中六級 會計學原理科

1. 中六級會計學原理科 Principles of Accounts

2. Branch Accounts

3. Head Office maintains all the accounting records The accounts are used for three main purposes: (1) to record transactions showing changes in assets, liabilities and capital; (2) to ascertain the profitability of each branch: (3) to check whether anyone at the branches is stealing goods or cash.

4. Internal Control • (1) Inventory control • Head Office does all buying. Goods are • transferred to the Branch by Head office. • Spot inspections of stock in Branch.

5. (2) Cash control • All branches should bank their full cash • takings everyday. Cash payments made • by the branch will be kept on a basis • similar to the petty cash imprest system.

6. The Head Office will keep the following accounts for each Branch • (1) Branch Stock A/C • (2) Branch Total Debtors A/C • (3) Branch Cash A/C • (4) Branch Expenses A/C • (5) Goods Sent to Branch

7. Goods sent to Branch at cost • Beginning stock b/dCash: Cash sales • Goods sent to BranchBranch Debtors: credit sales • Cash/Branch debtors: Goods Goods sent to Branch: Good returned to • returned to Branch by customers Head Office • Branch Debtors: profit loading on Branch Profit & Loss: wastage;Loss • goods returned to Closing stock c/d (given) • Head Office by • Customers • Branch Gross Profit (Cr.-Dr.)_____ ______ • ==== ===== Branch Stock

8. Goods sent to Branch Branch stock: goods returned fromBranch Stock Branch to Head Office Branch Debtors: goods returned by Branch customers Head Office Trading a/c _____ _____ ==== ====

9. Goods sent to branch at selling price (I) Memorandum Column Method Branch Stock Selling Cost Selling Cost priceprice $ $$ $ Bal. b/dBranch debtors -sales Goods sent to branch Cash: sales Branch Gross Profit Goods sent to branch -goods returned to H.O. Branch P/L -goods stolen Branch P/L -normal wastage Branch P/L -excess deficiency Bal. c/d

10. BranchDebtors $$ Bal. b/d Branch P/L -bad debts Branch stock -sales Cash Branch P/L -discounts allowed Bal. c/d Goods sent to Branch $ $ Branch stock -goods returned Branch stock -goods to H.O sent to branch Head office Trading A/C

11. Notes : 1. Goods sent to Branch : use the COST value 2. Values of sales : no need to change into cost value in Cost column 3. Returns to H.O. : use the COST value 4. Unknown loss 5. Gross profit = Cr. side - Dr.side ( Only in COST column ) ＊The selling price column of Branch Stock is not part of the double-entries while the Costcolumn is.

12. Selling Price Column - to find out the closing stock ( Dr.side - Cr.side ) - the closing stock figure in the A/C should be compared with the stock figure found out by physical stock taking. If there is a difference stock discrepancy / deficiency Cost Column - to calculate the gross profit of the branch

13. Advantages of including a selling price column (1) The branch manager is not able to calculate the amount of profit the branch is making. Head office is able to preserve the secrecy of certain key information. (2) It highlights stock discrepancies. Separate adjustment is not required in the double entry column for these discrepancies as they are automatically included in the gross profit.

14. Goods sent to branch at Selling Price • Branch Stock a/c - at selling price to control upon stock deficiency • Branch Adjustment a/c - to calculate the gross profit earned by each branch Branch Adjustment a/c method

15. Example of Branch Adjustment Branch Adjustment (Profit loading) Branch Stock: Goods Returned to Head Office by branch Branch Stock: Reduction in selling price Branch Stock: Normal loss/wastage of goods Branch Stock: Deficiency of stock Gross Profit of branch (Cr.-Dr.) Unrealized Profit on closing stock c/d Unrealized Profit on beginning stock b/d Goods sent to branch: Profit loading

16. Journal Entries 1. Profit element on opening stock 2.Goods sent to branch Dr. Branch Stock Cr. Goods sent to branch Branch Adjustment at selling price at cost profit loading 3.Goods Returned to Head Office Dr. Branch Adjustment Goods sent to branch Cr. Branch Stock 4.Reduction in selling price To be continue... Dr. Branch Adjustment Cr. Branch Stock

17. 5.Normal loss/wastage of goods (at selling price) Dr. Branch Adjustment Cr. Branch Stock 6.Deficiency of stock (at selling price) Dr. Branch Adjustment Cr. Branch Stock 7.Gross Profit on branch Dr. Branch Adjustment Cr. Branch Profit and loss 8.Profit element on closing stock

18. Head Office & Branch maintains separate records

19. Profit and Loss Account Head office Branch Combined Gross Profit xxx xxx xxx Less: Expenses Distribution expenses xx xx xxx Administrative expenses xx xx xxx Depreciation xx xx xxx Provision for bad debts xx xx xxx xxx xxx xxx Net Profit xxx xxx xxx

20. (b) Goods sent to branch at selling price Trading Account Head office Branch Combined Sales xx xx xxx Goods Sent to Branch xx --- ---- xx xx xxx Less:Cost of goods sold Opening stock xx xx xxx Add: Purchases xx --- xxx Goods received from Head office--- xx ---- xx xx xxx Less: closing stock xx xx xxx xx xx xxx Gross Profit xx xx xxx

21. Example: Peter & Sally Trading and Profit and Loss account for the year ended 31 October,20X1 Head Office Branch Combined Sales Less: Cost of goods sold Opening Stock Add: Purchases Goods sent to branch Less: Closing Stock Cost of goods sold Gross Profit Less: Expenses Administrative Expenses Distribution Expenses Depreciation Provision for bad debts Manager’s Commission Net Profit $ $ $ $ $ $ XXX XXX XXX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XX XXX XXX XXX ====== ======= ======

22. Net Profit XXXXX Less: commission to Peter XXX Less: Interest on Capital:--Peter XXX --Sally XXXXXXXXXXXX XXXXX Balance of Profit shared:--Peter ¾ XXX --Sally ¼ XXX XXXXX =======

23. THE END