Branch accounting (cost method of invoicing)

There are basically three types of inventory pricing to the branch from the head office. 
1.  The cost method
2.  The cost plus method (cost plus mark up)
3.  The fixed selling price method (market price method
        Below we shall see how to post these transactions using the cost method.
The cost method simply means that the goods were being invoiced to the branch by
their exact cost value.

When goods are being invoiced to the branch at cost method:

1. When goods are sent to branch

            Dr. Branch stock account (at cost)
Cr. Goods sent to branch (at cost)

2. Branch returns goods to the head office

Dr. Goods sent to branch (at cost)
Cr. Branch stock account (at cost)

3. When good are sold 

Dr. Cash (at selling price)
Cr. Branch stock (at selling price)

4. If customer returns goods to branch

Dr. Branch stock (at selling price)
Cr. Cash (at selling price)

5. If customer returns goods to head office directly

i.    Assume goods they are returned to branch
Dr. Branch stock (at selling price)
Cr. Cash (at selling price)
ii.   Assume goods are returned to head office
Dr. Goods sent to branch (at cost)
Cr. Branch stock (at cost)

6. Goods sale loss at the branch

Dr. Cash lost / insurance claim (at cost)
Cr. Branch stock (at cost)
 7. If stock lost
            Dr. Stock lost (at cost)
Cr. Branch stock (at cost)

cost plus method.
The cost plus method simply means that the goods were being invoiced to the branch
by their exact cost value with an additional markup value. (what is markup value?)

for the other two methods you shall click links at the end of this section:

When goods are being invoiced to the branch at cost method:

1. When goods are sent to branch

            Dr. Branch stock account (at invoicing price)
Cr. Goods sent to branch (at cost)
Cr. Branch stock adjustment (markup only)

2. Branch returns goods to the head office

Dr. Goods sent to branch (at cost)
Dr. Branch stock adjustment (markup only)
Cr. Branch stock account (at cost)

3. When good are sold 

Dr. Cash (at selling price)
Cr. Branch stock (at selling price)

4. If customer returns goods to branch

Dr. Branch stock (at selling price)
Cr. Cash (at selling price)

5. If customer returns goods to head office directly

i.                    Assume goods are returned to branch
Dr. Branch stock (at selling price)
Cr. Cash (at selling price)
ii.                  Assume goods are returned to head office
Dr. Goods sent to branch (at cost)
Dr. Branch stock adjustment (markup only)
Cr. Branch stock (at invoicing price)

6. cash sale loss at the branch

Dr. Cash lost / insurance claim (selling price)
Cr. Branch stock (s.p)
7. If stock lost
            Dr. Stock lost (at cost)
Dr. Branch stock adjustment (mark down )

Cr. Branch stock (invoicing)

8. When selling allowance is given

Dr. branch stock adjustment (markup)
Cr. Branch stock (markup)