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(d) The provision for doubtful debts is to be increased by TZS 50,000 in respect
of head office debtors and decreased by TZS 20,000 in the case of those of the
branch.
(e) On 31 December 2020, cash amounting to TZS 2,400,000 in transit from the
st
branch to head office, had been recorded in the branch books but not in those of
FOR ONLINE READING ONLY
head office; and on that date goods invoiced at TZS 800,000 in transit from head
office to the branch, had been recorded in the head office books but not in the
branch books.
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(f) Any adjustments necessary are to be made in the head office books.
Required:
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(i) Prepare a statement of profit or loss for the year ended 31 December 2024,
st
showing the net profit of the head office and the branch respectively;
(ii) Prepare statement of financial position as on that date, and
(iii) Show the closing entries in the branch current accounts.

Solution 5.6
Mr. Juma books of accounts
Statement of profit or loss
for the year ended 31 December 2024
st
Head office Branch Combined
TZS TZS TZS
“000” “000” “000”
Sales 39,000 26,000 65,000

Cost of goods sold:
- Opening inventory 13,000 4,400 17,400

- Purchases 37,000 - 37,000
50,000 4,400 54,400

Goods to branch (less “on transit’ -
800”) (17,200) 17,200
32,800 21,600 54,400
Less: Closing inventory 15,240 6,570 21,810

Cost of goods sold 17,560 15,030 32,410
Gross Profit 21,440 10,970 32,410
Add: decrease in provision for bad

debts - 20 20

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