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branch including those paid by the head office. On the other side, it is credited
with the amount remitted by the branch and the cost of goods returned to the
head office. At the end of the year, the value of the closing inventory, outstand-

ing accounts receivable and any petty cash balance are credited to this account
to ascertain the profit or loss made by the branch.
FOR ONLINE READING ONLY
Dr Branch account Cr

Amount Amount
Date Particulars At cost Particulars At selling price
LANGUAGE EDITING
(currency) (currency)
Balance b/d: Cash remittance to head
• Cash xx office:
• Inventory xx • Cash sales xx
• Accounts • Debtors’ sales xx
receivable xx • Goods returned to
• Petty cash xx head office xx
• Long term asset xx
• Prepaid expenses xx
Goods from head xx Balance c/d:
office • Cash xx
• Inventory xx
• Accounts xx
• receivable xx
• Petty cash xx
• Long term asset xx
• Prepaid expenses

Profit (credit side is xx Loss (debit side is larger) xx
larger)
xxx xxx

(b) Inventory and debtors’ method
When the company adopts this method, the head office is required to keep five
accounts concerning branch operations. These are branch inventory account,
branch debtors account, branch expenses account, branch income statement
(statement of profit or loss) and other comprehensive income), and goods sent
to branch account. Moreover, a branch that has permission to buy inventory and
incur expenses, will be required to maintain branch assets account and branch
cash account in addition to those kept at the head office.

Student’s Book Form Five
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