What is Stock and Debtor System in Branch Accounting

-

 Stock and Debtor System in 

Branch Accounting 

Stock and Debtor for accounting of branch is used for exercising more detailed control over the working of a branch. Under this method several accounts are opened in the books of head office in place of one branch account. By opening detail accounts of several transactions greater supervision can be imposed on the financial activities of branch.

Generally, following accounts are prepared for both cash price and invoice price transactions.

(A)   Branch Stock Account. (either at cost price or invoice price)

(B)   Branch Debtors Account.

(C)   Branch Cash Account.

(D)  Branch Expenses Account.

(E)    Branch Profit / Loss Account.

(F)    Abnormal loss Account.

(G)  Goods sent to Branch Account. Etc.

In case of invoice price transaction in addition to the above accounts an additional account is opened, called Branch Stock Adjustment Account, to reduce load on different invoice prices. All adjustments in relation to load on goods sent, goods return, abnormal loss of goods, opening and closing stocks are recorded in this account.

 

The balance of Branch Stock Account in case of cost price transactions represent Gross Profit or Gross Loss and the same is to be transferred to Branch Profit / Loss Account. In case of invoice price transaction, the balance of Branch Stock Adjustment Account shows Gross Profit or Gross Loss and transferred to the Branch P/L Account. Under invoice price transaction, Branch Stock Account is always balanced after making all relevant postings. But if in any case any balance arrives then such balance is called either Apparent Profit (Balance in the debit side) or Normal Loss (Balance in the credit side) and the same is transferred to the Branch Stock Adjustment Account.


The balance of Branch P/L Account is called Net Profit or Net Loss and transferred to the General P/L Account. The balances of Branch Expenses Account and Goods sent to Branch Account are transferred to the Branch P/L Account and Purchase Account respectively.



Comments

Post a Comment

Popular posts from this blog

Financial Accounting Important 2 Marks Theory Question and Answer

-
  1. Accounting: It's not just about recording transactions—it also involves interpreting financial information to make informed decisions. It includes financial reporting, auditing, and analyzing economic events. 2. Journal: It's the initial book of entry where transactions are recorded in chronological order. Each entry includes details like date, accounts involved, amounts, and a brief description. 3. Ledger: A ledger contains individual accounts summarizing transactions related to a specific asset, liability, equity, revenue, or expense. It's organized by account type and provides a detailed record of financial activities. 4. Legacy: It refers to outdated systems, processes, or technologies that persist because they were previously used and are still functional. However, they might not be as efficient or effective as newer alternatives. 5. Compensating Errors: These are mistakes that occur in accounting but counterbalance each other, ultimately resulting
Read more

Financial Accounting Important Theory Q&A Model Exam

-
2 Marks 1. Accounting:    Accounting is a systematic process of recording, summarizing, analyzing, and reporting financial transactions of a business or entity, enabling informed decision-making.   2. Double Entry System:    It's an accounting method requiring every transaction to have at least two entries (debit and credit), ensuring balance in financial records and maintaining the accounting equation.   3. Error of Commission:    An error made during accounting that involves an incorrect amount, account, or party, affecting the accuracy of financial records due to a wrong entry or commission.   4. Single Entry System:    A basic accounting method that records only one side of transactions, often cash or bank transactions, lacking the structured balance maintained by the double entry system.   5. Trading Account (Trading A/c):    An account summarizing direct costs (purchases, expenses, sales) related to buying and selling goods, determining the gross p
Read more

Financial Accounting Important 10 Mark theory Questions & Answer

-
Image
  1. Accounting Concepts:      Going Concern Concept: Assumes that the business will continue its operations for the foreseeable future, allowing assets to be recorded at their original cost rather than their liquidation value. This concept impacts how assets and liabilities are presented in the financial statements.      Consistency Concept: Requires a company to use the same accounting methods and principles consistently from one accounting period to another. It ensures comparability between financial statements over time, aiding analysis and decision making.      Accrual Concept: Transactions should be recorded when they occur, regardless of when the actual cash is exchanged. This means recognizing revenues when earned (even if the cash hasn't been received) and expenses when incurred (even if the cash hasn't been paid).      Matching Concept: Directly links expenses with the revenues they help generate during the same accounting period. It ensures that the financ
Read more