Page 145 - Accountancy_F5

Particulars TZS

Opening Inventory 8,000,000
Cash sales remitted to Head Office 34,000,000

Goods invoiced to the Branch 31,000,000
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Closing Inventory 5,000,000
Required: Prepare branch inventory account and goods sent to branch account by
using debtors’ method.

Solution 5.1
LANGUAGE EDITING
From the information given, the value of the inventory at the selling price could be
established in the branch inventory accounts in the books of Kwetusafi Ltd., as follows:

In the books of accounts of Kwetusafi Ltd
Branch inventory account
Dr Cr
Particulars TZS Particulars TZS

Balance b/d (opening 8,000,000 Cash sales remitted 34,000,000
inventory)
Goods sent to the branch 31,000,000 Balance c/d 5,000,000
39,000,000 39,000,000

Balance b/d 5,000,000

In the books of accounts of Kwetusafi Ltd
Goods sent to branch account
Dr Cr
Particulars TZS Particulars TZS
To Head Office: Statement of Branch inventory
Profit or Loss 31,000,000 account 31,000,000

31,000,000 31,000,000

When a entity uses the debtors’ method to control the operations of the branches, it is
important to make physical verification of the amount of inventory at regular intervals.
In operations of the branch, some inventory losses can occur due to wastage (broken,
expired) and thefts by customers or employees. Therefore, based on experience, the
head office usually provides a certain per cent of the closing inventory as an allowance
for such deficiencies. Through physical verification of inventory, the head office will

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