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The accounting records of the branch are the head office adopts (discussed in next Classification of Branches
Classfication of
Branches useful because they enable the head office section) when sending goods to the branch.
to observe the changes in assets, liability, Generally, the entity can adopt any of the
and capital. Furthermore, the separate three approaches to transfer goods to a
records of each branch help to determine branch. These are:
the profitability of each branch and exercise (a) goods are transferred at cost,
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Local Branches Foreign Branch
necessary controls to avoid misuse of (b) goods are transferred at selling price,
resources held by the branches. and
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(c) goods are sent at wholesale price.
Autonomous Non-autonomous Activity 5.2
branches branches Mazengo Ltd., is a big company Despite the pricing approach adopted, there
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specialised in processing agricultural food are common books of accounts maintained
products in Tanzania. The company’s
Figure 5.1: Classification of branch accounts by the entity operating with branches. Such
headquarter is in Dar es salaam where
it has two processing plants; one is for accounts include:
cooking oil and the other is for wheat (a) branch inventory account,
flour. In addition, the company has (b) branch accounts receivable account,
three branches packaging cooking oil in (c) branch expenses account,
Dodoma, Singida and Kigoma and two (d) goods sent to branch accounts, and
branches packaging wheat flour in Arusha (e) adjustment accounts.
and Mwanza.

Required: The descriptions of these accounts are as
(a) Identify the basic features for follows:
the branches of Mazengo Ltd. to Branch inventory account
be classified as non-autonomous The branch inventory account is used to
branches.
(b) Explain operational arrangements/ keep records of inventory movement. On
procedures to be established by the debit side, the account is used to record
Mazengo Ltd, that will be used as inventory received from the head office at
guidelines for effective operation invoice price and on the credit side, the
of its non-autonomous branches. inventory sold will be recorded at its cost,
(c) Write a report that will reflect the and the value of inventory on hand. Invoice
operational efficiency of Mazengo price is the price in which goods are sent to
Ltd., branches.
the branch at relatively higher value than
Transactions and accounts the cost price. Under this system the head
when non-autonomous office will invoice goods by adding a certain
branches are used percentage above the cost prices (example

The contents of the accounts for recording 10% or 20%) which account for profit.
branch transactions in relation to the head Therefore, when goods are transferred to
office depend on the pricing approach a branch at a selling price, the balancing

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