Accounting For Dependent Branches

You know that the dependent branches do not keep a complete set of books. Most  of their transactions are recorded at the head office level. The accounting system adopted by head office for a branch depends up on the size of a branch and the degree  of control to be exercised by the head office. The following are the various methods  by which the head office usually keeps branch accounts in its books:


i) Debtors System: This system is adopted generally for those branches which are fairly small in size. Under this system, the head office simply opens a Branch   Account for each branch in which it records all transactions relating to the branch.  The Branch Account is prepared in such a manner that it also helps in ascertaining the branch profit or loss.


ii) Final Accounts System: Under this system, the head office prepares a Trading and Profit and Loss Account in order to find out profit or loss of each branch and a Branch Account to find out the amount due to, or due from that branch. In this  case,  the Branch Account simply acts as a personal account.


iii) Stock and Debtors System: Under this system, the head office does not open any  Branch Account. For each branch, it prepares a Branch Stock Account, a Branch  Expenses Account, a Branch Adjustment Account and Goods sent to Branch Account in order to find out the profit or loss of each branch.

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