem. 8 From the following information, prepare Delhi Branch Account in the books, of head office for the year ending on 31st March 2001 Particulars ` Particulars ` Opening Stock (at cost) 1,78,000 Discount allowed to Customers 500 Opening Debtors 14,000 Bad Debts written off 1,000 Opening Petty Cash 250 Credit sales 7,29,400 Furniture (in the beginning) 6,000 Cash Sales 32,000 Opening Creditors 6,000 Petty Expenses paid by Branch 8,000 Goods sent to Branch (at Cost) 5,22,000 Cheques sent to Branch for expenses: Goods returned by Branch to Salaries 30,000 H.O (at cost) 7,800 Rent and Insurance 12,000 Goods returned by Customers Petty Cash 7,870 to Branch 5,700 Cash received by Branch from, its Customers 6,11,000 Goods are sold to customers at cost price + 50%. Depreciate the furniture @ 10% p.a.

Topper’s Institute Branch 5.10

Solution Dr. Delhi Branch Account in the books of H.O. Cr. Particulars ` Particulars ` To Balance b/d: By Balance b/d: creditors 6,000 Stock 1,78,000 By Cash Sales 32,000 Debtors 14,000 Collection from debtors 6,11,000 Less: Pay to Creditors (6,000) 6,37,000 Petty Cash 250 By Goods sent to Branch A/c Furniture 6,000 (return by branch) 7,800 To Goods sent to Branch A/c 5,22,000 By Balance c/d: To Bank A/c (Remittance to Branch) Stock 1,88,400 Salaries 30,000 Debtors 1,25,200 Rent and Insurance 12,000 Petty Cash 120 Petty Cash 7,870 49,870 Furniture (` 6,000 - ` 600) 5,400 To Net Profit t/f to General P & L A/c 1,99,800 9,75,920 9,75,920 Working Notes (i) Memorandum Branch Stock A/c

Particulars Amount Particulars Amount To B/d 178000 By Credit Sales 729400 To Goods Sent to Branch 522000 By Cash Sales 32000 Less: Return from customer (5700) To Gross Profit By Goods Returned by Branch 7800 (755700 × 50/150) 251900 By Closing stock (b/f) 188400 971900 971900 (ii) Dr. Memorandum Branch Debtors Account Cr. Particulars ` Particulars ` To Balance b/d 14,000 By Returns to Branch 5,700 To Credit Sales 7,29,400 By Discount allowed 500 By Bad Debts 1,000 By Cash received by Branch 6,11,000 By Balance c/d 1,25,200 7,43,400 7,43,400 (iv) Dr. Memorandum Branch Petty Cash Account Cr. Particulars ` Particulars ` To Balance b/d 250 By Petty Expenses A/c 8,000 To Remittance from H.O. 7,870 By Balance c/d 120 8,120 8,120

Problem 9. The following information and particulars relate to New Delhi Branch for the year 1989 - 1990 31/3/1989 (`) 31/3/1990 (`) Stock 50,000 75,000 Debtors 70,000 95,000 Petty Cash 250 120

Topper’s Institute Branch 5.11 Goods costing ` 5,50,000 was sold by the Branch @ 25% on cost. Cash sales amounted to `1,50,000 and the rest credit sales. Branch spent ` 30,000 for salaries, `12,000 for rent and ` 8,000 for petty expenses (all expenses were remitted by Head Office) You are requested to show the New Delhi Branch Account in the books of Head office for the year 1989-90 and prove your Solution by preparing a Branch Trading and Branch P/L A/c.

Solution Dr. New Delhi Branch Account Cr. Particulars ` Particulars ` To Opening Balances: By Cash A/c [Sent to H.O.) Branch Stock 50,000 Cash Sales 1,50,000 Branch Debtors 70,000 Collection from Debtors 5,12,500 6,62,500 Branch Petty Cash 250 By Closing Balances: To Goods sent to Branch. (W/N i) 5,75,000 Branch stock 75,000 To Cash: (sent by H.O.) Branch Debtors. 95,000 Salaries 30,000 Branch Petty cash. 120 Rent 12,000 Petty Exp. (W/N) 7,870 49,870 To Net Profit 87,500 8,32,620 8,32,620

Working Notes: Dr. (i) Memo. Branch Stock A/c. (at cost) Cr. Particulars ` Particulars ` To Balance b/d 50,000 By Cost of goods sold 5,50,000 To Goods sent by H.O.(Balancing figure) 5,75,000 By Balance c/d. 75,000

6,25,000 6,25.000 All expense are paid by H.O., therefore it is duty of Branch to sent all cash sales & coll. From debtor to H.O. No mark up for Goods sent is given, there fore we will assume goods sent at cost price to branch.

Dr. (ii) Memo. Branch Debtors A/c. Cr. Particulars ` Particulars ` To Balance b/d 70,000 By Cash (Bal. fig.) 5,12,500 To Credit sales 5,37,500 By Balance c/d. 95,000 6,07,500 6,07,500

Dr. (iii) Branch Petty Cash A/c. Cr. Particulars ` Particulars ` To Balance b/f 250 By Petty Expenses'(paid by branch) 8,000 To Cash (Received from H.O.) By Balance c/d. 120 Balancing figure. 7,870 8,120 8,120 Note: Total Sales = 5,50,000 + 1,37,500 = ` 6,87,500 Credit Sales = 6,87,500 –1,50,000 = ` 5,37,500

Branch Trading and Profit & Loss A/c Dr. (for the year ended 31st March, 89) Cr. Particulars ` Particulars ` To Opening Stock 50,000 By Sales: To Goods sent to branch 5,75,000 Cash sales 1,50,000 To Gross Profit c/d. 1,37,500 Credit Sales 5,37,500 ______By Closing stock 75,000 7,62,500 7,62,500 To Salaries. 30,000 By Gross Profit b/d 1,37,500

Topper’s Institute Branch 5.12 To Rent. 12,000 To Petty Expenses. 8,000 To Net profit 87,500 1,37,500 1,37,500

Problem 10. Shahrukh Ltd. of Delhi has a branch at Bhivani. Goods are invoiced to the branch at cost plus 25%. The branch does not maintain account books and all collections at the branch are remitted to head office. The expenses of the branch are reimbursed by the office. From the following particulars, prepare the branch account in the books of head office for the six months ending on 30th September, 2001. Particulars ` Particulars ` Opening Stock Bad debts 400 (at cost to head office) 55,000 Trade discount to customers Opening Debtors 15,000 (already taken into account Opening Furniture 12,000 while invoicing) 12,000 Opening Petty Cash 500 Goods sent to branch on 27.9.2001, Transactions for six months: received by branch on 5.10.2001 1,500 Goods received from head office 2, 25,000 Cash sent to branch for expenses 10,500 Cash sales 1, 95,000 Cash discount allowed to customers 800 Credit sales 80,000 Balances on 30.9.2001: Goods returned to head office 12,750 Stock 5,600 Normal loss 1,000 Debtors ? Sales returns by customers Petty cash 500 to branch 500 Depreciate Furniture @ 20%. Cash received from debtors 50,000 Bills receivable received from customers at branch 15,000

Solution Bhivani Branch Account

Particulars ` Particulars ` To Opening Balances: By Stock reserve, 13,750 Stock (` 55,000 + ` 13,750) 68,750 By Bank (Remittance): Debtors 15,000 Cash sales 1, 95,000 Furniture. 12,000 Cash from debtors 50,000 2, 45,000 Petty cash 500 By Goods sent to Branch To Goods. sent to branch A/c 2,26,500 (returns to HO) 12,750 (` 2,25,000 + ` 1,500) By Goods sent to branch A/c To Bank (expenses) 10,500 2,26,500 × 1/5 45,300 To Stock Reserve (1/5 of ` 7,100) 1,420 To Net Profit transferred to By Closing Balances: Profit and Loss A/c 41,280 Debtors 28,300 To Goods sent to Branch 2,550 Stock (` 5,600 + ` 1,500) 7,100 (12,750 × 1/5) Bills receivable 15,000 Furniture (12,000 × 90%) 10,800 Petty cash 500 3,78,500 3,78,500

Topper’s Institute Branch 5.13 Working Note: (1) Dr. Memorandum Branch Debtors Account Cr. Particulars ` Particulars ` To Balance b/d 15,000 By Sales returns 500 To Credit sales 80,000 By Bad debts' 400 By Bills receivable 15,000 By Bank 50,000 By Discount 800 By Balance c/d (b.f.) 28,300 95,000 95,000

Problem. 11 Ram of Chennai has a branch at Nagpur to which office, goods are invoiced at cost plus 25%. The branch makes sales both for cash and on credit. Branch expenses are paid direct from Head Office and the branch has to remit all cash received into the Head Office Bank Account at Nagpur. From the following details, relating to the year 2013, prepare the accounts in Head Office Ledger and ascertain Branch Profit as per stock and debtors method. Branch does not maintain any books of accounts, but sends weekly returns to head office: ` Goods received from head office at invoice price 1,20,000 Returns to head office at invoice price 2,400 Stock at Nagpur branch on 1.1.2013 at invoice price 12,000 Sales during the year – Cash 40,000 Credit 72,000 Debtors at Nagpur branch as on 1.1.2013 14,400 Cash received from debtors 64,000 Discounts allowed to debtors 1,200 Bad debts during the year 800 Sales returns at Nagpur branch 1,600 Salaries and wages at branch 12,000 Rent, rates and taxes at branch 3,600 Office expenses at Nagpur branch 1,200 Stock at branch on 31.12.2013 at invoice price 24,000 [P.M. Page No. 8.27, Q.15] Solution Goods sent to Branch A/c

Particulars ` Particulars ` To Shop stock (100%) 96,000 By Branch stock A/c 1,20,000 To Branch Adjustment By Shop stock (100%) 1,920  25  By Branch Adjustment 480 1,20,000  24,000 25  100  2,400 125 To Branch stock (return) (125%) 2,400 1,20,000 1,20,000

Branch Stock A/c Particulars ` Particulars ` To Balance b/d 12,000 By Branch Cash 40,000 To Goods sent to Branch 1,20,000 By Branch debtors 72,000 To Branch debtor (sales return) 1,600 By Goods sent to Branch (return to To Branch Adjustment A/c (b/f) 4,800 H.O.) 2,400 By c/d 24,000 1,38,400 1,38,400

Topper’s Institute Branch 5.14 Branch Debtors A/c

Particulars ` Particulars ` To Balance b/d 14,400 By Branch Cash 64,000 To Branch stock 72,000 By Branch discount 1,200 By Branch Bad debts 800 By Branch Stock 1,600 By c/d 18,800 86,400 86,400

Branch Cash A/c

Particulars ` Particulars ` To b/d - By Cash A/c 1,04,000 To Branch stock ( Cash sales) 40,000 (sent to H.O.) To Branch Debtor 64,000 By Branch expenses To Cash A/c 16,800 . S & W 12,000 (Sent to Branch by H.O.) . Rent 3,600 . Office expense 1,200 1,20,800 1,20,800

Branch Adjustment A/c

Particulars ` Particulars ` To Goods sent to By OSR  1  25 Branch2,400  480 12,000 2,400 125  5  To Closing S.R. By Goods sent to Branch By Branch Stock 24,000  25  4,800 24,000   125  4,800 To G.P. transfer to Branch P/L A/c 25,920 31,200 31,200

Branch P/L A/c

Particulars ` Particulars ` To Branch discount 1,200 By G.P. 25,920 To Branch Bad debts 800 To Branch expense: . S & W 1,200 . Rent 3,600 . Office expense 1,200 To Net profit transfer to General P/L A/c 7,120 25,920 25,920

Problem. 12 Sell Well who carried on a retail business opened a branch X on January 1st, 2013 where all sales were on credit basis. All goods required by the branch were supplied from the Head Office and were invoiced to the branch at 10% above cost. The following were the transactions:

Topper’s Institute Branch 5.15 Jan. ‘2013 Feb. ‘2013 March ‘2013 ` ` ` Goods sent to Branch (Purchase Price) 40,000 50,000 60,000 Sales as shown by the branch monthly report 38,000 42,000 55,000 Cash received from Debtors and remitted to H.O. 20,000 51,000 35,000 Returns to H.O. (Invoice price to Branch) 1,200 600 2,400 The stock of goods held by the branch on March 31, 2013 amounted to ` 53,400 at invoice to branch. Record these transactions in the Head Office books, showing balances as on 31st March, 2013 and the branch gross profit for three months ended on that date. All workings should form part of your solution [P.M. Page No. 8.21, Illus.8] Solution Branch Stock A/c

Particulars ` Particulars ` To Balance b/d Nil By Goods sent to Branch (return) 4,200 To Goods sent to Branch 1,65,000 By Sales Branch debtor 1,35,000 (1,50,000 + 10%) By c/d 53,400 To Branch Adjustment A/c 27,600 1,92,600 1,92,600

Branch Debtor A/c

Particulars ` Particulars ` To Balance b/d Nil By Branch Bank 1,06,000 To Branch Stock 1,35,000 By c/d 29,000 1,35,000 1,35,000

Branch Adjustment A/c

Particulars ` Particulars `  10  By OSR Nil To C.S.R. 53,400  4,855 By Goods sent to Branch 15,000  110  By Branch Stock (Sales above I.P.) 27,600 To Goods sent to Branch  10  4,200   110  382 To Gross Profit 37,363 42,600 42,600

Problem. 13 Modi Sales Ltd. Modinagar has branch at Delhi. Goods are supplied to branch at a profit of 20% on sale price. A/cs are kept at head office from where all expenses (except petty expenses) are paid. Such petty expenses are paid by the branch which is allowed to maintain petty cash balance of ` 500 on imprest system. From the following balances as shown by books, prepare Branch A/c. Particulars ` Particulars ` Balance as on 1st Jan., 1992: Petty cash in hand at Branch 500 Cash paid by branch to creditors 8,000 Creditors as on 31.12.1992 3,000 Stock at Invoice price 20,000 Payments made by H.O.: Sundry Debtors at Branch 4,000 Rent for one year (Paid on 1st April 92) 2,000 Sundry Creditors at Branch 1,200 Salaries 3,000

Topper’s Institute Branch 5.16 Furniture at Branch 10,000 Insurance paid for the year ending 31st Rent prepaid (up to 31st March 1992) 400 March, 1993 800 Transactions for the year ended Payment made by Branch: 31st Dec., 1992 were follows: Petty Expenses 300 Goods sent to Branch 1,05,000 Balance on 31 Dec., 1992 Cash Sales at Branch 80,000 Stock at cost 30,000 Credit Sales at Branch 45,000 (Cost of goods supplied by H.O.) Allowances to Debtors 500 Write off Dep. @ 10% p.a. on furniture. Bad debts written off 200 Collection from Debtors 40,000

Solution Delhi Branch Account Dr. (for the period from 1.1.1992 to 31.12.1992) Cr. Particulars ` Particulars ` To Opening Balances: By Opening Balances: Petty Cash 500 Creditors 1,200 Stock 20,000 By Cash (remitted by Branch) 1,12,000 Debtors 4,000 By Stock Reserve Furniture 10,000 (20,000  20/100) 4,000 Prepaid Rent 400 34,900 By Goods sent to Branch To Goods sent to Branch 1,05,000 (1,05,000  20/100) 21,000 To Cash : By Closing Balance: Rent 2,000 Petty Cash 500 Salaries 3,000 Stock 37,500 Insurance 800 5,800 Debtors 8,300 Furniture 9,000 To Cash (Petty Expenses) 300 Prepaid rent 500 To Stock Reserve (37,500  20 /100 7,500 Prepaid Insurance 200 To Closing Balance Creditors 3,000 To Net Profit 37,700 1,94,200 1,94,200

Working Notes: (i) Calculation of Closing Debtors. Dr. Memorandum Branch Debtors Account Cr. Particulars ` Particulars ` To Balance b/f 4,000 By Allowances 500 To Sales (Credit) 45,000 By Cash Received 40,000 By Bad Debts 200 By Balance c/d 8,300 49,000 49,000

(ii) Petty cash is maintained on imprest system, Head Office will reimburse petty expenses paid by Branch. Therefore, closing balance of petty cash will remain at ` 500. (iii) Calculation of cash remitted by Branch to Head Office.

Cash Sales 80,000 Collections from Debtors 40,000 1,20,000 Less: Paid to Creditors 8,000 Cash remitted to H.O. 1,12,000 (iv) Prepaid Rent as on 31.12.92

Topper’s Institute Branch 5.17 Rent paid for the period from 1.4.92 to 31.3.93 2,000 Prepaid for 3 months (2000  3/12) 500

Problem. 14 Widespread Ltd, invoices goods to its branch at cost plus 20% The branch sells goods for cash as well as on credit The branch meets its expenses out off cash collected from its debtors and cash sales and remits the balance of cash to head office after withholding ` 10,000 necessary for meeting immediate requirements of cash, On 31st March, 2012 the assets at the branch were as follows: ` ('000) Cash in Hand 10 Trade Debtors 384 Stock, at Invoice Price 1,080 Furniture and Fitting 500 During the accounting year 31st March, 2013 the invoice price of goods dispatched by the head office to the branch amounted to ` 1 crore 32 lakh, Out of the goods received by it, the branch sent back to head office goods invoiced at ` 72,000, Other transactions at the branch during the year were as follows: ` ('000) Cash Sales 9,700 Credit Sales 3,140 Cash collected by Branch from Credit Customers 2,842 Cash Discount allowed to Debtors 58 Returns by Customers 102 Bad Debts written off 37 Expenses paid by Branch 842 On 1st January 2013 the branch purchase new furniture for ` 1 lakh for which payment was made by head office through a cheque. On 31st March, 2013 branch expenses amounting to ` 6,000 were outstanding and cash in hand was again ` 10,000, Furniture is subject to depreciation @ 16% per annum on diminishing balances method. Prepare Branch Account in the books of head office for the year ended 31st March, 2013.

Solution Branch A/c

Particulars Amount Particulars Amount To b/d By O.S.R. . Cash 10  20  . Debtor 384 1,080  180 . Stock 1,080  120  . F & F 500 By Goods sent to Branch(return) 72 To Goods sent to Branch 13,200 By Cash A/c 11,700 To Bank A/c (sent to Branch) 100 By Goods sent to Branch To Goods sent to Branch  20  13,200   20  120 2,200 72     12 By c/d  120  To C.S.R. . Stock . Debtors 1,470 20 485 1,470 . Cash 120 245 . Furniture 10 To c/d 516 . o/s Liab. To N.P. 6 1,096 16,621 16,621

Topper’s Institute Branch 5.18 Furniture A/c

Particulars Amount Particulars Amount To b/d 500 By Dep. To Bank 100 . 500 × 16% 80 . 100 ×16% × 3/12 4 By c/d 516 600 600

Branch Debtors A/c

Particulars Amount Particulars Amount To b/d 384 By Cash dis. 58 To Branch Stock 3,140 By Cash collected 2,842 By return 102 By bad debts 37 By c/d (b/f) 485 3,524 3,524

Branch Cash A/c

Particulars Amount Particulars Amount To b/d 10 By Branch expense 842 To Branch Stock 9,700 By Remittance to H.O. (b/f) 11,700 To Branch Debtors 2,842 By balance c/d 10 12,552 12,552

Branch Stock A/c

Particulars Amount Particulars Amount To b/d 1,080 By Cash Sales 9,700 To Goods received from H.O. 13,200 By Credit Sales 3,140 To Good returned by customers 102 By returned to H.O. 72 By c/d 1,470 14,382 14,382

Problem. 15

Red and White of Mumbai started a branch at Bangalore on 1.4.2012 to which goods were sent at 20% above cost. The branch makes both cash sales and credit sales. Branch expenses are met from branch cash and balance money remitted to H.O. The branch does not maintain double entry books of account and necessary accounts relating to branch are maintained in H.O. Following further details are given for the year ending on 31.3.2013: ` Cost of goods sent to branch 1,00,000 Goods received by branch till 31.3.2013 at Invoice price 1,08,000 Credit sales for the year 1,16,000 Closing debtors on 31.3.2013 41,600 Bad debts written off during the year 400 Cash remitted to H.O. 86,000 Closing cash on hand at branch on 31.3.2013 4,000 Cash remitted by H.O. to branch during the year 6,000 Closing stock in hand at branch at invoice year 12,000 Expenses incurred at branch 24,000

Topper’s Institute Branch 5.19 Draw up the necessary Ledger Accounts like Branch Debtors Account, Branch Stock Account, Goods sent to Branch Account, Branch Cash Account, Branch Expenses Account and Branch Adjustment A/c for ascertaining gross profit and Branch Profit and Loss P/L for ascertaining Branch profit. [P.M. Page No. 8.20, Q.11]

Problem. 16 Following is the information of the Jammu branch of Best Ltd., New Delhi for the year ending 31 st March 2010 from the following:

(1) Goods are invoiced to the branch at cost plus 20%. (2) The sale price is cost plus 50%. (3) Other information: ` Stock as 01-04-2009 2,20,000 Goods sent during the year 11,00,000 Sales during the year 12,00,000 Expenses incurred at the branch 45,000 Ascertain (i) the profit earned by the branch during the year (ii) branch stock reserve in respect of unrealized profit. [Nov.-2010]

Solution (i) Calculation of profit earned by the branch In the books of Jammu Branch Trading Branch Particulars Amount (`) Particulars Amount (`) To Opening Stock 2,20,000 By Sales 12,00,000 To Goods sent to branch A/c 11,00,000 By Closing stock (b/f) 3,60,000 To Gross profit c/d (12,00,000× 30/150) 2,40,000 15,60,000 15,60,000 To expense 45,000 By Gross profit 2,40,000 To Net profit 1,95,000 2,40,000 2,40,000 (ii) Closing Stock reserve in respect of unrealized profit = ` 3,60,000 × (20/120) = ` 60,000 Opening stock reserve = 22000 × 20/120 = 36,667

Problem. 17 T of Calcutta has a branch at Dibrugarh. The branch does not maintain separate books of accounts. The branch has the following assets and liabilities on 31st August, 1997 and 30th September 1997. Particulars 31st August 1997(`) 30th September 1997(`) Stock of tea 1,80,000 1,50,000 Advance to suppliers 5,00,000 4,50,000 Bank Balance 75,000 1,00,000 Prepaid expenses 10,000 12,000 Outstanding expenses 13,000 11,000 Creditors for purchase 3,00,000 to be ascertained

During the month, Dibrugarh branch. (a) Received by electronic mail transfer ` 10,00,000 from Calcutta head office: (b) Purchased tea worth ` 12,00,000; (c) Sent tea costing ` 12,30,000 to Calcutta freight of ` 80,000 being payable at the destination by the receiver; (d) Spent ` 25,000 on office expenses. (e) Paid ` 3,00,000 as advanced to suppliers; (f) Paid ` 6,50,000 to suppliers in settlement of outstanding dues.

Topper’s Institute Branch 5.20 In addition T informs you that the Calcutta office has directly paid ` 3,50,000 to Dibrugrh supplies by cheques drawn on bank accounts in Calcutta during the month. T informs you that for the purpose of accounting, Dibrugarh branch is not treated as an outsider. He wants you to write the detailed accounts relating to the transactions of the Dibrugarh branch as would appear in the books of Calcutta Head Office. [Nov-1997]

Solution Branch Stock Account Particulars ` Particulars ` To Balance b/d 1,80,000 By Goods Received 12,30,000 To Branch Creditors 12,00,000 from Branch By Balance c/d 1,50,000

13,80,000 13,80,000 Dr. Branch Advance to Creditors A/c Cr. Particulars ` Particulars ` To Balance b/d 5,00,000 By Creditors(Adjustment.) 3,50,000 To Branch Bank. 3,00,000 By Balance c/d 4,50,000

8,00,000 8,00,000 Dr. Branch Creditors Account Cr. Particulars ` Particulars ` To BranchAdvance to 3,50,000 By Balance b/d 3,00,000 Creditor By Branch stock. (Purchases) 12,00,000 To Branch Bank 6,50,000 To Cash (payment by H.O.) 3,50,000 To Balance c/d. 1,50,000 15,00,000 15,00,000 Dr. Branch Bank Account Cr. Particulars ` Particulars ` To Balance b/d 75,000 By Advance to Suppliers 3,00,000 To Cash A/c (H.O.) 10,00,000 By Creditors 6,50,000 By Expenses. 25,000 By Balance c/d 1,00,000 10,75,000 10,75,000 Dr. Branch Expenses Account Cr. Particulars ` Particulars. ` To Prepaid Exps. At begning 10,000 By Outstanding Exps.at beginning 13,000 To Branch Bank. 25,000 By Prepaid Exps. 12,000 To Outstanding Exps. At end 11,000 By Profit and Loss 21, 000 46,000 46,000

Problem. 18 M/s Bright &., Co with its head office in Madras, invoiced goods to its branch at Bombay, at 20% less than the catalogue price which is cost plus 50%, with instructions that cash sales were to be made at invoice price and credit sales at catalogue price. Discount on credit sale at 15% on prompt payment will be allowed. From the following particulars available from the branch, prepare the branch trading and profit and loss account for the year ended 31st March, 1992 in the head office books, so to show the actual profit / loss of the branch for the year.

Topper’s Institute Branch 5.21 Particulars ` Particulars ` Stock 1.4.1991 (Invoice price) 12,000 Discount allowed to debtors 13,365 Goods received from head office Expenses at the branch 6,000 (invoice price ) 1,32,000 Remittance to head office 1,20,000 Debtors on 1.4.1991 10,000 Debtors on 31/3/1992 11,000 Sales (Cash ) 46,000 Cash in hand on 31/3/1992 5,635 Sales (Credit) 1,00,000 Stock on 31/3/1992 (invoice price) 15,000 Cash realised from debtors 85,635 It was reported that a part of stock at the branch was lost by fire during the year whose value is to be ascertained; and provision should be made for discount to be allowed to debtors as on 31st March, 1992 on the basis of the year’s trend of prompt payment.

Solution Trading and Profit & Loss Account For the year ended 31st March, 1992 Particulars ` Particulars ` To Opening Stock(12,000×100/120) 10,000 By Sales To Goods received from Cash 46,000 H.O. (1,32,000 × 100/120) 1,10,000 Credit 1,00,000 1,46,000 To Gross Profit c/d 41,000 By loss of Stock by Fire (B/f) 2,500 ______By Closing Stock (15,000×100/120) 12,500 1,61,000 1,61,000 To Branch Expenses 6,000 By Gross Profit b/d 41,000 To Discount allowed 13,365 To Provision for Discount (W/N) 1,485 To Abnormal loss 2,500 To General Profit & Loss A/c 17,650 41,000 41,000

Cost Cost Consume 100% price 150% 100% I.P. Credit 100% Sales

Discount 15% for prompt payment Working Note G.P = Sales× G.P. Ratio Cash sales = 46,000×20/120 = 7,667 Credit sales = 10,0,000×50/150=33,333 Total G.P. 41,000

Debtors A/c Particulars Amount Particulars Amount To balance b/d 10,000 By cash A/c 85,635 To credit sales 1,00,000 By Discount 13,365 By balance c/d 11,000 1,10,000 1,10,000

Topper’s Institute Branch 5.22 Year trend: Total Debtor Settlement Discount P.Y. 99,000 13,365 N.Y. 11,000 ? 13,365/99,000×11,000 = 1,485 – Provisions to be made on the basis of past year trend.

Problem. 19 A Ltd. has its head office at New Delhi and two branches at Calicut and Mangalore. The branches purchase goods independently. The Calicut branch makes a profit of 33-1/3% on cost while the Mangalore branch makes a profit of 20% on sales. Goods are also supplied by one branch to another at the respective sales price. From the following particulars, prepare the Trading and Profit and Loss Account of each of the branches and find out the profit or loss made by each of them after taking into account the reserve for unrealized profits: Particulars Calicut Branch (`) Mangalore Branch (`) Opening Stock 80,000 60,000 Purchases (including Inter Branch Transfers) 4,00,000 5,00,000 Sales 5,60,000 5,91,250 Chargeable Expenses 30,000 55,000 Closing Stock 60,000 87,000 Office and Adm. Expenses 26,500 14,000 Selling and Distribution Expenses 30,000 20,000 Information: (i) Opening stock at Calicut Branch includes goods of ` 20,000 taken from Mangalore Branch. (ii) Opening stock at Mangalore Branch includes goods of ` 34,000 taken from Calicut Branch at cost to receiving branch. (iii) The Calicut Branch sales include transfer of goods to Mangalore Branch at selling price ` 40,000. (iv) The sales at Mangalore Branch include transfer of goods to Calicut Branch at selling price ` 30,000. (v) Closing stock at Calicut Branch includes goods received from Mangalore Branch ` 10,000. (vi) Closing stock at Mangalore Branch includes goods of ` 8,000 received from Calicut Branch.

Solution Calicut Branch Trading and Profit and Loss Account Dr. for the year ending on... Cr. Particulars ` Particulars ` To Opening Stock By Sales (including ` 40,000 to M. Branch) 5,60,000 (including ` 20,000 from M. Branch) 80,000 By Closing Stock To Purchases 4,00,000 (including ` 10,000 from M. Branch) 60,000 To Chargeable Expenses 30,000 To Gross Profit c/d

(before making adjustment for unrealised profit) l,10,000 ______6,20,000 6,20,000 To Stock Reserve (for unrealised By Gross Profit b/d l,10,000 profit in Closing Stock lying at By Stock Reserve unrealised Mangalore Branch) profit in Opening Stock lying (` 8,000  25/100) 2,000 at Mangalore Branch) 8,500 To Office & Adm. Expenses 26,500 (` 34,000  25/100) To Selling & Distribution Expenses 30,000 To Net Profit 60,000 1,18,500 1,18,500

Topper’s Institute Branch 5.23

Mangalore Branch Trading and Profit and Loss Account Dr. for the year ending on...... Cr.

Particulars ` Particulars ` To Opening Stock 60,000 By Sales 5,91,250 (including ` 34,000 from C. Branch) (including ` 30,000 to C. Branch) To Purchases 5,00,000 By Closing Stock 87,000

To Chargeable Expenses 55,000 (including ` 8,000 To Gross Profit c/d 63,250 from C. Branch) (before making adjustment for ______unrealised profit) 6,78,250 6,78,250 By Gross Profit b/d 63,250 To Stock Reserve (for unrealised profit on By Stock Reserve (for unrealised profit Closing Stock lying at Calicut Branch) Closing Stock lying at Calicut Branch) [` 10,000  20/100] 2,000 [` 20,000  20/100] 4,000 To Office & Adm. Exp. 14,000 To Selling & Distribution Expenses 20,000 To Net Profit 31,250 67,250 67,250

Problem. 20

M/s Maheshwari Bros. with their head office at Bombay have a branch at Sholapur. They supply goods to its branch at selling price less 20%. The company as well as the branch sell goods to their consumers at profit of 100% on cost. Maheshwari Bros. also sell goods to their approved stockiest at the same price at which they are selling to their branch at Sholapur. From the following particulars prepare trading accounts of the head office and of the branch for the second year of their business and show the provision for unrealized profits of stock at the branch comprising of goods supplied by the head office. Particulars Head office (`) Branch (`) Stock in the beginning 3,000 160 Purchase during the year 25,600 Goods sent to the branch 4,000 Goods received from the H. O. 4,000 Goods sold to approved stockiest 6,000 Goods sold to customers 12,000 3,600 Expenses 200 100 Solution Trading & P/L A/c Particulars H.O Branch H.O Branch To op Stock 3,000 160 By Sales To Purchase 25,600 Stock 6000 To GR from H.O. 4,000 Customer 12,000 3,600 To G. Profit 9,750 720 GSTB A/c 4,000 --- C. Stock 16,350 1,280 38,350 4,880 38,350 4,880 To Exp 200 100 By G.P 9,750 720 To Stock Reserve 480 By Stock reserve (op.) 60 (1,280× 60/160) (160 × 60/160)

To Net profit 9,130 620 9,810 720 9,810 720

Topper’s Institute Branch 5.24 Working Note Calculate Of Stock (Closing) Particulars ` ` Opening stock 3,000 160 + Purchase 25,600 + GRF H.O 4,000 (-) GST B A/c (2,500) (-) Sales :- Stock (3,750) Customer (6,000) 2,880 C. stock 16,350 1,280 32,7000 8320 Working Note. 1 Cost =100 + Total profit =100 Selling price 200

Less: Reduction for dealer (200×20%) 40 Whole sale price (dealer price) 160

Working Note.2

Calculation of G.P. = Sales × G.P. Ratio

H.O. Sales to customer = 12,000×100/200 = 6,000 Sales to Branch = 4,000×60/160 = 1,500 Sales to stockiest = 6,000×60/160 = 2,250 Total G.P. 9,750 Branch: Sales to customer = 3600×40/200 = 720 Problem. 21 New Textiles Limited operate a number of retail shops to which goods are invoiced at wholesale price which is cost plus 20%. Shops sell the goods at the list price which is wholesale price plus 10%. From the following particulars ascertain the profit or loss for 2002 at shop No. 143. ` Stock at shop on January 1,2002 15,000 Goods invoiced to shop during 2002 1,40,000 Sale at the shop during the year 1,54,770 Goods destroyed by accident (retail value) 660 Expenses at the shop 7,200 Solution Trading A/c of Shop Particulars ` Particulars ` To opening stock 15,000 By sales 1,54,770 To GRF H.O. 1,40,000 By Goods Lost(660 × 120/132) 600 To Gross profit(1,54,770×12/132) 14,070 By C. Stock (b/f) 13,700 1,69,070 1,69,070 To Expenses 7,200 By G.P 14,070 To Loss by accident (abnormal 600 loss) To Net profit 6,270 14,070 14,070

Topper’s Institute Branch 5.25

Problem. 22

Beta Ltd. having head office at Mumbai has a branch at Nagpur. The head office does wholesale trade only at cost plus 80%. The goods are sent to branch at the wholesale price viz. cost plus 80%. The branch at Nagpur is wholly engaged in retail trade and the goods are sold at cost to H. O. plus 100%. Following details are furnished for the year ended 31st March, 2013: Head Office Branch ` ` Opening Stock (as on 1.4.2012) 2,25,000 - Purchases 25,50,000 - Goods sent to branch (Cost to H. O. plus 80%) 9,54,000 - Sales 27,81,000 9,50,000 Office Expenses 90,000 8,500 Selling Expenses 72,000 6,300 Staff Salary 65,000 12,000 Required: Prepare trading and profit and loss Account of the Head office and Branch for the year ended 31st march, 2013.

Solution Trading and Profit and loss A/c of Beta Ltd. For the year ended 31st March 2013 Particulars H. O. Branch Particulars H. O. Branch ` ` ` ` To Opening Stock 2,25,000 - By Sales 27,81,000 9,50,000 To Purchase 25,50,000 - By Goods sent to branch 9,54,000 - To Goods received from By Closing Stock(b/f) 7,00,000 99,000 head office - 9,54,000 To Gross Profit (w/n) 16,60,000 95,000 44,35,000 10,49,000 44,35,000 10,49,000 To Office Expenses 90,000 8,500 By Gross Profit b/d 16,60,000 95,000 To Selling Expenses 72,000 6,300 To Staff Salaries 65,000 12,000 To Closing Stock Reserve 44,000 - To Net Profit 13,89,000 68,200 16,60,000 95,000 16,60,000 95,000

Working Notes (i) Gross Profit of Branch = ` 9,50,000 × 20/200= 95,000 (ii) Gross Profit of H.O. = ` (27,81,000+9,54,000) × 80/100= 16,60,000

Problem. 23 XYZ Company is having its Branch at Kolkata. Goods are invoiced to the branch at 20% profit on sale. Branch has been instructed to send all cash daily to head office. All expenses are paid by head office except petty expenses which are met by the Branch Manager. From the following particulars prepare branch 'account in the books of Head Office. Particulars ` Particulars ` Stock on 1st April 2010 (invoice price) 30,000 Discount allowed to debtors 160 Sundry Debtors on 1st April, 2010 18,000 Expenses paid by head office : Cash in hand as on 1st April, 2010 800 Rent 1,800 Office furniture on 1st April, 2010. 3,000 Salary 3,200 Good invoiced from the head office Stationary & Printing 800 (invoice price) 1,60,000 Petty exp. Paid by the branch 600 Goods return to Head Office 2,000 Depreciation to be provided on Goods return by debtors 960 branch furniture at 10% p.a

Topper’s Institute Branch 5.26 Cash received from debtors 60,000 Stock on 31st March, 2011 (at Cash Sales 1,00,000 invoice price) 28,000 Credit sales 60,000 [May-2011] Solution Kolkata Branch A/c Particulars Amount Particulars Amount To b/d By Goods sent to H.O. 2,000 Stock (IP) 30,000 By Cash: Debtor 18,000 Cash sales 1,00,000 Cash 800 Collection from debtor 60,000 1,60,000 Furniture 3,000 To Goods sent to Branch 1,60,000 By c/d Petty cash (800-600) 200 To Cash A/c (paid by H.O.) Furniture (3,000×90%) 2,700 Rent 1,800 Stock 28,000 Salary 3,200 Debtor 16,880 Stationary and printing 800 By OSR (30000×20%) 6,000 By Goods sent to Branch To CSR (28000×20%) 5,600 (1,60,000×20%) 32,000 To Goods sent to Branch 400 (2000×20%) To N.P. 24,180 2,20,780 2,20,780 Working Note 1. Memorandum Debtor A/c Particulars ` Particulars ` To b/d 18,000 By Bank. 60,000 To Credit Sales 60,000 By Discount 160 By Sales return 960 By C/d 16880 78,000 78,000

Problem. 24 A Bombay firm whose accounting year ends on 31st December has two branches-one at Allahabad and the other at Varanasi. The branches keep a complete set of books on 31st December, 1986 the Allahabad and Varanasi Branch Accounts in the Bombay books showed debit balances of ` 30,450 and ` 45,000 Respectively before taking the following information into account: (a) Goods valued ` 2,000 were transferred from Allahabad to Varanasi under instructions from Head Office. (b) The Allahabad Branch collected ` 2,500 from an Allahabad customer of the Head office. (c) The Varanasi Branch paid ` 5,000 for certain goods purchased by the Head Office in Varanasi. (d) ` 5,000 remitted by the Allahabad Branch on 29th December, 1986, was received on 3rd January following. (e) The Varanasi Branch received on behalf of the Head Office ` 1,500 as dividend from a Varanasi Company. Pass journal entries in the Head Office books and then write up the two Branch Accounts therein.

Topper’s Institute Branch 5.27

Solution In the books of the Head Office Journal Date Particulars Dr. ` Cr. ` 1993 (i) Varanasi Branch A/c. Dr. 2,000 Dec. 31 To Allahabad Branch A/c. 2,000 (Being goods transferred from Allahabad branch to Varanasi branch under head office instruction)

(ii) Allahabad Branch A/c. Dr. 2,500 To Sundry Debtors A/c. 2,500 (Being cash collected by Allahabad branch from head office debtors at Allahabad)

(iii) Purchases A/c. Dr. 5,000 To Varanasi Branch A/c. 5,000 (Being the amount paid by Varanasi branch in respect of purchases of head office)

(iv) Cash-in-Transit A/c. Dr. 5,000 To Allahabad Branch A/c. 5,000 (Being cash remitted by Allahabad branch on 29th December 1993 received by the head office on 3rd Jan. 1994)

(v) Varanasi Branch A/c. Dr. 1,500 To Dividend received A/c. 1,500 Dr. Allahabad Branch Account Cr. Date Particulars ` Date Particulars ` 31.12.1993 To Balance b/d 30,450 31.12.1993 By Varanasi Branch A/c 2,000 To Sundry Debtors A/c. 2,500 By Cash in Transit A/c 5,000 By Balance c/d 25,950 32,950 32,950 Cr. Varanasi Branch Account Cr. Date Particulars ` Date Particulars ` 31.12.93 To Balance b/d 45,000 31.12.93 By Purchases A/c 5,000 To Allahabad Branch A/c 2,000 By Balance c/d 43,500 To Dividend 1,500 48,500 48,500

Problem. 25 Head office passes adjustment entry at the end of each month to adjust the position arising of inter-branch transactions during the month. From the following inter-branch transactions in January 1996, make the entry in the books of Head Office; (a) Bombay Branch : 1. Received Goods ` 6,000 from Calcutta branch, ` 4,000 from Patna branch. 2. Sent Goods to : ` 10,000 to Patna, ` 8,000 to Calcutta. 3. Received B/R ` 6,000 from Patna 4. Sent Acceptance : ` 4,000 to Calcutta, ` 2,000 to Patna (b) Madras Branch (Apart from above) 1. Received Goods ` 10,000 from Calcutta. ` 4,000 from Bombay

Topper’s Institute Branch 5.28 2. Cash sent ` 2,000 to Calcutta ` 6,000 to Bombay. (c) Calcutta Branch (Apart from the above); 1. Sent Goods to Patna : ` 6,000 2. Paid B/P : ` 4,000 to Patna. ` 4,000 cash to Patna.

Solution Statement of inter branch transfer

Particulars Bombay Calcutta Patna Madras Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Received goods 10,000 6,000 4,000 Sent goods 18,000 8,000 10,000 Received B/R 6,000 6,000 Sent acceptance 6,000 4,000 2,000 Received goods 4,000 10,000 14,000 Cash sent 6,000 2,000 8,000 Goods sent 6,000 6,000 B/P given and cash 8,000 8,000 Total 22,000 28,000 14,000 30,000 26,000 10,000 14,000 8,000 Difference 6,000 cr. 16,000 16,000 6,000 cr. cr. cr.

Adjustment entry at the end of month: Patna branch a/c……… Dr. 16,000 Madras branch a/c……… Dr. 6,000 To Bombay branch a/c 6,000 To Calcutta branch a/c 16,000

Problem. 26 Show adjustment Journal entry in the books of Head Office at the end of April, 2003 for incorporation of inter- branch transactions assuming that only Head Office maintains different branch accounts in its books. a. Delhi Branch: (1) Received goods from Mumbai – ` 35,000 and ` 15,000 from Kolkata. (2) Sent goods to Chennai – ` 25,000, Kolkata – ` 20,000. (3) Bill Receivable received – ` 20,000 from Chennai (4) Acceptances sent to – Mumbai – ` 25,000, Kolkata – ` 10,000 b. Mumbai Branch (part from the above): (5) Received goods from Kolkata - ` 15,000, Delhi 20,000 (6) Cash sent to Delhi – ` 15,000, Kolkata – ` 7,000. c. Chennai Branch (part from the above). (7) Received goods from Kolkata – ` 30,000 (8) Acceptances and Cash sent to Kolkata – ` 20,000 and ` 10,000, respectively. d. Kolkata Branch (apart from the above) : (9) Sent goods to Chennai – ` 35,000. (10) Paid cash to Chennai – ` 15,000. (11) Acceptances sent to Chennai – ` 15,000. All working should form part of the answer.

Topper’s Institute Branch 5.29

Solution Adjustment Table

Delhi Br. Mumbai Kolkata Chennai Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. 50,000 – – 35,000 – 15,000 – – – 45,000 – – 20,000 – 25,000 – 20,000 – – – – – – 20,000 – 35,000 25,000 – 10,000 – – – – 20,000 35,000 – – 15,000 – – 15,000 – – 22,000 7,000 – – – – – – – – 33,000 30,000 – – – – – 30,000 – – 30,000 – – – – – 35,000 35,000 – – – – - – 15,000 15,000 15,000 – – 3,000 58,000 15,000 15,000 70,000 10,000 10,000 60,000 60,000 1,10,000 1,05,000 Adjustment entry in the books of H.O. Mumbai Br. Dr. 3,000 Chennai Br. Dr. 70,000 To Delhi Br. A/c 15,000 To Kolkata Br. A/c 58,000

Problem. 27 On 1st April, 2001, a head office purchased a plant costing ` 66,000 for the branch. On 1st Jan, 2002, the branch purchased furniture for ` 10,000. The rate of depreciation on plant is 33-1/3% p.a. and on furniture 10% p.a. The accounting year of the head office and branch is the financial year. Give the necessary journal entries in the books of H.O. and Branch if fixed assets accounts are maintained (a) at Head Office (b) at Branch.

Solution (a) If Fixed Assets Accounts are maintained at H.O. (i) Journal of Head Office Date Particulars Dr. (`) Cr. (`) 01.04.2001 Branch Plant A/c Dr. 66,000 To Cash A/c 66,000 (Being the Plant purchased for Branch) 01.01.2002 Branch Furniture A/c Dr. 10,000 To Branch A/c 10,000 (Being the Furniture purchased by Branch) 31.03.2002 Branch A/c Dr. 22,250 To Branch Plant A/c 22,000 To Branch Furniture A/c 250 (Being the depreciation provided) (ii) Journal of Branch Date Particulars Dr. (`) Cr. (`) 01.04.2001 No Entry 01.01.2002 Head Office A/c Dr. 10,000 To Cash A/c 10,000 (Being Furniture purchased) 31.03.2002 Depreciation A/c Dr. 22,250

Topper’s Institute Branch 5.30 To H.O. A/c 22,250 (Being the depreciation provided) (b) If Fixed Assets Accounts are maintained at Branch

(i) Journal of Head Office Date Particulars' Dr. (`) Cr. (`) 01.04.2001 Branch A/c 66,000 To Cash A/c Dr. 66,000 (Being Plant purchased for Branch) 01.08.2002 No Entry 31.03.2002 No Entry (ii) Journal of Branch

Date Particulars Dr. (`) Cr. (`) 01.04.2001 Plant A/c Dr. 66,000 To H.O. A/c 66,000 (Being Plant purchased by H.O.) 01.01.2002 Furniture A/c Dr. 10,000 To Cash A/c 10,000 (Being Furniture Purchased) 01.03.2002 Depreciation A/c Dr. 22,250 To Plant A/c 22,000 To Furniture A/c 250 (Being the depreciation provided)

Problem. 28 Alphs & Co., having head office in Mumbai has a branch in Nagpur. The branch at Nagpur is an independent branch maintaining separate books of account. On 31.3.2007, it was found that the goods dispatched by head office for ` 2,00,000 was received by the branch only to the extent of ` 1,50,000. The balance goods are in transit. What is the accounting entry to be passed by the branch for recording the goods in transit, in its books? [May – 2007] Solution

Nagpur branch must include the inventory in its books as goods in transit. The following journal entry must be passed by the branch: Goods in Transit A/c Dr. 50,000 To Head Office A/c 50,000 (Being Goods sent by Head Office is still in transit on the closing date)

Problem. 29 Goods worth ` 50,000 sent by head office but the branch has received till the closing date goods worth ` 40,000. Give journal entry in the books of H.O. and branch for goods in transit. [Nov – 2008] Solution Goods in transit = Goods sent by HO = Goods received by Branch = 50,000 – 40,000 = ` 10,000

Topper’s Institute Branch 5.31 The following journal entries may be passed: In the books of H.O. Particulars ` ` Goods in Transit A/c Dr. 10,000 10,000 To Branch (Being goods sent by HO still in transit) Goods in Transit A/c Dr. 10,000 To H.O. A/c 10,000 (Being Goods sent by Head Office is still in transit on the closing date)

Problem. 30 Global Limited has a branch which closes its books of account every year on 31st March. This is an independent branch which maintains comprehensive books of account for recording their transactions. You are required to show journal entries in the books of branch on 31st March. 2011 to rectify or adjust the following: (i) Head Office allocates ` 1,35,000 to the branch as head office expenses, which have not yet been recorded by branch. (ii) Depreciation of branch fixed assets, whose accounts are kept by head office in its books, not yet recorded in the branch books, ` 1,15,000 (iii) Branch paid ` 1,40,000 as salary to an official from head office on visit to branch and debited the amount to its Salaries Account. (iv) Head Office collected ` 1,30,000 directly from a branch customer on behalf of the branch, but no intimation was received earlier by the branch. Now the branch learns about it. (v) It is learnt that a remittance of ` 1,50,000 sent by the branch has not been received by head office till date. [Nov.-2011] Solution In the books of Branch Journal Entries Date Particular’s Dr.(`) Cr. (`) (i) Head Office Expenses Dr. 1,35,000 To Global Limited (H.O.) A/c 1,35,000 (Being expenses allocated to branch by head office) (ii) Depreciation A/c Dr. 1,15,000 To Global Limited (H.O.) A/c 1,15,000 (Being depreciation on fixed assets of branch, whose account are maintained by head office) (iii) Global Limited (H.O.) A/c Dr. 1,40,000 To Salaries A/c 1,40,000 (Being the rectification of salary paid, on behalf of the head office) (iv) Global Limited (H.O.) A/c Dr. 1,30,000 To Debtors A/c 1,30,000 (Being adjustment of direct collection from branch debtors, by head office) (v) No. entry shall be passed in the books of Branch but will be shown in the books of Head Office as cash- in-transit. Cash in transit A/c Dr. 1,50,000 To H.O. A/c 1,50,000

Problem. 31 Give Journal Entries in the books of Head Office to rectify or adjust the following: (i) Goods sent to Branch ` 12,000 stolen during transit. Branch manager refused to accept any liability. (ii) Branch paid ` 15,000 as salary to the officer of Head Office on his visit to the breach.

Topper’s Institute Branch 5.32 (iii) On 28th March, 2012, the H.O. dispatched good to the Branch invoiced at ` 25,000 which was not received by Branch till 31st March, 2012. (iii) A remittance of ` 10,000 sent by the branch on 30th March, 2012, received by the Head Officer on 1st April, 2012. (iv) Head Office made payment of ` 25,000 for purchase of goods by Branch and wrongly debited its own purchase account. [Nov-2012] 5 Marks

Solution Journal in the books of H.O. Particulars Dr. Cr. (i) Loss in transit A/c Dr. 12,000 To Branch A/c 12,000 (being Goods Stolen in transit) (ii) Salaries A/c Dr. 15,000 To Branch A/c 15,000 (Being Salary paid by Branch) (iii) Goods – in- transit A/c Dr. 25,000 To Branch A/c 25,000 (Being Goods Sent to Branch is in transit) (iv) Cash in transit A/c Dr. 10,000 To Branch A/c 10,000 (Remittance by Branch is in transit) (v) Branch A/c Dr. 25,000 To purchase A/c 25,000 (being entry rectified)

Problem. 32 Sri Sundram commenced business on 1st April 1992 with head office at Madras and a branch at Nagpur. Purchases were made exclusively by the head office when the goods were processed before sale. The was no loss or wastage’s in processing. Only the processed goods received from head office were handled by the branch and these were charged there to at processed cost plus 10%. All sales whether by head office or by the branch were at a uniform gross profit of 25% on cost. Following is the Trial balance of Sri Sundram as on 31st March 1993. Head Office Dr. Cr.

Particulars ` ` Capital 62,000 Drawings 11,000 Purchases 3,93,900 Cost of processing 10,100 Sales 2,56,000 Goods sent to branch 1,84,800 Administrative expenses 27,800 Selling expenses 10,000 Debtors 61,920 Creditors 1,20,280 Branch current account 77,960 Bank balance 30,400 6,23,080 6,23,080

Topper’s Institute Branch 5.33 Branch Particulars Dr. Cr. Sales 1,64,000 Goods received from Head office 1,76,000 Administrative expenses 3,000 Selling expenses 1,240 Debtors 22,720 Creditors 2,160 H.O. Current accounts 52,300 Bank balance 15,500 2,18,460 2,18,460

The following further information are also available: (i) Goods sent by head office to the branch in March, 1993 art ` 8,800 were not received by the branch until April 1993. (ii) A remittance of ` 16,860 from the branch to head office was not received unit April 1993. (iii) Stock taking at the branch disclosed a shortage of goods of ` 4,000 (at selling price) (iv) Cost of unprocessed goods at head office on 31st March, 1993 was ` 20,000 Prepare Trading and profit and loss Account in Columnar form and balance sheet of the business as a whole as on 31st March 1993. Solution Trading and P/L A/c on 31.3.1993 Particulars H.O Branch Particulars H.O Branch To Purchase 3,93,900 By sales 2,56,000 1,64,000 To Cost of processing 10,100 By GSTB A/c 1,84,800 To GRF H.O 1,76,000 By Shortage (4000 × 110/125) 3,520 To G. Profit 68,000 19,680 By closing Stock (164000 × 15/125) Unprocessed Goods 20,000 Processed Goods 11,200 28,160 4,72,000 1,95,680 4,72,000 1,95,680 By Adm. Exp. 27,800 3,000 By G.P 68,000 19,680 By Opening stock reserve - - By S. Exp. 10,000 1,240 By Shortage 3,520 By Stock res. 3,360 -- [(28,160+8,800)×10/100] By Net Profit 26,840 11,920 68,000 19,680 68,000 19,680

W/N- G.P. Of H.O.- To customer 256000× 25/125 = 51200 To branch 184800 × 10/110 = 16800 68,000 W.N.1 Closing Stock Particulars H.O Branch Purchase 3,93,900 Goods sent/received (1,68,000) 1,76,000 (-) Cost of sales (2,04,800) 1,44,320 (-) In of Goods Shortage 3,520 C. Stock 21,100 28,160

Topper’s Institute Branch 5.34 + Cost of prov. 10,100 Total Stock 31,200 Unproduced 20,000 Produced 11,200

Balance Sheet On 31-3-93 Particulars Particulars Capital 62,000 Stock (+) Profit 38,760 H.O 31,200 (-) Drawing (11,000) 89,760 Branch 28,160 Creditors In transit 8,800 H.O 1,20,280 (-) Stock Res. (3,360) 64,800 Branch 2,160 1,22,440 Debtors H.O 61,920 Branch 22,720 84,640 Bank Balance H.O 30,400 Branch 15,500 45,900 Cash in transit 16,860

2,12,200 2,12,200

Balance sheet

Particulars H.O. Branch Particulars H.O. Branch Capital 62,000 Debtor 61,920 22,720 H.O. Current A/c Bank 15,500 (capital a/c of branch) 52,300 Closing stock P/L a/c 26,840 11,920 Unprocessed 20,000 Drawing (11,000) Processed 11,200 28,160 Creditor 1,20,280 2,160 In transit 8,800 Closing stock reserve 3,360 Cash in transit 16,860 Branch a/c 52,300 2,01,480 66,380 2,01,480 66,380

In the books of H.O. Stock in transit a/c………………….Dr. 8800 Cash in hand a/c…………………..Dr. 16860 To Branch a/c 25660

Gross profit at branch = 164000×15/125 = 19680

Problem. 33

Stainless Ltd. operates from a head office in Indore and a branch at Churu, where separate books are kept. The company makes up its accounts to December 31, in each year. Goods sent to the branch by head office are charged at cost plus 10%. Other than the sales to branch, head office sales are made at a uniform gross profit of 25% on selling price. Churu sales are all made at a uniform gross profit to the branch of 20% on selling price. You are given the following relevant information regarding the year ended December 31,1994 Indore ` Churu ` (1) Expenses paid during the year : Salary 6,415 2,418 Selling expenses 4,220 1,610

Topper’s Institute Branch 5.35 Overhead expenses 2,991 2,021 (2) Overhead expenses accrued. December 31, 1993 249 156 December 31, 1994 416 82 (3) Purchases at head office totalled ` 97,680 and sales, including ` 44,000 invoiced to Churu branch, were ` 1,19,000. (4) In addition to goods received from head office the Churu branch has purchased goods from outside suppliers amounting to ` 9,200. On December, 31, 1994, there were goods-in-transit from head office at an invoice price of ` 3,400 which were not received by the branch until January 3, 1995. (5) Sales at Churu were ` 60,000 and discounts allowed to customers during the year amounted to ` 910. (6) The stocks on hand on December 31, 1993, had been ` 17,250 at Indore and ` 7,500 at Churu, being cost to the branch. The stock at Churu included stock invoiced by head office at ` 5,600. On December, 31,1994 the stock at Churu contained stock invoiced by head office amounting to ` 7,700. You are required to prepare, in columnar form, the head office, branch and combined trading and profit and loss accounts for the year ended December 31' 1994.

Solution Trading and Profit and Loss A/c for the year ended 31st December 1994 Particulars H.O. Churu Particulars H.O. Churu ` ` ` ` To Opening stock 17,250 7,500 By Sales to customer 75,000 60,000 To Purchases 97,680 9,200 By Goods sent to Branch 44,000 – To Goods from H.O. – 40,600 By Closing Stock (b/f) 18,680 9,300 To Gross Profit c/d 22,750 12,000 ______1,37,680 1,37,680 1,37,680 1,37,680 To Salary 6,415 2,418 By Gross Profit b/d 22,750 12,000 To Selling Exp. 4,220 1,610 By Provision for unrealised 509 – To Overhead Exp. 3,158 1,947 Profit in opening stock To Discount – 910 To Provision for unrealised profit in 1,009 – closing stock To Net Profit 8,457 5,115 23,259 12,000 23,259 12,00

10/110 Branch I.P. = 110 H.O. Cost =100 110 × 25% = 27.5

= 137.5 33.33% Customer 133.33%

Working Note

G.P. = Sales ×G.P. Ratio (i) At branch = 60000×20% = 12,000 (ii) At H.O.: To branch = 44,000 × 10/110 = 4,000 To customer = 75 000×25% = 18,750 22,750

Topper’s Institute Branch 5.36 Note: S.R. will be calculated only on closing stock at branch which has come from H.O. not on outside purchase. OSR = 5600 × 10/110 = 509 CSR = 7700 × 10/110 = 700 (+) 3400 × 10/110 = 309 (in transit) 1009

Working Note OH paid 2,991 2,021 (+) o/s at end 416 82 (-) o/s at beginning (249) (156) OH Incurred 3,158 1,947

Problem. 34 X, Y and co. commenced business on 1.1.1987 with Head office at Calcutta and a Branch at Trichur. All gooks were purchased by Head Office and normally packed immediately but on 31.12.1987, goods costing ` 5,000 remained unpacked. Only packed goods were sent to the Branch which was charged at selling price less 10% Following information is furnished to you as on 31st Dec. 1987 from Head Office and Branch Office books. Particulars H. O. Branch Capital Account 40,000 — Drawing by proprietor 10,000 — Purchases 4,00,000 — Packing materials bought 6,000 — Sales 3,20,000 1,00,000 Dispatch of goods to Branch 1,13,400 — Selling expenses 16,000 800 Clerk’s salary, wages, etc. 20,000 3,000 Sundry Debtors 28,000 4,200 Sundry Creditors 26,600 5,000 Current Accounts: Head Office (credit balance ) 12,000 Branch Office ( Debit balance ) 19000 Bank Balances 1,000 1,000 Goods received from Head Office — 1,08,000

You are further informed that: (a) Sales by Head Office were at a uniform gross profit, after charging packing materials of 20% on selling price. (b) Sales at Branch were at fixed selling price. (c) Goods invoiced and dispatched by Head Office to Branch in December, 1987 for ` 5,400 were received in the Branch only on 10th January, 1988. (d) Stock of packing materials on hand as on 31st December, 1987 was valued at `1,000. (e) Remittance of ` 1,600 the Branch to Head office was in transit on 31.12.87 (f) ` 2,000 worth of stock at selling price was damaged at the Branch. For valuing Stock, this was reduced by ` 1,090 below the invoice cost to the Branch. It was decided that the Head office and the branch would share equally this loss including the shortage of the Branch of goods at selling price of ` 500. Prepare the Profit and Loss Account of the Trichur and Calicut Offices and also a Balance Sheet as at 31.12.1987.

Topper’s Institute Branch 5.37

Solution XV & Co. Dr. Profit & Loss Account for the year ended 31st December, 1993 Cr. Particulars Head Office Branch Particulars Head Office Branch To Purchases 4,00,000 — By Sales 3,20,000 1,00,000 To Goods received from HO — 1,13,400 By Goods Sent to Branch 1,13,400 — To Packing Materials consumed 5,000 — By Branch Shortage in Stock — 450 To Gross Profit c/d (Note: 3 & 4) 76,600 10,000 By Damaged Goods — 1.090 By Closing Stock Damaged goods 710 Unpacked goods 5,000 — Packed goods (B.f.) 43,200 15,750 4,81,600 1,23,400 4,81,600 1,23,400 To Selling expenses 16,000 800 By Gross Profit b/d 76,600 10,000 To Salaries & wages 20,000 3,000 To Damaged Goods (1 : 1) 545 545 To Shortage in Stock (1 : 1) 225 225 To Stock Reserve 2,350 — To Net Profit 37,480 5,430 (trSolution to Capital) 76,600 10,000 76,600 10,000 Balance Sheet

Particulars H.O Branch Particulars H.O Branch Capital 40,000 Debtors 28,000 4,200 Less: Drawing (10,000) Branch A/c 11,230 30,000 Bank 1,000 1,000 H.O A/c 11230 Cash-in-transit 1,600 P/L A/c 37,480 5430 Closing Stock Creditors 26,600 5000 Packing Material 1,000 C.S.R 2,350 Unpacking material 5,000 Packed Material 43,200 15,750 Damaged Goods 710 Stock-in-transit 5,400 96,430 21,660 96,450 21,660

Branch A/c

Particulars Amount Particulars Amount To B/d 19,000 By Goods-in-transit 5,400 By Cash-in-transit 1,600 By Abnormal loss & shortage 770 By C/d 11,250 19,000 19,000

H.O A/c

Particulars Amount Particulars Amount To Abnormal Loss & Shortage 770 By B/d 12,000 To C/d 11,230 12,000 12,000

Topper’s Institute Branch 5.38 Balance Sheet of XY & Co

Liabilities Amount Assets Amount Capital 40,000 Debtors: H.O 2,800 Less: Drawing 10,000 Branch 4,200 32,200 30,000 Bank 2,000 P/L A/c 42,910 Cash-in-transit 1,600 Creditor 31,600 Stock CSR 2,350 PM 1,000 Unpacked material 5,000 Packing Material 58,950 Damaged Goods 710 In-transit 5,400 1,06,860 1,06,860 Working Notes (1) Let the selling price be 100 Less Profit 20% 20 Cost Price 80

(2) Selling price 100 Less 10 % of selling price 10 Invoice price 90

(3) G.P. of Branch = 1,00,000  10/100 = 10,000 (4) G.P. of H.P. = 1,13,400  10/90 = 12,600 = 3,20,000  20/100 = 64,000 76,600 (5) Stock reserve is to be created @ 10/90 on ` 15,750 = ` 1.750. Loading on goods-in-transit is 10/90 × ` 5,400 = ` 600. Total loading is `1,750 + ` 600 = ` 2,350.

Change working note 5 & balance sheet (excluding S.R portion)

(i) S.P to branch 2000 G.P of branch (10/100) 200 Invoice price to branch 1800 Valued at NRV 710 Reduced by 1090

H.O Branch (545) (225) ii) Shortage of Branch at S.P 500 Invoice price to Branch (90%) 450

H.O Branch (225) (225)

Problem. 35 M/s Shah & Co. commenced business on 1.4.2012 with Head Office at Mumbai and a Branch at Chennai. Purchases were made exclusively by the head office, where the goods were processed before sale. There was no loss or wastage in processing.

Topper’s Institute Branch 5.39 Only the processed goods received from Head Office were handled by the Branch. The goods were sent to branch at processed cost plus 10%. All sales, whether by Head Office or by the Branch, were at uniform gross profit of 25% on their respective cost. Following is the Trail Balance as on 31.3.2013. Head Office Branch Dr. Cr. Dr. Cr. ` ` ` ` Capital 3,10,000 Drawings 55,000 Purchases 19,69,500 Cost of processing 50,500 Sales 12,80,000 8,20,000 Goods sent to Branch 9,24,000 Administrative expenses 1,39,000 15,000 Selling expenses 50,000 6,200 Debtors 3,09,600 1,13,600 Branch Current A/c 3,89,600 Creditors 6,01,400 10,800 Bank Balance 1,52,000 77,500 Head Office Current account 2,61,500 Goods received from H.O. 8,80,000 31,15,400 31,15,400 10,92,300 10,92,300 Following further information is provided: (i) Goods sent by Head Office to the Branch in March, 2013 of ` 44,000 were not received by the Branch till 2.4.2013. (ii) A remittance of ` 84,300 sent by the Branch to Head Office was also similarly not received upto 31.3.2013. (iii) Stock taking at the Branch disclosed a shortage of ` 20,000 (at selling price to the branch). (iv) Cost of unprocessed goods at Head Office on 31.3.2013 was ` 1,00,000. Prepare Trading and Profit and Loss account in columnar form and Balance Sheet of the Business as a whole as at 31.3.2013. [Nov. 2005]

Solution Trading and Profit and Loss Account for the year ended 31 st March, 2013 Particulars H.O. Branch Particulars H. O. Branch ` ` ` ` To Opening stock Nil Nil By Sales 12,80,000 8,20,000 To Purchase 19,69,500 - By Goods sent to BR 9,24,000 - To Cost of processing 50,500 - By Abnormal shortage To Good received from 110 20,000 H. O. - 8,80,000 137.5 - 16,000 To Gross Profit c/d 3,40,000 1,64,000 By Closing Stock: Unprocessed goods 1,00,000 - Processed goods (b/f) 56,000 2,08,000 23,60,000 10,44,000 23,60,000 10,44,000 To Admn. Exp. 1,39,000 15,000 By Gross profit 3,40,000 1,64,000 To Selling Exp. 50,000 6,200 By O.S.R. Nil To Abnormal Shortage - 16,000 To C.S.R. 10 22,909 - 2,08,000  110 44,000

To Net Profit 1,28,091 1,26,800 3,40,000 1,64,000 3,40,000 1,64,000

Topper’s Institute Branch 5.40

Working Note: 27.5 G.P. at Branch = 8,20,000   1,64,000 137.5

At H.O. 25  Direct 12,80,000   2,56,000 125 10  Branch 9,24,000   84,000 110 3,40,000

Balance sheet as at 31st March, 2005 Liabilities ` Assets ` Capital 3,10,000 Debtors Add: Net Profit 2,54,891 H. O. 3,09,600 5,64,891 Branch 1,13,600 4,23,200 Less: Drawings 55,000 5,09,891 Closing Stock Creditors Processed Goods H. O. 6,01,400 H. O. 56,000 Branch 10,800 6,12,200 Branch 2,08,000 2,64,000 Less: Stock Reserve 18,909 2,45,091 Unprocessed goods 1,00,000 Bank Balance H.O. 1,52,000 Branch 77,500 2,29,500 Goods in transit 44,000 Less: Stock reserve 4,000 40,000 Cash in transit 84,300 11,22,091 11,22,091 Working Notes (i) Stock at Head Office: Cost of goods processed ` (19,69,500 + 50,000 – 1,00,000) 19,20,000 Less: Cost of goods sent to Branch (` 9,24,000 × 100/10) 8,40,000 Cost of goods sold (` 12,80,000 × 100/125) 10,24,000 18,64,000 Stock of processed goods with H. O. 56,000 (ii) Stock at Branch: ` Goods received from H. O. (at invoice price) 8,80,000 Less: Invoice value of goods sold ` 8,20,000 × 100/125) 6,56,000 Invoice value of stock shortage (` 20,000 × 100/125) 16,000 6,72,000 Stock at Branch at invoice price 2,08,000 Less: Stock Reserve (2,08,000 × 10/110) 18,909 Stock of processed goods with Branch (at cost) 1,89,091 (i) Stock Reserve Unrealised profit on Branch Stock (` 2,08,000 × 10/110) 18,909 Unrealised profit on goods in transit (` 44,000 × 10/110) 4,000 22,909

Topper’s Institute Branch 5.41

Problem. 36 A Limited Company has its Head Office in Delhi and a Branch in Bombay where a separate set of books is used. The following are the vital balances extracted on 31st December, 2012: Head Office Trial Balance Particulars ` ` Share Capital (Authorised: 10,000 Equity Shares of ` 100 each) Issued: 8,000 Equity Shares 8,00,000 Profit and Loss Account 1.1.12 25,310 Interim Dividend paid- August 2012 30,000 General Reserve 1,00,000 Fixed Assets 5,30,000 Stock 2,22,470 Debtors and Creditors 50,500 21,900 Profit for 2012 82,200 Cash Balance 62,730 Branch Current Account 133,710 10,29,410 10,29,410 Branch Trial Balance Particulars ` ` Fixed Assets 95,000 Profit for 2012 31,700 Stock 50,460 Debtors and Creditors 19,100 10,400 Cash Balance 6,550 Head Office Current Account 1,29,010 1,71,110 1,71,110 The difference between the balances of the Current Accounts in the two sets of books is accounted for as follows: (a) Cash remitted by the Branch on 31st Dec., 2012, but received by the H.O. on 1st Jan. 2013: ` 3000. (b) Stock stolen in transit from Head Office and charged to the Branch by the Head Office but not credited to Head Office in the Branch books as the Branch Manager declined to admit any liability -`1,700. Give the Branch Current Account in the Head Office books after incorporating Branch Trial Balance through Journal. Also prepare the company’s Balance Sheet on 31st December, 2012.

Solution Journal Entry

Particulars Dr. Cr. Cash in transit a/c…………Dr. 3,000 Loss in transit a/c………….Dr. 1,700 To Branch A/c 4700 Branch F.A. A/c…………….Dr. 95,000 Branch stock a/c……………Dr. 50,460 Branch Debtor a/c………….Dr. 19,100 Branch cash a/c…………….Dr. 6,550 To Branch A/c 1,71,110 Branch a/c………………….Dr. 10,400 To Branch creditor A/c 10,400 Branch a/c…………………Dr. 31,700 To General P/L A/c 31,700

Topper’s Institute Branch 5.42

Dr. Branch Current Account Cr. Particulars ` Particulars ` To Balance b/d 1,33,710 By Cash-in-transit 3,000 To General P/L a/c (b/f) 31,700 By Loss of theft 1,700 To Branch Creditors 10,400 By Branch Assets 1,71,110 1,75,810 1,75,810 Dr. General Profit and Loss Account for 2012 Cr. Particulars ` Particulars ` To Loss by Theft 1,700 By Balance b/d 25,310 To Interim Dividend for 1994 30,000 By Year's Profit: To Balance c/d (carrying forward to B/S) 1,07,510 H.O. 82,200 Branch 31,700 1,13,900 1,39,210 1,39,210

Balance Sheet of the Company as on 31st Dec. 2012 Equity & Liab. ` 1. Shareholders Fund: Equity share capital (8,000 × 100) 8,00,000 P/L A/c 1,07,510 General Reserve 1,00,000 1,07,510 2. Non-Current Liability Nil 3. Current Liability Creditor 32,300 10,39,810 Assets ` 1. Non-Current Assets: Fixed Assets 6,25,000 2. Current Assets  Stock 2,72,930  Debtors 69,600  Cash 69,280  Cash in transit 3,000 4,14,810 10,39,810

Problem. 37 The following is the trial balance of Delhi Branch as at 31 st March, 2002. Particulars Dr. (`) Cr. (`) H.O. Account 32,400 Stock on 1st April 2001 60,000 Purchases 1,78,000 Goods received from H.O. 90,000 Sales 3,80,000 Goods supplied to H.O. 60,000 Salaries 15,000 Debtors 37,000 Creditors 18,500 Rent 9,600 Office expenses 4,700 Cash in hand and at bank 17,800 Furniture 14,000 4,58,500 4,58,500

Topper’s Institute Branch 5.43

Information: (a) Stock on hand was valued at ` 27,000, (b) The Branch account in the Head office books on 31st March, 2002 stood at ` 4,600 (Debit balance). (c) On 27th March, the Head Office forwarded goods to the value of ` 25,000 to the: branch where they were received on 3rd April, Required: Give Journal entries necessary of incorporation and prepare Delhi Branch Trading and Profit and Loss A/c and the Delhi Branch A/c in the Books of H.O.

Solution Journal of H.O.

Particulars Dr. (`) Cr. (`) Goods-in-transit A/c Dr. 25,000 To Delhi Branch A/c 25,000 (Being adjustment of goods-in-transit)

Cash-in-transit A/c Dr. 12,000 To Delhi Branch A/c 12,000 (Being adjustment of remittances-in-transit)

Delhi Branch Trading A/c Dr. 3,28,000 To Delhi Branch A/c 3,28,000 [Stock ` 60,000 + Purchases ` 1, 78,000 + Goods received from H.O, ` 90,000] (Being incorporation of debit items of trading account)

Delhi Branch A/c Dr. 4,67,000 To Delhi Branch Trading A/c 4,67,000 [Sales ` 3,80,000 + Goods supplied to H.O. ` 60,000 + Closing stock ` 27,000] (Being incorporation of credit items of trading account) Delhi Branch Trading A/c Dr. 1,39,000 To Delhi Profit & Loss A/c 1,39,000 (Being transfer of gross Profit to Profit and Loss A/c)

Delhi Branch Profit and Loss A/c Dr. 29,300 To Delhi Branch A/c 29,300 [Salaries ` 15,000 + Rent ` 9,600 + Office expenses ` 4,700] (Being debit items of branch profit and loss account incorporated)

Delhi Branch Profit and Loss A/c Dr. 1,09,700 To General Profit and Loss A/c 1,09,700 (Being transfer of branch profit to general Profit and Loss Account)

Delhi Branch Debtors A/c Dr. 37,000 Delhi Branch Cash A/c Dr. 17,800 Delhi Branch Furniture A/c Dr. 14,000 Delhi Branch Stock A/c Dr. 27,000 To Delhi Branch A/c 95,800 (Being incorporation of branch assets)

Delhi Branch A/c Dr. 18,500 To Delhi Branch Creditors A/c 18,500 (Being incorporation of branch creditors)

Topper’s Institute Branch 5.44 Dr. Delhi Branch Account Cr. Particulars ` Particulars ` To Balance b/d, 4,600 By Goods-in-transit 25,000 To Balance Trading Account 4,67,000 By Cash-in-transit 12,000 To Branch liabilities 18,500 By Branch Trading A/c 3,28,000 By Branch Profit and Loss A/c 29,300 By Branch Assets A/c 95,800 4,90,100 4,90,100 Delhi Branch Trading and Profit and Loss Account Dr. for the year ended 31st March, 2002 Cr. Particulars ` Particulars ` To Branch Account: By Branch Account: Stock 60,000 Sales 3,80,000 Purchases l,78,000 Goods supplied to H.O. 60,000 Goods from H.O. 90,000 3,28,000 Closing stock 27,000 4,67,000 To G.P 1,39,000 ______4,67,000 4,67,000 To Branch A/c By G.P. 1,39,000 Salaries 15,000 Rent 9,600 Office expenses 4,700 29,300 To General P & L A/c (Net Profit) 1,09,700 1,39,000 1,39,000

H.O. A/c (Dr.) 32,400 Branch A/c (Dr. balance) 4,600 Difference 37,000

Out of 37000: Stock in transit = 25,000 Cash in transit = 12,000 (balancing figure assumption)

Problem. 38 AFFIX of Kolkata has a branch at Delhi to which the goods are supplied from Kolkata but the cost thereof is not recorded in the Head Office books. On 31st March, 2012 the Branch Balance was as follows:

Liabilities ` Assets ` Creditors Balance 40,000 Debtors Balance 2,00,000 Head Office 1,68,000 Building Extension A/c closed by transfer to H.O. A/c - Cash at Bank 8,000 2,08,000 2,08,000

During the six months ending on 30-9-2012, the following transactions took place at Delhi.

` Assets ` Sales 2,40,000 Manager’s Salary 4,800 Purchases 48,000 Collections from Debtors 1,60,000 Wages paid 20,000 Discounts allowed 8,000 Salaries (inclusive of advance of ` Discount earned 1,200 2,000) 6,400 Cash paid to Creditors 60,000 General Expenses 1,600 Building Account (further payment) 4,000

Topper’s Institute Branch 5.45 Fire insurance (paid for one year) 3,200 Cash in hand 1,600 Remittance to H.O. 38,400 Cash at Bank 28,000 2,08,000 2,08,000

Set out the Head office Account in Delhi books and the Branch Balance Sheet as on 30-9-2012. Also give journal entries in the Delhi books. [S.M., Page – 8.45, Illus.5]

Problem. 39

On 31st March, 2013 Kanpur Branch submits the following Trial Balances to its Head Office at Lucknow: Debit Balance ` in lacs Furniture and Equipment 18 Depreciation of Furniture 2 Salaries 25 Rent 10 Advertising 6 Telephone, Postage and Stationery 3 Sundry Office Expenses 1 Stock on 1st April, 2012 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, 2013 was valued at ` 62 lacs on 29th March, 2013 the Head Office dispatched goods costing ` 10 lacs to its branch. Branch did not receive these goods before 1st April, 2013. Hence the figure of goods received from Head office does not include these goods. Also the head office has charged the branch ` 1 lacs for centralised services for which the branch has not passed the entry. You are required to: (a) Pass Journal Entries in the books of the Branch to make the necessary adjustments. (b) Prepare Final Accounts of the Branch including Balance Sheet, and (c) Pass Journal Entries in the books of the Head Office to incorporate the whole of the Branch Trial Balance. [P.M., Page No.-8.6 Q.5]

Topper’s Institute Branch 5.46

Solution Books of Branch Journal Entries ` in Lacs ` ` 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, 2013) Expenses A/c Dr. 1 To Head Office A/c 1 (Amount charged by head office for centralized services)

Trading Profit & Loss Account of the Branch For the year ended 31st March, 2013 ` in lacs ` in lacs To Opening Stock 60 By Sales 360 To Goods received from By Closing Stock in hand 62 Head Office 288 Less: returns 5 283 To Carriage Inwards 7 To Gross Profit c/d 72 ___ 422 422 To Salaries 25 To Depreciation on Furniture 2 By Gross Profit b/d 72 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, 2013 Liabilities ` in lacs Assets ` in lacs Head Office 80 Furniture & Equipment 20 Add: Goods in transit 10 Less: Depreciation 2 18 Head Office Stock in hand 62 Expenses 1 Goods in Transit 10 Net Profit 24 115 Debtors 20 Outstanding Expenses 3 Cash in Hand & Bank 8 118 118

(iii) Books of Head Office Journal Entries (` in lacs) Particulars ` ` Branch Trading Account Dr. 355 To Branch Account 355 (The total of the following items in branch trial balance debited to branch trading account

Opening stock Dr. 60 Goods received from Head Office Dr. 288 Carriage Inwards Dr. (7) 341

Topper’s Institute Branch 5.47 To Branch Trading Account 341 (Total sales, closing stock and goods returned to Head office credited to branch trading account individual Amounts being as follows:)

Sales Dr. 360 Closing Stock Dr. 62 Goods received from Head Office Dr. 5 427 To Branch Trading A/c 427

Branch Trading A/c To Branch Profit and Loss Account 72 (Gross profit earned by branch credited to Branch 72 Profit & Loss Account)

Branch Profit and Loss Account Dr. 48 To Branch Account 48 (Total of the following branch expenses debited to branch P/L A/c) Salaries 25 Rent 10 Advertising 6 Telephone, Postage & Stationery 3 Sundry Office Expenses 1 Head Office Expenses 1 Depreciation on furniture & Equipment 2 Branch Profit & Loss Account 24 72 To P/L A/c 72 (Net profit at branch credited to (general) Profit & Loss A/c)

Branch Furniture & Equipment Dr. 18 Branch Stock Dr. 62 Branch Debtors Dr. 20 Branch Cash at Bank and in Hand Dr. 8 Goods in Transit Dr. 10 To Branch A/c 118 (Incorporation of different assets at the branch in H. O. books)

Branch Dr. 3 To Branch Outstanding Expenses 3 (Incorporation of Branch Outstanding Expenses in H. O. books)

Problem. 40 KP manufactures a range of goods which it sells to wholesale customers only from its head office. In addition, the H.O. transfers goods to a newly opened branch at factory cost plus 15%, The branch then sells these goods to the general public on only cash basis. The selling price to wholesale customers is designed to give a factory profit which amounts to 30% of the sales value. The selling price to the general public /s designed to give a gross margin (i.e. selling price less cost of goods from H. 0.) of 30% of the sales value. KP operates from rented premises and leases all other types of fixed assets. The rent and hire charges for these are included in the overhead costs shown in the trial balances. From the information given below, you are required to prepare for the year ended 31st Dec., 2012 in columnar form. (a) A Profit & Loss account for (i) H. 0. (ii) the branch (iii) the entire business. (b) Balance Sheet as on 31st Dec., 2012 for the entire business.

Topper’s Institute Branch 5.48

H.O. Branch ` ` ` ` Raw materials purchased 35,000 Direct wages 1,08,500 Factory overheads 39,000 Stock on 1-1-2012 Raw materials 1,800 Finished goods 13,000 9,200 Debtors 37,000 Cash 22,000 1,000 Administrative Salaries 13,900 4,000 Salesmen's Salaries 22,500 6,200 Other administrative & selling overheads 12,500 2,300 Inter-unit accounts 5,000 2,000 Capital 50,000 Sundry Creditors 13,000 Provision for unrealized profit in stock 1,200 Sales 2,00,000 65,200 Goods sent to Branch 46,000 Goods received from H 0. 44,500 3,10,200 3,10,200 67,200 67,200

Notes: (1) On 28th Dec., 2012 the branch remitted ` 1,500 to the H.O. and this has not yet been recorded in the H.O. books. Also on the same date, the H.O. dispatched goods to the branch invoiced at ` 1,500 and these too have not yet been entered into the branch books. It is the company's policy to adjust items in transit in the books of the recipient. (2) The stock of raw materials held at the H.O. on 31st Dec., 2012 was valued at ` 2,300. (3) You are advised that:  there were no stock losses incurred at the H.O. or at the branch.  it is KP's practice to value finished goods stock at the H.O. at factory cost.  there were no opening or closing stock of work -in-progress. (4) Branch employees are entitled to a bonus of ` 156 under a bilateral agreement. [S.M., Page No.- 8.43, Illus.-14] Problem. 41 How will you translate the following items of the London Branch as on 31.3.2002: Opening Stock $ 4,100, Goods from H.O. $ 29,400, Salaries & Wages $ 7,600, Sales $ 52,600, Closing Stock $ 1,200. Goods sent to London Branch in the H.O. Books amounted to ` 10,73,100, Exchanges rate: on 1.4.2001 $ 1 = ` 26.40, on31.3.2002 $ 1 = ` 42.20, Average of 2001 – 2002 $ 1 = ` 36.50.

Topper’s Institute Branch 5.49

Solution Statement showing the Translation into Rupees Item $ Relevant Exchange Rate Translated value in ` Opening Stock 4,100 Opening Rate as on 1.4.2001 4,100 x ` 26.40 = ` 1,08,240 Goods from H.O. 29,400 To be taken at the Rupee Value recorded in H.O. Books `10,73,100 Salaries & Wages 7,600 Average Rate of 2001-2002 7,600 x ` 36.50 = ` 2,77,400 Sales 52,600 Average Rate of 200l -2002 52,600 x ` 36.50 = ` 19, 19,900 Closing Stock 1,200 C1osing Rate as on 31.3.2002 1,200 x ` 42.20 = ` 50,640

Problem. 42 The New York Branch of Fine Textiles Limited, Delhi sent the following Trial Balance (in Dollars) as on 31st Dec., 2003: Fixed Assets 1,20,000 Stock, 1st Jan., 2003 56,000 Goods from H.O. 3,20,000 Sales Expenses 25,000 Sales 4,20,000 Debtors and Creditor 24,000 17,000 Cash at Bank 6,000 H.O. Account 1,14,000 5,51,000 5,51,000 In the H.O. Books, the Branch Account stood as shown below: New York Branch Account Particulars ` Particulars ` To Balance b/d 10,05,000 By Cash 26,08,000 To Goods sent to Branch 24,63,000 By Balance c/d 8,60,000 34,68,000 34,68,000

(a) Goods are invoiced to the branch at cost plus 10% and the branch has instruction to sell at invoice price plus 25%. (b) Fixed assets were acquired on 1st Jan., 20Xl when $100 = ` 380. (c) Rates of exchange were : 1st January, 2003 $ 100 = ` 760 31st December, 2003 $ 100 = ` 770 Average $ 100 = ` 750 (d) Fixed Assets have to be depreciated by 10%. (e) The Branch Manager is entitled to commission of 5% on the profit of the branch (on invoice price basis) after charging such commission. You are required to: (i) Prepare Branch Trading and Profit & Loss Account and Branch Balance Sheet in Dollars; (ii) Convert the Branch Balance Sheet prepared in dollar into rupees; (iii) Convert the Branch Trial Balance into rupees and prepare the Branch Trading & : Profit & Loss Account and the Branch Account and Branch Balance Sheet in rupees;

Topper’s Institute Branch 5.50

Solution (i) New York Branch Trading & Profit & Loss Account (in Dollars) Dr. for the year ending on 31st Dec, 2003 Cr. Particulars ` Particulars ` To Opening Stock 56,000 By Sales 4,20,000 To Goods from H.O. 3,20,000 By Closing Stock (balancing figure) 40,000 To Gross Profit c/d (Rs 4,20,000  20/100) 84,000 ______4,60,000 4,60,000 To Selling Expenses 25,000 By Gross Profit b/d 84,000 To Depreciation 12,000 To Commission (Rs 47,000  5/105) 2,238 To Profit 44,762 84,000 84,000

Balance Sheet as at 31st Dec, 2003 (In dollars) Liabilities $ Assets $ Creditors 17,000 Fixed Assets (120000-12000) 1,08,000 Commission Payable 2,238 Closing Stock 40,000 H.O. Account: Debtors 24,000 Balance 1,14,000 Cash at Bank 6,000 Add. Profit 44,762 1,58,762 1,78,000 1,78,000

(ii) Balance Sheet as at 31st Dec 20X3 (in Rupees) Liabilities ` Assets ` Creditors 1,30,900 Fixed Assets 4,10,400 Commission Payable 17,232 Closing Stock 3,08,000 H.O. Account: Debtors 1,84,800 Balance 8,60,000 Cash 46,200 Add: Profit 3,35,715 11,95,715 Difference in Exchange 3,94,447 13,43,847 13,43,847

(iii) Statement showing conversion of branch trial balance into H.O. currency Particulars Rate (Dr.) $ (Cr.) $ (Dr.)` (Cr.) ` Fixed Assets 3.8 1,20,000 - 4,56,000 Stock 1.1.2003 7.6 56,000 - 4,25,600 - Goods from H.O. - 3,20,000 - 24,63,000 - Sales 7.5 - 4,20,000 - 31,50,000 Expenses 7.5 25,000 - 1,87,500 - Debtors/Creditors 7.7 24,000 17,000 1,84,800 1,30,900 Cash at Bank 7.7 6,000 - 46,200 - H.O. Account - - 1,14,000 - 8,60,000 Difference in exchange - - - 3,77,800 - 5,51,000 5,51,000 41,40,900 41,40,900 Closing Stock 7.7 40,000 3,08,000 (iv) New York Branch Trading and Profit & Loss Account Working Note:

Profit before manager commission (84,000 - 25,000-12,000) = 47,000 Less: Commission 5% (47,000×5/105) 2,238

Topper’s Institute Branch 5.51 Profit after commission (100 %) 44,762 Closing stock = $ 40,000× 7.7 = ` 3,08,000 O/s commission = $ 2,238 × 7.7 = 17,232 Dr. for the year ending on December 31, 2003 Cr. Particulars ` Particulars ` To Opening Stock 4,25,600 By Sales 31,50,000 To Goods from H.O. 24,63,000 By Closing Stock 3,08,000 To Gross Profit c/d 5,69,400

34,58,000 34,58,000

To Expenses 1,87,500 By Gross Profit b/d 5,69,400 To Depreciation 45,600 By Net Loss 58,732 To Commi. ($ 2,238 @ $ 100 = 770) 17,232 To Difference in Exchange 3,77,800 6 ,28, 132 6,28, 132 Dr. New York Branch Account Cr. Particulars ` Particulars ` To Balance b/d 8,60,000 By Net Loss 58,732 By Balance c/d 8,01,268 8,60,000 8,60,000

(vi) Balance Sheet as at 31.12.2002 (As per Trial Balance in `) Liabilities ` Assets ` Creditors 1,30,900 Fixed Assets 4.10,400 Commission Payable 17,232 Stock 3,08,000 H.O. A/c 8,60,000 Debtors 1,84,800 Less : Loss 58, 732 8,01,268 Cash 46,200 9,49,400 9,49,400

Particulars H.O.(Dr) ` (Cr.) ` Branch ( Dr ) $ Branch Cr. $ Capital A/c 7,50,000 Land and Building 1,50,000 Goodwill 75,000 Plant & Machinery 12,00,000 1,80,000 Fur. And Fittings 45,000 12,000 Stock 1.1.87 5,10,000 84,000 Purchases 31,68,000 3,60,000 Goods from H.O. 1,20,000 Goods to N.Y. Branch 11,78,000 Sales 34,82,000 6,24,000 Salaries and Wages 1,44,000 12,000 Rent, Rates &Taxes 18,000 3,000 Insurance 10,500 1,500 Trade Expenses 27,000 3,000 Head Office 1,71,000 N.Y. Branch 12,33,500 Sundry Debtors 3,30,000 36,000 Sundry Creditors 16,69,000 25,500 Cash in Hand and with banks 1,68,000 9,000 70,79,000 70,79,000 8,20,500 8,20,500

Topper’s Institute Branch 5.52

Problem. 43 Following are the Balances of Bombay Head Office and New York Branch on 31.12.1987: 1. Stock as on 31.12.1987 was valued at: Head Office ` 4,38,000 N.Y. Branch $ 78,000 2. Depreciation on Plant and Machinery and Furniture and Fittings to be provided at 10% p.a. 3. Rates of Exchange were (i) When Plant and Machinery and Fixtures were purchased $ 100= ` 780 (ii) On 1.1.87: $ 100 = ` 850 (iii) On 31.12.1987: $ 100 = ` 950 (iv) Average Rate $ 100=` 970. You are required to prepare a Combined Columnar Profit and Loss Account and Balance Sheet of Head Office and the Branch.

Solution Branch A/c 1. Statement showing conversion of foreign Branch T.B. into H.O. Currency Particulars Dr. $ Cr. $ Exchange Rate Dr. ` Cr. ` Plant & Machinery 1,80,000 - 7.8 DOA 14,04,000 Furniture & Fixtures 12,000 - 7.8 AA 93,600 Opening stock 84,000 - 8.5 (OR) 7,14,000 Purchase 3,60,000 - 9.7 (AR) 34,92,000 Goods from Head 1,20,000 - Goods sent to 11,78,000 Office - 6,24,000 branch 60,52,800 Sales 12,000 - 9.7 1,16,400 Salary & Wages 3,000 - 9.7 29,100 Rents taxes 1,500 - 9.7 AR 14,550 Insurance 3,000 - 9.7 29,100 Trade Exps. - 1,71,000 9.7 Head Office 36,000 - Branch A/c 12,33,500 Sundry Debtors - 25,500 9.5 3,42,000 Sundry Creditors 9.5 CR 2,42,250 Cash in hand & 9,000 - 9.5 85,500 with banks 30,300 Foreign exchange fluctuation a/c (b/f) 78,000 7,41,000 Closing Stock $ C.R. 9.5

Trading & P/L A/c for the year ended 31.12.87 Particulars Head Office Branch Particulars Head Office Branch To Opening Stock 5,10,000 7,14,000 By Sales 34,82,000 60,52,800 To purchase 31,68,000 34,92,000 By Goods sent to To Goods send from Branch 11,78,000 - Head office - 11,78,000 By Closing stock 4,38,000 7,41,000 To Gross Profit 14,20,000 14,09,800 50,98,000 67,93,000 50,98,000 67,93,800 To Sales & Wages 1,44,000 1,16,400 By Gross Profit 14,20,000 14,09,800 To Rent & rate 18,000 29,100 To Interest 10,500 14,550 To Trade expense 27,000 29,100 To Foreign exchange - 30,300 fluctuation To Dep. Plant & Machinery 1,20,000 1,40,400 Furniture & Fixtures 4,500 9,360 To Net Profit 10,96,000 10,40,590 14,20,000 14,09,000 14,20,000 14,09,800

Topper’s Institute Branch 5.53 Balance Sheet

Particulars H.O Branch Particulars H.O Branch Capital 7,50,000 - Land & Building 1,50,000 H.O A/c - 12,33,500 Goodwill 75,000 P/L A/c 10,96,000 10,40,590 Plant & Machinery 10,80,000 12,63,600 Creditors 16,69,000 2,42,250 Furniture 40,500 84,240 Branch A/c 12,33,500 - Debtor 3,30,000 3,42,000 Cash & Bank 1,68,000 85,500 Closing Stock 4,38,000 74,100 35,15,000 25,16,340 35,15,000 25,16,340

Problem. 44 Carlin & Co. has head office at New York (USA) and branch at Mumbai (India). Mumbai branch furnishes you with its trial balance as on 31st March, 2013 and the additional information given thereafter: Dr. Cr.(` in thousands) Stock on 1st April 2012 300 — Purchases and sales 800 1,200 Sundry debtors and creditors 400 300 Bills of exchange 120 240 Wages and salaries 560 — Rent rates and taxes 360 — Sundry charges 160 — Computers 240 — Bank balance 420 — New York Office a/c — 1,620 3,360 3,360 Additional information: (a) Computers were acquired from a remittance of US$ 6000 received from New York head office and paid to the suppliers. Depreciate computers at 60% for the year. (b) Unsold stock of Mumbai branch was worth ` 4,20,000 on 31st March 2013. (c) The rates of exchange may be taken as follows : (i) On 1.4 2012 @ ` 40 per US $ (ii) On 31.3.2013 @ ` 42 per US $ (iii) Average exchange rate for the year @ ` 41 per US $ (iv) Conversion is $ shall be made up to two decimal accuracy. You are asked to prepare in US dollars the revenue statement for the year ended 31st March, 2013 and the balance sheet as on that date on Mumbai branch as would appear in the books of New York head office of Carlin & Co. You are informed that Mumbai branch account showed a debit balance of US $ 39609. 18 on 31.3.2013 in New York books and there were no item pending reconciliation.

Solution Trading P/L A/c Particulars Amount Particulars Amount To Opening Stock 7500.00 By Sales 29268.29 To Purchase 19512.20 By Closing Stock 10,000 To W&S 13658.54 By Gross Loss 1402.45

To Gross Loss 1402.45 To Rent & Taxes 8780.49 To Sundry Charges 3902.44 To Depreciation on Computer (6000 × 60%) 3600 By Net Loss 17685.38 17685.38 17685.38

Topper’s Institute Branch 5.54

An Extract of Balance Sheet of CAMII & Co. as at 31st March, 2013 Liabilities ` Assets ` Creditors 7,142.86 Computer 6,000 Bills Payable 5,714.29 Less: Depreciation 3,600 2,400.00 H.O. 39,609.18 Debtors 9,523.81 Less: Net Loss 17,685.38 21,923.8 Bills Receivable 2,857.14 Bank Balance 10,000.00 ______Closing Stock 10,000.00 34,780.95 34,780.95 Working Notes: Statement showing conversion of Trial Balance in $ Particulars Rate ` (000) ` (000) $ $ Stock as on 1st April, 2001 40 300 7,500.00 Purchase & Sales 41 800 1,200 19,512.20 29,268.29 Debtors/Creditors 42 400 300 9,523.81 7,142.86 Bills of Exchange 42 120 240 2,857.14 5,714.29 Wages & Salaries 41 560 13,658.54 Rent, Rates and Taxes 41 360 8,780.49 Sundry charges 41 160 3,902.44 Computers - 240 6.000.00 Bank balance 42 420 10,000.00 New York Office A/c - 1,620 39,609.18 3,360 3,360 81,734.62 81,734.62 Closing Stock 42 4,20,000 10,000 - Problem. 45 An Indian company has a branch at Washington. Its Trial Balance as at 30 th September, 2012 is as follows: Dr. Cr. US $ US $ Plant and machinery 1,20,000 — Furniture and fixtures 8,000 — Stock, Oct. 1, 2011 56,000 — Purchases 2,40,000 — Sales — 4,16,000 Goods from Indian Co. (H.O.) 80,000 — Wages 2,000 — Carriage inward 1,000 — Salaries 6,000 — Rent, rates and taxes 2,000 — Insurance 1,000 — Trade expenses 1,000 — Head office A/c — 1,14,000 Trade debtors 24,000 — Trade creditors — 17,000 Cash at bank 5,000 — Cash in hand 1,000 — US $ 5,47,000 US $ 5,47,000 The following further information is given: (1) Wages outstanding -$ 1,000. (2) Depreciate Plant and Machinery and Furniture and Fixtures @ 10 per cent p.a. (3) The Head Office sent goods to Branch for ` 39,40,000. (4) The Head office shows an amount of ` 43,00,000 due from Branch. (5) Stock on 30th September, 2012 - $ 52,000. (6) There were no in transit items either at the state or at the end of the year. (7) On September 1, 2010 when the fixed assets were purchased, the rate of exchange was ` 38 to one $.

Topper’s Institute Branch 5.55 On October 1, 2011 the rate was ` 39 to one $. On September 30, 2012 the rate was ` 41 to one $. Average rate during the year was ` 40 to one $. You are asked to prepare: (a) Trial balance incorporating adjustments given under 1 to 4 above, converting dollars into rupees; (b) Trading and Profit and Loss Account for the year ended 30th September, 2012 and Balance sheet as on that date depicting the profitability and net position of the branch as would appear in India for the purpose of incorporating in the main Balance Sheet.

Solution Converted Trial Balance as on 30 Sept. 2012 Particulars Dr. $ Cr. $ Rate Dr. ` Cr. ` Plant and Machinery 1,08,000 38 41,04,000 Depreciation on above 12,000 38 4,56,000 Furniture and fixtures 7,200 38 2,73,600 Depreciation on above 800 38 30,400 Stock 1.10.2011 56,000 39 21,84,000 Purchases 2,40,000 40 96,00,000 Sales 4,16,000 40 1,66,40,000 Goods from Indian Co. 80,000 Actual 39,40,000 Wages (2,000 + 1,000) 3,000 40 1,20,000 Outstanding wages 1,000 41 41,000 Carriage Inwards 1,000 40 40,000 Salaries 6,000 40 2,40,000 Rent, rates and taxes 2,000 40 80,000 Insurance 1,000 40 40,000 Trade expenses 1,000 40 40,000 Head office A/c l,14,000 Actual 43,00,000 Trade debtors 24,000 41 9,84,000 Trade creditors 17,000 41 6,97,000 Cash at bank 5,000 41 2,05,000 Cash in hand 1,000 41 41,000 Difference in exchange 7,00,000 5,47,000 5,47,000 2,23,78,000 2,23,78,000

Closing stock at ` 41 per dollar i.e. 52,000  41 = ` 21,32,000. Note: (ii) It is assumed that no depreciation on fixed assets has been charged since the date of purchase. Therefore fixed assets as shown in the Trial balance are at original cost and the given rate of 10% is on straight line method. (iii) If rate of depreciation is at 10% on written down value basis and value of fixed assets in the Trial balance are at written down value on 1.10.2011. In both the above cases the depreciation figure will remain the same

Dr. Trading, Profit & Loss Account Cr. for the year ended 30.9.2012 Particulars ` Particulars ` To Opening stock 21,84,000 By Sales 1,66,40,000 To Purchases 96,00,000 By Closing stock 21 ,32,000 To Goods from H.O. 39,40,000 To Wages 1,20,000 To Carriage Inward. 40,000 To Gross Profit c/d 28,88,000 1,87,72,000 By Gross Profit b/d 1,87,72,000 To Salaries 2,40,000 28,88,000

Topper’s Institute Branch 5.56 To Rent Rates & taxes 80,000 To Insurance 40,000 To Trade expenses 40,000 To Depreciation Machinery 4,56,000 Furniture 30,400 4,86,400 To Net Profit Loss 20,01,600 28,88,000 To Net Profit to H.O 27,01,600 By Net Profit 28,88,000 By Difference in exchange 20,01,600 7,00,000 27,01,600 27,01,600 Branch Balance Sheet as at 30th Sept. 2012 Liabilities ` Assets ` ` Head Office A/c 43,00,000 Plant & Machinery 45,60,000 Profit & Loss A/c 27,01,600 Less Depreciation 4,56,000 41,04,000 Creditors 6,97,000 Furniture & fitting 3,04,000 Outstanding wages 41,000 Less: Depreciation 30,400 2,73,600 Stock 21,32,000 Debtors 9,84,000 Cash at Bank 2,05,000 Cash in hand 41,000 77,39,600 77,39,600

Problem. 46 The Washington branch of XYZ Mumbai sent the following trial balance as on 31st December, 2012: $ $ Head office A/c - 22,800 Sales - 84,000 Debtors and creditors 4,800 3,400 Machinery 24,000 - Cash at bank 1,200 - Stock, 1 January, 2012 11,200 - Goods from H.O. 64,000 - Expenses 5,000 - 1,10,200 1,10,200 In the books head office, the Branch A/c stood as follows: Washington Branch A/c ` ` To Balance b/d 8,10,000 By Cash 28,76,000 To Goods sent to branch 29,26,000 By Balance c/d 8,60,000 37,36,000 37,36,000

Goods are sent to the branch at cost plus 10% and the branch sells goods at invoice price plus 25%. Machinery was acquired on 31st January, 2007, when $ 1.00= 40. Rates of exchange were: 1st January, 2012 $ 1.00 = ` 46 31st December, 2012 $ 1.00 = ` 48 Average $ 1.00 = ` 47 Machinery is depreciated @ 10% and the branch manager is entitled to a commission of 5% on the profits of the branch.

Topper’s Institute Branch 5.57 You are required to: (i) Prepare the Branch Trading & Prom & Loss A/c in dollars. (ii) Convert the Trial Balance of branch into Indian currency and prepare Branch Trading & Profit and Loss A/c and the Branch A/c in the books of head office. [P.M. Page – 8.39, Q. No – 21] Solution (i) Branch Trading & P/L A/c in US$

Particulars Amount Particulars Amount To Opening Stock 11,200 By Sales 84,000 To Gross from H.O 64,000 By Closing Stock (b/c) 8,000 To Gross Profit (84,000 × 25/125) 16,800 92,000 92,000 To Depreciation (6000 × 60%) 2400 By Gross Profit 16800 To Expense 5000 To Branch Manager commission 470 (16800 -5000-2900 × 5/100) To Net Profit 8930 16,800 16,800 Branch B/s in $

Liabilities Amount Assets Amount Head office A/c 22800 Machinery 24000 P/L A/c 8930 Less: Depreciation 2400 21600 O/S Managers Commission 470 Debtor 4800 Creditors 3400 Land & Building 1200 Closing Stock 8000 35,600 35,600

(ii) Statement of conversion of Branch Trial Balance in `

Particulars $ Ex. ` Dr. Cr. Rate Dr. Cr. H.O - 22800 Br. A/c - 860000 Sales - 84000 AR - 47 - 3948000 Debtor/Creditor 4800 3400 CR – 48 230400 163200 Machinery 2400 - 40 960000 - Cash & Bank 1200 - CR – 48 57600 - Opening stock 11200 - OR – 46 515200 - Goods from H.O 64000 - Goods sent to branch 2926000 - Expense 5000 - AR - 47 235000 - Foreign Exchange Fluctuation - - 47000 - 4971200 4971200 Closing stock = $8000 × 48 = 384000 O/S Manager’s Commission = $470 × 48 = 22560

Branch A/c Particulars Amount Particulars Amount To B/d 860000 By Branch Debtor 230400 To O/S Manager Commission 22560 By Branch Machinery 864000 To Branch Creditor 163200 By Branch Cash & Bank 57600 To P/L A/c 490240 By Closing Stock 384000 15,36,000 15,36,000 Branch Trading & P/L A/c

Topper’s Institute Branch 5.58 Particulars Amount Particulars Amount To Opening Stock 515200 By Sales 3948000 To Gross from H.O 292600 By Closing Stock 384000 To Gross Profit 890800

To Foreign Exchange Fluctuation 47000 By Gross Profit 890800 To Expense 235000 To Branch Manager commission 22560 To Depreciation on Machinery 96000 To Net Profit 490240 8,90,800 8,90,800

Balance Sheet

Liabilities Amount Assets Amount Head office A/c 860000 Machinery 864000 P/L A/c 490240 Debtor 230400 O/S Managers Commission 22500 Cash & Bank 57600 Creditors 163200 Closing Stock 384000 15,36,000 15,36,000

Problem. 47 On 31st March, 2010, the following Ledger balances have been extracted from the books of Washington branch office: Ledger A/c $ Building 180 Stock as on 1.4.2009 26 Cash and Bank Balances 57 Purchases 96 Sales 110 Commission receipts 28 Debtors 46 Creditors 65 You are required to convert above Ledger balances into Indian Rupees. Use the following rates of exchange: Opening Rate $ = 46 Closing Rate $ = 50 Average Rate $ = 48 For Fixed Assets $ = 42 [May-2010] Solution Particulars Rate Amount Details ` $ ` Building Rate at the date of actual purchase 42 180 7560 Stock(1.4.2009) Opening rate 46 26 1196 Cash & Bank Closing rate 50 57 2850 Purchase Average rate 48 96 4608 Sales Average rate 48 110 5280 Commission Receipts Average rate 48 28 1344 Debtors Closing rate 50 46 2300 Creditors Closing rate 50 65 3250

Topper’s Institute Branch 5.59

Problem. 48

An Indian Company Moon Star Limited has a Branch at Verginia (USA). The Branch is a non-integral foreign operation of the Indian company. The trail balance of the branch as at 31st March, 2012 is as follows:

Particulars US $ Dr. Cr. Office equipments 48,000 Furniture and Fixtures 3,200 Stock (April 1, 2011) 22,400 Purchases 96,000 Sales - 1,66,400 Goods sent from H.O. 32,000 Salaries 3,200 Carriage inward 400 Rent, Rates & Taxes 800 Insurance 400 Trade Expenses 400 Head Office Account - 45,600 Sundry Debtors 9,600 Sundry Creditors - 6,800 Cash at Bank 2,000 Cash in Hand 400 2,18,800 2,18,800 The following further information are given: (1) Salaries outstanding $ 400. (2) Depreciate office equipment and Furniture & Fixture @ 10% p.a. at written down value. (3) The Head Office sent goods to Branch for ` 15,80,000. (4) The Head Office shown an amount of ` 20,50,000 due from branch. (5) Stock on 31st March, 2012- $ 21,500 (6) There were no transit items either at the start or at the end of the year. (7) On April 1, 2010 when the fixed assets were purchased the rate of exchange was ` 43 to one $. On April 1, 2011, the rate was ` 47 per $. On March 31, 2012, the rate was ` 50 per $. Average Rate during the year was ` 45 to one $. Prepare (a) Trail balance incorporating adjustment given converting dollars into rupees. (b) Trading, profit and Loss Account for the year ended 31st March, 2012 and Balance Sheet as on date depicting the profitability and net position of the Branch as would appear in the books of Indian Company for the purpose of incorporating in the main Balance Sheet. [May-2012] Solution (i) Conversion of Trial Balance Particulars Rate $ ` Dr. Cr. Dr. Cr. Office equipment 50 43,200 21,60,000 Depreciation on office equipment 50 4,800 2,40,000 Furniture & Fixtures 50 2,880 1,44,000 Depreciation on Furniture 50 320 16,000 Stock (Opening) 47 22,400 10,52,800 Purchases 45 96,000 43,20,000 Sale 45 - 1,66,400 74,88,000 Goods received from HO - 32,000 15,80,000 - Salaries [3200 + 400] 45 3,600 - 1,62,000

Topper’s Institute Branch 5.60 Outstanding Salary 50 400 - 20,000 Carriage inward 45 400 18,000 Rent, Rates & Taxes 45 800 36,000 Insurance 45 400 18,000 Trade expense 45 400 18,000 Head Office A/c - 45,600 - 20,50,000 Sundry Debtor 50 9,600 - 4,80,000 - Sundry Creditor 50 - 6,800 3,40,000 Cash at bank 50 2,000 - 1,00,000 - Cash in hand 50 400 - 20,000 - Foreign Exchange translation reserve (b/f) - 4,66,800 10364800 10364800

Trading and Profit & Loss A/c Particulars ` Particulars ` To Opening Stock 10,52,800 By Sales 74,88,000 To Purchase 43,20,000 By Closing Stock (21,500 × 50) 10,75,000 To Goods from HO 15,80,000 To Carriage 18,000 To Gross Profit (b/f) 15,92,200 85,63,000 85,63,000 To Salaries 1,62,000 By Gross Profit 15,92,200 To Rent, Rates & Taxes 36,000 To Insurance 18,000 To Trade Exp. 18,000 To Depreciation - Office equipment 2,40,000 - Furniture 16,000 To Net Profit 11,02,200 15,92,000 15,92,000 Balance Sheet Liabilities ` Assets ` Head Office A/c 20,50,000 Office equipment 21,60,000 (+) Net Profit 11,02,200 Furniture 1,44,000 Stock 10,75,000 Translation Reserve 4,66,800 Sundry debtor 4,80,000 Salary outstanding 20,000 Cash at Bank 1,00,000 Sundry Creditor 3,40,000 Cash in Hand 20,000 39,79,000 39,79,000

Note: Questions requires preparation of financial statement assuming Non – integral operation hence conversion rule of NIFO is applied.

Problem. 49 Pass necessary Journal entries in the books of an independent Branch of a Company, wherever required, to rectify or adjust the following: (i) Income of ` 2,800 allocated to the Branch by Head Office but not recorded in the Branch books. (ii) Provision for doubtful debts, whose accounts are kept by the Head Office, not provided earlier for ` 1,000.

Topper’s Institute Branch 5.61 (iii) Branch paid ` 3,000 as salary to a Head Office Manager, but the amount paid has been debited by the Branch to Salaries Account. (iv) Branch incurred travelling expenses of ` 5,000 on behalf of other Branches, but not recorded in the books of Branch. (v) A remittance of ` 1,50,000 sent by the Branch has not received by Head Office on the date of reconciliation of Accounts. (vi) Head Office allocates ` 75,000 to the Branch as Head Office expenses, which has not yet been recorded by the Branch. (vii) Head Office collected ` 30,000 directly from a Branch Customer. The intimation of the fact has been received by the Branch only now. (viii) Goods dispatched by the Head office amounting to ` 10,000, but not received by the Branch till date of reconciliation. The Goods have been received subsequently. [May – 2014, 12 Marks] Solution Journal Entries in the books of Independent Branch S.No. Particulars Amount (Dr) Amount (Cr) (i) Head Office Dr. 2,800 To Income A/c 2,800 (Being income allocated to branch by H.O.) (ii) Provision for Doubtful Debts A/c Dr. 1,000 To Head Office A/c 1,000 (Being Provision for Doubtful debts provided) (iii) Head Office A/c Dr. 3,000 To Salaries A/c 3,000 (Being the rectification of salary paid on behalf of H.O)

(iv) Head Office A/c Dr. 5,000 To Cash/ Bank A/c 5,000 (Being the expenditure on account of other branches recorded in books) (v) No entry (vi) Expenses A/c Dr. 75,000 To Head Office A/c 75,000 (Being the allocated expenditure by the head office recorded in branch books) (vii) Head Office A/c Dr. 30,000 To Debtors A/c 30,000 (Being the adjustment of collection from branch debtors) (viii) Goods in transit A/c Dr. 10,000 To Head Office A/c 10,000 (Being goods dispatched by H.O but yet not received)

Problem. 50 LMN is having branch at Mumbai. Goods are invoiced to the branch at 25% profit on sale. Branch has been instructed to send all cash daily to head office. All expenses are paid by head office except petty expenses, which are met by the branch. From the following particulars, prepare branch account in the books of head office:

Topper’s Institute Branch 5.62 Particulars Amount Particulars Amount (`) (`) Stock as on 1st April, 2013 (invoice price ) 40,000 Discount allowed to debtors 300 Sundry Debtors as on 1st April, 2013 25,000 Expenses paid by head office: Cash in hand as on 1st April, 2013 1,000 Salary 4,000 Office furniture as on 1st April, 2013 4,000 Staff welfare 750 Goods invoiced from the head office 1,80,000 Telephone expenses 1,200 (invoice price) Other miscellaneous expenses paid Goods returned to head office 6,000 by branch 700 Goods return by debtors 1,250 Stock as on 31st March, 2014 Cash received from Debtors 65,000 (invoice price) 35,000 Cash sales 1,20,000 Depreciation to be provided on Credit sales 70,000 branch furniture 10% p.a. [Nov - 2014] 8 Marks Solution Mumbai Branch Account Particulars ` Particulars ` To opening balances: By stock reserve (40000×25/125) 8,000 Stock 40,000 By Bank: Debtors 25,000 Cash sales 1,20,000 Cash 1,000 Collection from debtor 65,000 1,85,000 Furniture 4,000 By goods returned to H.O. 6,000 To goods received from H.O. 1,80,000 By closing balance: To stock reserve (35000×25/125) 7,000 Stock 35,000 Debtors 28,450 Cash Furniture (4000-10%) 3,600

Memorandum Branch Debtors A/c Particulars ` Particulars ` To balance b/d 25,000 By goods returned by debtor 1,250 To credit sales 70,000 By discount 300 By cash 65,000 By balance c/d 28,450 95,000 95,000

Problem. 51 M/s. Sandeep, having Head Office at Delhi has a Branch at Kolkata. The Head Office does Wholesale Trade only at Cost plus 80%. The Goods are sent to Branch at the Wholesale Price, viz. cost plus 80%. The Branch at Kolkata wholly engaged in Retail Trade and the goods are sold at cost to Head Office plus 100%. Following details are furnished for the year ended 31st March 2014: Particulars Head Office (`) Kolkata Branch (`) Opening Stock (as on 01.04.2013) 1,25,000 – Purchases 21,50,000 – Goods sent to Branch (cost to H.O. plus 80%) 7,38,000 – Sales 23,79,600 7,30,000 Office Expenses 50,000 4,500 Selling Expenses 32,000 3,300 Staff Salary 45,000 8,000 Prepare Trading and Profit & Loss Account of the Head Office and Branch for the year ended 31st March 2014. [May - 2015] 8 Marks

Topper’s Institute Branch 5.63

Solution A. Trading and Profit and Loss Account for the year ended on 31 st March (in `)

Particulars HO Branch Particulars HO Branch To Opening Stock 1,25,000 Nil By Sales 23,79,600 7,30,000 To Purchases 21,50,000 Nil By Goods Sent to Branch 7,38,000 Nil To Goods received from HO – 7,38,000 By Closing Stock (WN 2,3) 5,43,000 81,000 To Gross Profit (bal. figure) 13,85,600 73,000 Total 36,60,600 8,11,000 Total 36,60,600 8,11,000 To Staff Salary 45,000 8,000 By Gross Profit b/d 13,85,600 73,000 To Office Expenses 50,000 4,500 To Selling Expenses 32,000 3,300 To NP trfd to General P&L (b/f) 12,58,600 57,200

Total 13,85,600 73,000 Total 13,85,600 73,000

B. General Profit and Loss Account

Particulars ` Particulars ` To Stock Reserve on Branch Closing By Head Office Profit b/d 12,58,600  80  By Branch Profit b/d 57,200 Stock 81,000  36,000  180  To Net Profit (balancing figure) 12,79,800

Total 13,15,800 Total 13,15,800

Working Notes: 1. Computation of Loading Margin

Particulars ` Cost of Goods to Head Office 100 Add: Loading by HO to Branch 80 Whole Sale Price, i.e. Invoice Price to Branch 180 Sale Price at Branch 200

2. Closing Stock at Branch

Goods Received from HO at Whole Sale Price ` 7,38,000 Less: Sales converted into Wholesale Price (` 7,30,000 × 180) 200 ` 6,57,000 Closing Stock at Branch ` 81,000

3. Closing Stock of HO = Opening Stock + Purchase – Cost of Goods Sent to Branch – Cost of Goods Sold by HO  100   100  = 1,25,000 + 21,50,000 – 7,38,000  - 23,79,600   180   180 

= 1,25,000 + 21,50,000 – 4,10,000 – 13,22,000 = ` 5,43,000.

Problem. 52 M/s ABC & Co. has head office at New York (U.S.A.) and branch in Bangalore (India). Bangalore branch is an integral foreign operation of M/s ABC & Co.

Topper’s Institute Branch 5.64 Bangalore branch furnishes you with its trial balance as on 31st March, 2015 and the additional information given thereafter: Dr. Cr. (Rupees in thousands) Stock on 1st April, 2014 300 - Purchases and Sales 800 1,200 Sundry Debtors & Creditors 400 300 Bills of Exchange 120 240 Wages & Salaries 560 - Rent, Rates & Taxes 360 - Sundry Charges 160 - Computers 240 - Bank Balance 420 - New York Office A/c - 1,620 3,360 3,360

Additional Information:

(a) Computers were acquired from a remittance of US $ 6,000 received from New York head office, and paid to the suppliers. Depreciate computers at 60% for the year. (b) Unsold stock of Bangalore branch was worth ` 4,20,000 on 31st March, 2015. (c) The rates of exchange may be taken as follows:  On 01.04.2014 @ ` 55 per US$  On 31.03.2015 @ ` 60 per US$  Average exchange rate for the year @ ` 58 per US $  Conversion in $ shall be made up to two decimal accuracy. You are asked to prepare in US dollars the revenue statement for the year ended 31st March, 2015 and the balance sheet as on that date of Bangalore branch as would appear in the books of New York head office of ABC & Co. You are informed that Bangalore branch account showed a debit balance of US $ 29845.35 on 31.3.2015 in New York books and there were no items pending reconciliation. [May - 2016] Solution 1. Conversion of Bangalore Branch Trial Balance as at 31st March 2015 into US Dollars Particulars Debit Credit Rate per US $ Dr. Cr. (` in 000's) (` In 000's) (`) US $ US $ Stock as on 01.04.2014 300 - 55 5,454.55 - Purchases & Sales 800 1,200 58 13,793.10 20,689.66 Debtors & Creditors 400 300 60 6,666.67 5,000.00 Bills of Exchange 120 240 60 2,000.00 4,000.00 Wages & Salaries 560 - 58 9,655.17 - Rent, Rates & Taxes 360 - 58 6,206,90 - Sundry Charges 160 - 58 2,758.62 - Computers 240 - Actual 6,000.00 - Bank 420 - 60 7,000.00 - BalanceNew York Office A/c - 1,620 Actual - 29,845.35 Total 3,360 3,360 59,535.01 59,535.01

2. Trading and Profit & Loss Account for the year ended 31 st March 2015 (Amount in US $)

Particulars Amount Particulars Amount To Opening Stock 5,454.55 By Sales 20,689.66 To Purchases 13,793.10 By Closing Stock (` 4,20,000 ÷ 60) 7,000.00 To Wages & Salaries 9,655.17 By Gross Loss c/d (bai.fig) 1,213.16 Total 28,902.82 Total 28,902.82

Topper’s Institute Branch 5.65 To Gross Loss b/d 1,213.16 By Net Loss c/d to Balance Sheet (bai.fig) 13,778.68 To Rent, Rates & Taxes 6,206.90 To Sundry Charges 2,758.62

To Depn. On Computers 3,600.00 (6,000 x 60%) Total 13,778.68 Total 13,778.68

3. Balance Sheet of Bangalore Branch as on 31st March 2015 (Amount in US $)

Capital and Liabilities Amount Properties and Assets Amount Capital: Fixed Assets: New York Office A/c 29,845.35 Computers 6,000.00 Less: Net Loss for the year (13,778.68) Less: Depreciation (3,600.00) 2,400,00 Net Balance in HO A/c 16,066.67 Current Assets, Loans and Advances: Current Liabilities & Provisions: Closing Stock 7,000.00 Sundry Creditors 5,000.00 Sundry Debtors 6,666.67 Bills Payable 4,000.00 Bank Balance 7,000.00 Bills Receivable 2,000.00 Total 25,066.67 Total 25,066.67

Problem. 53 Nee with headquarters at Mumbai, maintains a branch at Goa. Goods are invoiced at cost plus 25%. In respect of Goa branch, the following information pertaining to the year ended 31st March 2013 are made available to you. ` Goods sent to Branch (at invoice price) 6,75,000 Goods returned by branch during the year (at Invoice price) 24,000 Cash Sales effected by branch 1,85,000 Discount allowed to customers 2,500 Amount received from branch debtors 3,25,000 Cheques of customers which got dishonoured 8,000 Branch expenses met in cash 72,500 Sales return at Goa Branch 10,000 Bad debts 5,500 On 31st March. 2012 On 31st March. 2012 Branch debtors 1,05,000 50,000 Stock at branch (at invoice price) 2,36,000 1,50,000

Adopting the Stock and debtors system, you are required to prepare the following Ledger accounts, as appearing in the books of the Head Office: (i) Goa branch debtors account; (ii) Goa branch adjustment account; (iii) Goa branch profit and loss account. [P.M. Page No. 8.22, Q.12] Problem. 54 Pawan, of Delhi has a branch at Jaipur. Goods are invoiced to the branch at cost plus 25%. The branch is instructed to deposit the receipts everyday in the head office account with the bank. All the expenses are paid through cheque by the head office except petty cash expenses which are paid by the Branch. From the following information, you are required to prepare Branch Account in the books of Head office:

Topper’s Institute Branch 5.66 ` Stock at invoice price on 1.4.2012 1,64,000 Stock at invoice price on 31.3.2013 1,92,000 Debtors as on 1.4.2012 63,400 Debtors as on 31.3.2013 84,300 Furniture & fixtures as on 1.1.2012 46,800 Cash Sales 8,02,600 Credit Sales 7,44,200 Goods invoiced to branch by head office 12,56,000 Expenses paid by head office 2,64,000 Petty expenses paid by the branch 20,900 Furniture acquired by the branch on 1.10.2012 (payment was made by the branch from cash sales and collection from debtors) 5,000

Depreciation to be provided to branch furniture & fixtures @ 10% p.a. on WDV basis. [P.M. Page No. 8.26, Q.14] Problem. 55 M/s Rahul operates a number of retail outlets to which goods are invoiced at wholesale price which is cost plus 25%. These outlets sell the goods at the retail price which is wholesale price plus 20%. Following is the information regarding one of the outlets for the year ended 31.3.2012: ` Stock at the outlet 1.4.11 30,000 Goods invoiced to the outlet during the year 3,24,000 Gross profit made by the outlet 60,000 Goods lost by fire ? Expenses of the outlet for the year 20,000 Stock at the outlet 31.3.12 36,000

You are required to prepare the following accounts in the books of Rahul Limited for the year ended 31.3.12: (a) Outlet Stock Account (b) Outlet Profit & Loss Account (c) Stock Reserve Account [S.M. Page No. 9.28, Illus.11]

Problem. 56 Messrs Ramchand & Co. Hyderabad have a branch in Delhi. The Delhi Branch deals not only in the goods from Head Office but also buys some auxiliary goods and deals in them. They, however, do not prepare any Profit & Loss Account but close all accounts to the Head Office at the end of the year and open them afresh on the basis of advice from their Head Office. The fixed assets accounts are also maintained at the Head Office. The goods from the Head Office are invoiced at selling prices to give a profit of 20 percent on the sale price. The goods sent from the branch to Head Office are at Cost. From the following prepare Brach Trading and Profit & Loss Account in the Head Office Books.

Trial Balance of the Delhi Brach as on 31-12-2012 Debit ` Credit ` Head office opening balance on 1-1-12 15,000 Sales 1,00,000 Goods from H.O. 50,000 Goods to H.O. 3,000 Purchases 20,000 Head Office Current A/c 15,000 Opening Stock Sundry Creditors 3,000 (H.O. goods at invoice prices) 4,000 Opening stock of other goods 500 Salaries 7,000

Topper’s Institute Branch 5.67 Rent 3,000 Office expenditure 2,000 Cash on Hand 500 Cash at Bank 4,000 Sundry Debtors 15,000 1,21,000 1,21,000

The Branch balances as on 1st January, 2012, were as under: Furniture ` 5,000; Sundry Debtors ` 9,500; Cash ` 1,000; Creditors ` 30,000; Stock (H.O. goods at invoice price) ` 4,000; other goods ` 500. The closing stock at branch of the head office goods at invoice price is ` 3,000 and that of purchased goods at cost is ` 1,000. Depreciation is to be provided at 10 percent on branch assets. [S.M. Page No. 9.36, Illus.12]

Problem. 57 The following Trial balances as at 31st December, 2012 have been extracted from the books of Major Ltd. and its branch at a stage where the only adjustments requiring to be made prior to the preparation of a Balance Sheet for the undertaking as a whole.

Head Office Branch Dr. Cr. Dr. Cr. ` ` ` ` Share Capital 1,50,000 Fixed Assets 75,125 18,901 Current Assets 1,21,809 23,715 (Note 3) Current Liabilities 34,567 9,721 Stock Reserve, 1st Jan., 2012 (Note 2) 693 Revenue Account 43,210 10,250 Branch Account 31,536 Head Office Account 22,645 2,28,470 2,28,470 42,616 42,616 Note: 1. Goods transferred from Head Office to the Branch are invoiced at cost plus 10% and both Revenue Accounts have been prepared on the bases of the prices charged. 2. Relating to the Head Office goods held by the Branch on 1st January, 2012. 3. Includes goods received from Head Office at Invoice price ` 4,565. 4. Goods invoiced by Head office to Branch at ` 3,641 were in transit at 31st December, 2012, as was also a remittance of ` 3,500 from the Branch. 5. At 31st December, 2012, the following transactions were reflected in the Head Office books but unrecorded in the Branch books. The purchase price of lorry, ` 2,500, which reached the Branch on December 25th; a sum received on December 30, 2012 from one of the Branch debtors, ` 750. You are required: (i) to record the foregoing in the appropriate ledger accounts in both sets of books; (ii) to prepare a Balance sheet as at 31st December, 2012 for the undertaking as a whole. [S.M. Page No. 9.48, Illus.16] Problem. 58 ABCD Ltd. Delhi has a branch in New York, USA, which is an integral foreign operation of the company. At the end of 31st March, 2013, the following ledger balances have been extracted from the books of the Delhi office and the New York Branch:

Topper’s Institute Branch 5.68 Particulars Delhi Delhi (` in thousands) (` thousands) Share Capital 1,250 Reserve and Surplus 940 Land 475 Building (cost) 1,000 Buildings Depreciation Reserve 200 Plant & Machinery (cost) 2,000 100 Plant & Machinery Depreciation Reserve 500 20 Trade receivables/payables 500 270 60 20 Stock (01-4-2012) 250 25 Branch Stock Reserve 65 Cash & Bank Balances 125 4 Purchases/Sales 275 600 25 125 Goods sent to Branch 1,500 30 Managing Director’s salary 50 Wages & Salaries 100 18 Rent 6 Office Expenses 25 12 Commission receipts 275 100 Branch/H.O. Current A/c 800 15 5,600 5,600 280 280

The following information is also available: 1. Stock as at 31-3-2013 Delhi – ` 2,00,000 New York - $ 10 (all stock received from Delhi) 2. Head office always sent goods to the Branch at cost plus 25%. 3. Provision is to be made for doubtful debts at 5%. 4. Depreciation is to be provided on Buildings at 10% and on Plant and Machinery at 20% on written down values. You are required: (a) To convert the branch Trial Balance into rupees, using the following rates of exchange: Exchange: Opening rate 1 $ = ` 50 Closing rate 1 $ = ` 55 Average rate 1 $ = ` 52 For fixed assets 1 $ = ` 45 (b) To prepare the Trading and Profit & Loss Account for the year ended 31st March, 2013, showing to the extent possible, Head Office results and Branch results separately. [P.M. Page No. 8.48, Q.24]

Problem. 59 Mr. Chena Swami of Chennai trades in Refined Oil and Ghee. It has a branch at Salem. He despatches 30 tins of Refined Oil @ ` 1,500 per tin and 20 tins of Ghee @ ` 5,000 per tin on 1st of every month. The Branch has incurred expenditure of ` 45,890 which is met out of its collections; this is in addition to expenditure directly paid by Head Office. Following are the Other details:

Chennai H.O. Salem B.O. Amount(`) Amount(`) Purchases: Refined Oil 27,50,000 Ghee 48,28,000 Direct Expenses 6,35,800 Expenses paid by H.O. 76,800

Topper’s Institute Branch 5.69 Sales: Refined Oil 24,10,000 5,95,000 Ghee 38,40,500 14,50,000 Collection during the year (including Cash Sales) 20,15,000 Remittance by Branch to Head Office 19,50,000

Chennai H.O. Balance as on 01.04.2015 31.03.2016 .. Amount( `) Amount( `) Stock: Refined Oil 44,000 8,90,000 Ghee 10,65,000 15,70,000 Building 5,10,800 7,14,780 Furniture & Fixtures 88,600 79,740

Salem Branch Office Balance as on 01.04.2015 31.03.2016 Amount(`) Amount(`) Stock: - Refined Oil 22,500 19,500 Ghee 40,000 90,000 Sundry Debtors 1,80,000 ? Cash in Hand 25,690 ? Furniture & Fixtures 23,800 21,420

Additional information: (i) Addition to Building on 01-04-2015 ` 2,41,600 by H.O. (ii) Rate of depreciation: Furniture & Fixtures @ 10% and Building @5% (already adjusted in the above figure). (iii) The Branch Manager is entitled to 10% commission on overall organizational profits after charging such commission. (iv) The General Manager is entitled to a salary of ` 20,000 per month. (v) General expenses incurred by Head Office is ` 1,86,000. You are requested to prepare Branch Account in the Head Office books and also prepare Chena Swami's Trading and Profit & Loss Account (excluding branch transactions) for the year ended 31st March, 2016. [Nov – 2016, 8 Marks] Solution Branch Account

Particulars Amount Particulars Amount To B/d Stock - Oil 22,500 - Ghee 40,000 Debtors 1,80,000 Cash 25,690 F&F 23,800 To Goods sent to Branch Oil – (30 × 1500) × 12M 5,40,000 By Cash A/c Ghee – (20 × 5000) × 12M 12,00,000 - Remittance by Branch 19,50,000 To Cash By C/d - Paid by H.O 76,800 Closing Stock - Oil 19,500 To N.P transfer to Gen P/L A/c 2,26,930 - Ghee 90,000

Topper’s Institute Branch 5.70 Debtor 2,10,000 Cash 44,800 F & F 21,420 23,35,720 23,35,720

General P/L A/c

Particulars Amount Particulars Amounts To Branch Manager commission 80,195 By Branch A/c 2,26,930 (882150 × 10/110) To Net Profit of Company 8,01,955 By H.O A/c 6,55,220 8,82,150 8,82,150

Branch Debtor A/c

Particulars Amount Particulars Amount To B/d 25,690 By Bank 20,15,000 To Branch Debtor 20,15,000 By C/d 2,10,000 20,40,690 20,40,690

Branch Trading & P/L A/c

Particulars Amount Particulars Amount To Opening Stock By Sales to customer - Oil 44,000 - Oil 24,10,000 - Ghee 10,65,000 - Ghee 38,40,500 To Purchase By transfer to Branch -Oil 27,50,000 - Oil 5,40,000 -Ghee 48,28,000 - Ghee 12,00,000 To Direct Expense 6,35,800 By Closing Stock To Gross Profit 11,27,700 - Oil 8,90,000 - Ghee 15,70,000 1,04,50,500 1,04,50,500 To Dep. - F & F 8,860 By Gross Profit 11,27,700 - Building 37,620 (510800 + 241600) × 5% To General Manager commission 2,40,000 To General Expenses 1,86,000 To Net Profit (Transfer to General P/L) 6,55,220 11,27,700 11,27,700

Problem 60. Show Adjustment Journal Entry along with working notes in the books of head office at the end of April, 2017 for incorporation of inter branch transactions assuming that only head office maintains different branch account in its books: (A) Delhi Branch: (i) Received goods from Mumbai ` 1,40,000 and ` 60,000 from Kolkata. (ii) Sent goods to Chennai ` 1,00,000, Kolkata ` 80,000 (iii) Bill receivable received ` 80,000 from Chennai (iv) Acceptances sent to Mumbai ` 1,00,000, Kolkata ` 40,000 (B) Mumbai Branch (Apart from the above): (i) Received goods from Kolkata ` 60,000, Delhi ` 80,000

Topper’s Institute Branch 5.71 (ii) Cash sent to Delhi ` 60,000, Kolkata ` 28,000 (C) Chennai Branch (Apart from the above): (i) Received goods from Kolkata `1,20,000 (ii) Acceptances and cash sent to Kolkata ` 80,000 and ` 40,000 respectively. (D) Kolkata Branch (Apart from the above) (i) Sent goods to Chennai ` 1,40,000 (ii) Paid cash to Chennai ` 60,000 (iii) Acceptances sent to Chennai ` 60,000 [May – 2017, 8 Marks] Solution 1. Statement of Inter Branch Transaction Effects Particulars Delhi Mumbai Chennai Kolkata Delhi Received Goods 2,00,000 (1,40,000) - (60,000) Sent Goods (1,80,000) - 1,00,000 80,000 Received Bills Receivable 80,000 - (80,000) - Sent Acceptance (1,40,000) 1,00,000 - 40,000 Mumbai Received Goods (80,000) 1,40,000 - (60,000) Sent Cash 60,000 (88,000) - 28,000 Chennai Received Goods - - 1,20,000 (1,20,000) Sent Cash and Acceptance - - (1,20,000) 1,20,000 Kolkata Sent Goods 1,40,000 (1,40,000) Sent Cash 60,000 (60,000) Sent Acceptances 60,000 (60,000) (60,000) 12,000 2,80,000 (2,32,000)

2. Journal Entry in the Books of Head office

Particulars Dr.(`) Cr.(`) Mumbai Branch A/c Dr. 12,000 Chennai Branch A/c Dr. 2,80,000 To Delhi Branch A/c 60,000 To Kolkata Branch A/c 2,32,000 (Being adjustment entry passed by HO for Inter Branch Transaction for April)