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be able to establish whether the deficiency in the branch is within the tolerance rate/
provision or not.

The entity can also use columnar format, without adjustment account, to prepare the
branch account to establish the amount of profit derived by the branch. With the use of
a computerised accounting system, keeping branch accounts in columns would not be
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a problem. In such a format, one column on the debit side keeps the value of goods sent
from head office and opening inventory at the selling price (which is the invoice price)
and the other column keeps their corresponding values at cost. The column on the debit
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side which keeps records of the selling price is just for control purposes and it is not part
of the double-entry system. Meanwhile, on the credit side, both columns are recorded
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in the selling price (invoice price).

Example 5.2
Msasa Ltd is a retailing company whose headquarter is in Dar es salaam and a branch
in Mwanza. The entity policy is to sell its products to customers at a 25 per cent profit
margin and to allow a deficiency of 4 per cent of the sales. The same retailing price is
used to transfer goods to the branch.

The following information relates to the branch operations for January 2024.

Particulars TZS
Opening inventory 5,000,000
Cash sales remitted to the head office 37,000,000
Goods invoiced to the branch 40,000,000
Closing inventory 6,000,000

Solution 5.2
The branch inventory account in the books of the Msasa Ltd., and the amount of deficiency
would be worked as follows:

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