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OPERATIONS
BRANCHES
BRANCHES
Identifiable
Branch accounting
systems
Segmenting
(separating)
accounting system for HO and B
operations.
HO records
B records
Central
accounting
unit
Adjunct
accounting
systems
Branch accounting
systems
Branch accounting
systems
Combining process:
Similar
Transactions between HO
and the branch
Assume:
Expando corporation creates a branch in Splinter,
Montana, by trnasferring cash of $5,000 and
equipment with a cost $10,000 to the branch
manager.
HO Books
Splinter
branch
Cash
Branch Books
$15,000
Cash
$ 5,000 Equipment
10,000
HO
$ 5,000
10,000
$15,000
Transactions between HO
and the branch
HO
Transactions between HO
and the branch
Assume:
(merchandise transfers)
Expando corporation ships merchandise to
Splinter branch at its $8,000 HO cost.
HO Books
Splinter
branch
Shipment
to
SB
$8,000
$ 8,000
Branch Books
Shipment
from HO
HO
$ 8,000
$8,000
Transactions between HO
and the branch
JOURNAL
ENTRIES
T
R
1.
HO BOOKS
BB
Cash
BB BOOKS
20,00
Cash
0 20,00
HO
0
2.
3.
Equipment
Cash
BB
Shipments
to BB
16,00
Shipments from
0 16,00 HO
0
HO
4.
5.
Shipments to BB
BB
1,000
16,00
0
4,000
Cash
30,00
0
HO
1,000
10,00
0
Purchases
Cash
Sales
6.
20,00
0
Shipments
from
HO
20,00
0
10,00
0
16,00
0
4,000
30,00
0
1,000
1,000
T
R
HO BOOKS
9.
BB BOOKS
Adj. entries
Salaries exp
salaries
payable
Depreciation
exp-equipment
1,000
1,000
2,000
2,000
accumulated
depreciationEquipment
10 Adj. entries
.
BB branch
BB profit
Closing entries
2,000
Sales
2,000 Inventory
Shipment fr
HO
purchase
salaries exp
depreciation
exp
30,00
0
6,000
15,00
0
4,000
7,000
2,000
1,000
HO
BB
Inventory Jan 1
Purchase
Shipment to branch
Shipment from HO
85,000
150,000
(15,000)
220,000
(80,000)
19,000
(6,000)
Cost of Sales
140,000
13,000
4,000
15,000
WORKING
PAPERS
MERCHANDISE SHIPMENTS
IN EXCESS OF COST
Shipments
to Branch Recorded at
Cost
Illustration:
SFM HO ships merchandise that
costs $100,000 to its Tampa
branch at 20 % mark up based on
cost.
HO BOOKS
TB BOOKS
Tbranch
Shipments to
TB
Loading in
TB
120,00
0
Shipments from
100,0 HO
00
HO
20,00
120,00
0
120,00
0
MERCHANDISE SHIPMENTS
IN EXCESS OF COST
$200,000 debit
100,000 credit
20,000credit
TB Books
Sales
Shipments from HO
Expenses
HO
$160,000 credit
120,000 debit
30,000 debit
200,000 credit
MERCHANDISE SHIPMENTS
IN EXCESS OF COST
Adj. entries
TB branch
TB profit
Loading in TB
inventory
TB profit
Closing entries
22,00
Sales
0 22,00 Inventory
0
Shipment fr
HO
18,00
Expenses
0 18,00
HO
0
160,0
00
12,00
0
120,00
0
30,000
22,000
Computation of Income
Sales
Shipments to branch (at
cost)
Less: Inventory (at cost)
Gross profit
Other expenses
Branch income
160,000
100,000
10,000
90,000
70,000
30,000
$40,000
Shipments to Branch
Recorded at Billing Prices
120,000
120,000
year-end adjusting
entries are
HO BOOKS
Shipments
to TB
20,000
needed
Loading in Tbranch
inventory
Loading in Tbranch inventory
T branch profit
20,000
18,000
18,000
Freight Costs on
Shipments
HO BOOKS
Branch
Shipments to
B
Loading in
B
inventory
Cash
13,000
TB BOOKS
Shipments from
10,00 HO
0 Freight in on HO
shipments
2,500
HO
500
12,500
500
13,000
Freight Costs on
Shipments
Freight Costs on
Shipments
BRANCH BOOKS
HO
Shipments from
HO
Freight in on
HO
shipments
Cash
6,75
0
HO BOOKS
Shipments to B
6,250 Loading in b
inventory
250 Loss on excessive
250 freight charges
Branch
5,000
1,250
500
6,750