Unit – 4
DEPARTMENTAL ACCOUNTS AND BRANCH ACCOUNTS
Department is a division of a large organization, dealing with a specific area of activity. Department is distinguished from Branch. Various branches of a business are located at distinct places, generally far from each other. Department are small units, carrying out their own specific activity within a single premises of the business.
Whenever there are departments in a business, it is also necessary that profit-loss situation is also derived from each department. Hence,departmental accounts are prepared.
While preparing Departmental Accounts, following points are considered:
1) Specific expenses of each department are directly charged to that department.
2) Common expenses are allocated to each department, using some logical method
For e.g. Rent is a common expenditure paid for the whole unit of the business. So it will be allocated to each department on the basis of the area occupied by each of them.
Large business organizations may have a main office, known as Head Office (H.O.) and several offices at different geographical locations, known as Branch. Branches are opened with a view to gain larger customer base, from different geographies. It increases sales of the company.
Any business entity having Branch or Branches need to prepare different set of books of accounts for H.O separately from its Branch. This is done so that Branch Profits can be computed and management can find out the profitability of each of the branch separately.
There are two types of Branch. Dependent and Independent.
Accounting of Dependent Branch is done as per one of the two methods:
Debtors Method and
Stock and Debtors Method.
In Debtors Method, a separate branch a/c is prepared in the books of the H.O. And all items related to the specific branch are recorded in the same a/c. Accounting is different on the fact whether Goods are sent to the branch by H.O. at Cost Price or at a higher price than the cost i.e. loading price.
In Stock and Debtors Method,a separate branch a/c is prepared in the books of the H.O. But in much more detailed manner, than in the Debtors Method. In this case also, accounting depends upon the price at which goods are sent to the branch by the H.O.
Q 1) From the following particulars you are required to prepare Departmental Trading Account for Departments A and B for the year ended 31.03.2015
Particulars | Department A
| Department B |
Opening Stock Purchases Sales Closing Stock | 60,000 3,60,000 6,00,000 20,000
| 90,000 5,40,000 8,00,000 80,000
|
Solution: Departmental Trading for the year ended on 31.03.2015
Particulars | Dept.A
| Dept.B | Total | Particulars | Dept.A | Dept.B | Total |
To Opening Stock To Purchases
To Gross Profit c/d | 60,000
3,60,000
2,00,000 | 90,000
5,40,000
2,50,000 | 1,50,000
9,00,000
4,50,000 | By Sales By Closing Stock | 6,00,000 20,000
| 8,00,000 80,000
| 14,00,000 1,00,000
|
6,20,000 | 8,80,000 | 15,00,000 | 6,20,000 | 8,80,000 | 15,00,000 |
Q 2) Prepare Departmental Trading Account from the following particulars:
Particulars
| Dept. A | Dept. B | Dept. C | Total |
Purchases Sales Wages Closing Stock Carriage Inwards | 90,000 160,000 30,000 44,000
| 60,000 1,28,000 24,000 32,000 | 30,000 64,000 20,000 28,000 | - - - - 12,000 |
Additional Information:There was no Opening Stock.
Solution: Departmental Trading Account for the year ending……
Particulars | Dept. A | Dept. B | Dept. C | Particulars | Dept. A | Dept. B | Dept. C |
To purchases To Carriage inward To Wages
To Gross Profit c/d
| 90,000
6,000 30,000
78,000
| 60,000
4,000 24,000
72,000
| 30,000
2,000 20,000
40,000
| By Sales By Stock | 1,60,000 44,000
| 1,28,000 32,000
| 64,000 1,04,000
|
2,04,000 | 1,60,000 | 92,000 | 2,04,000 | 1,60,000 | 92,000 |
Note No.1:Carriage inward should be allocated in the ratio of Purchases which is 90,000 : 60,000 i.e. 3:2
PART 2 - BRANCH ACCOUNTING
Q1) Hari is having his Head Office at Patna and Branch Office at Gaya. Prepare the Branch Account in the books of the Head Office from the following transactions with the branch:
Particulars | Amount | Particulars | Amount |
Opening Balance at Branch: - Petty Cash - Stock - Debtors Goods Supplied to Branch during the year Amounts remitted by the Branch: - Cash Sales - Realisation from Debtors |
1,000 39,500 21,000
3,10,000
1,13,200 2,30,300
| Amounts remitted to the Branch for: - Petty Cash Expenses - Salary - Rent and Taxes Closing balances at Branch: - Petty Cash - Debtors - Stock |
4,000 12,000 3,500
950 53,000 26,500 |
IN THE BOOKS OF H. O.
Gaya Branch Account
Particulars | Amount | Particulars | Amount |
To Balance b/d: Branch Petty Cash Branch Stock Branch Debtors To Goods sent to Branch To Cash remitted for: Petty Cash Expenses Salary Rent To General P/L A/C (Bal. Fig.) |
1,000 39,500 21,000 3,10,000
4,000 12,000 3,500 32,950
4,23,950 | By Bank (Remittances) Cash Sales Realisation from Debtors By Balance c/d: Branch Petty Cash Branch Debtors Branch Stock |
1,13,200 2,30,300
950 53,000 26,500
4,23,950 |
Q2) Babubhai of Patna opened a branch at Gaya on 1st January, 2013. During the year ended 31st December 2013, the following transactions have taken place:
Goods sent to Gaya 60,000
Cash sent to Gaya 5,000
Goods returned from Gaya 6,000
Cash received from Gaya 58,000
Rent for Branch paid by Head Office 3,000
Expenses paid by Branch:
Salaries 6,000
Conveyance 500
Postage 500
Carriage 400 7400
Discount allowed to customers was 800. Sales on Credit amounted to 68,000. Cash Sales amounted to 8,000. On 31st December, 2013. Stock worth 6,000 was at Branch, 5,000 was due from Debtors and Cash on hand was 1,000.Show Branch Account in the books of Babubhai.
IN THE BOOKS OF H.O.Gaya Branch Account
Particulars | Amount | Particulars | Amount |
To Goods sent to Branch A/c To Cash To Cash (Rent paid) To General P/L A/c (Bal. Fig.)
| 60,000 5,000 3,000 8,000
| By Goods sent to Branch A/c (Returns) By Bank A/c (Remittances) By Balance c/d: Closing Stock Cash Debtors |
6,000 58,000
6,000 1,000 5,000
|
76,000 | 76,000 |
Notes:
1 For the following transactions no entry will be passed by H.O. In its Books: Expenses paid by branch, discount allowed to customers, sales by branch. These are recorded by the branch in its Memorandum (rough) Accounts are reflected in the closing balances c/d.
2 Since this is the first year when the branch was started, there are no opening balances.
Reference-
- S. M. Shukla : Financial Accounting.
- Singh and Singh : Financial Accounting.
- Bhrigu Nath Ojha & Others. : Company Accounting.
- M. C. Shukla : Advanced Accounts.
- R. D. Gupta : Advanced Accounts.
- T. S. Grewal : Financial Accounts.
- Paul and Paul : Financial Accounting
