Closing Entries In Branch Books

At the end of the accounting period, the branch books have also to be closed. For this purpose, the branch can pass the usual closing entries for transferring all revenue items to its Trading and Profit & Loss Account and ascertaining its net profit or net loss. The amount of net profit or net loss should be transferred to the Head Office Account by passing the following journal entry.


In case of net profit

Profit and Loss A/c                Dr.

To Head Office A/c


In case of net loss

Head Office A/c                      Dr.

To Profit and Loss A/c


After the above entry for transferring net profit or net loss to the Head Office Account has been passed, the balance in the Head Office Account will be equal to the branch net assets (assets minus liabilities). The branch can then prepare its Balance Sheet by showing the Head Office  Account balance on the liabilities side as this account would normally show a credit balance. If,  the Head Office Account shows a debit balance, the same will appear on the assets side of the Balance Sheet.


The accounts pertaining to assets and liabilities can also be closed, if required, by transferring their balances to the Head Office Account. For this purpose, the following two journal entries will be passed in the branch books.


1) For transfers of assets

Head Office A/c              Dr.

To Assets A/c

The assets should be credited individually


2) For transfer of liabilities

Liabilities A/c                                 Dr.

To Head Office A/c

(The liabilities should be debited individually)


As a result of the above entries, the Head Office Account shall also be closed as it will not show any balance.

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