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In the Books of .........…………Ltd
           Dr                                    Branch account                                     Cr

                                           Amount                          Amount (currency)
             Date       Particulars        (currency)     Particulars
                                          At      At                     At sell-  At selling
          FOR ONLINE READING ONLY
                                         selling   cost                 ing price  price (except
                                         price                                      unsold
                                                                                   inventory)
                       LANGUAGE EDITING

                   Balance b/d:                        Cash remittance to
 LANGUAGE EDITING
                    •  Inventory             xx    xx head office:
                    •   Accounts receivable  xx    xx   •  Cash sales         xx           xx
                    •  Petty cash            xx    xx   •  Debtors’ sales     xx           xx
                    •  Long term asset       xx    xx   •  Goods returned     xx           xx
                    •  Prepaid expenses      xx    xx     to head office


                                           xxx    xxx                       xxx           xxx

           (c)  Statement of profit or loss (final accounts) method
                  In this method, separate statements of profit or loss are prepared for each branch
                  to reflect their trading activities and other operations. In preparation of the branch

                  statements of profit or loss, the cost of the goods transferred to the branch at sell-
                  ing price is converted into cost price. The statements of profit or loss   does not
                  make part of the double-entry system, it simply shows the financial performance
                  of a branch.

           Goods sent to a branch at cost price

           Under this approach, the goods sent to the branch are charged at the cost. The approach
           can be used either under the debtors’ method, inventory and debtor’s method, or in-
           come statement (final accounts) method.

           (a)    Debtors’ method
                  Under debtor’s method only one account namely branch account is used to re-

                  cord business transactions between the head office and the branch. When goods
                  are transferred at cost, the debit side of the branch account is recorded with
                  the opening balance of the inventory, debtors’ opening balance, and the petty
                  cash. It is also debited with the cost of goods sent to the branch, expenses of the




            Student’s Book Form Five
                                                   139




                                                                                            23/06/2024   17:35
     ACCOUNTANCY_DUMMY_23 JUNE.indd   139                                                   23/06/2024   17:35
     ACCOUNTANCY_DUMMY_23 JUNE.indd   139
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