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Recording of business transactions in autonomous branches

The transactions of each branch are recorded in their books of accounts and at the end of
the accounting period, each branch prepares its trial balance. The head office maintains
only one account known as the current account for recording all transactions associated
with the branches. Similarly, each branch maintains a current account for recording
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transactions associated with the head office. The current account of the head office
considers the branches as debtors while the current account of the branches considers
the head office as a creditor. It means every transaction between the head office and the
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branch is recorded in both current accounts; in the head office current account and branch
current account. However, for transactions that are just concerned with the branches only,
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they will appear in the branch books of accounts and are not recorded in the head office.

Example 5.5
Champions Ltd has a head office in Mwanza and decided to open a branch in Dar es
salaam. The following are the transactions that took place in the first month of the
branch operations:
(a) The head office opened a bank account for the branch and deposited
TZS 30,000,000.
(b) The head office purchased an office building for the branch for TZS 150,000,000.
(c) The branch purchased a motor vehicle at TZS 18,000,000.
(d) The branch purchased goods from supplier of TZS 50,000,000 which was paid
through a bank before the end of the financial year.
(e) The branch sold merchandise of TZS 90,000,000 on a cash basis.
(f) The head office sent goods of TZS 84,000,000 at a cost to the branch and there
was no payment made till the end of the month.
(g) The branch refunded TZS 40,000,000 to the head office as part of the expenditure
incurred during its establishment.
(h) Some of the goods were returned by the head office at a cost price of TZS
3,000,000
Required: Record the above transactions in the books of head office and the branch.

Solution 5.5
Recording of the above transaction in the books of accounts of the head office and those
in the branch would be as follows:

Student’s Book Form Five
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