Page 162 - Accountancy_F5

Required:
(a) Identify whether the existing structure of the company reflects non-autonomous
or autonomous branches.
(b) Identify and explain the best structure (between autonomous and non-autonomous)
by which the company should re-arrange its branches to resolve the problem it
experiences in recent years. Your explanations should consider the sectors it
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operates.
(c) Propose a suitable branch structure (between autonomous and non-autonomous)
by presenting a comprehensive document that will be used in XYZ Ltd governing
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board meeting for decision-making.
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Items in transit

Items in transit reflect those transactions which have been recorded in books of accounts
of one part (either at the branch or head office) but not in the other part because the
items or transaction is not complete. It also refers to transactions that are supposed to
be recorded in the current accounts of both, the branch, and the head office, but due
to a mismatch in the time of recording, they are seen in the records of one part only.
For example, when the head office sends goods to the branch, it records them straight
away in a current account, but the branch will not record them until they are received.
Similarly, a branch may return goods to the head office or remit cash to the head office,
but their arrival may delay.

Hence, they will not be captured in the books of accounts of the head office promptly.
Therefore, when these kinds of transactions are made a few days before the closure of
the financial year, it is very possible to find some records in the current account of one
part missing in the other part.
In preparing the final accounts, items in transit require adjustments. Otherwise, the
books of accounts will not balance because of the differences in the current account’s
balances. All adjustments are made in the books of accounts of the head office so that
the balance of its current account matches that of the branch. Then, the adjusted balance
will be used in the preparation of the final accounts as well as in carrying forward to the
next accounting period.

Example 5.6
Juma is a wholesaler with a head office in Tunduma. Juma has contracted Hanifa as
a branch manager of his office in Kyela. The branch is required to prepare its own
financial statements. All goods were purchased by head office and goods sent to the
branch were invoiced at cost. The following was the trial balance as on 31 December
st
2024. Juma was responsible for all matters relating to the buying department of the

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