Branch accounting

Branch accounting

By S.P. Chandravanshi

Branch accounting

Branch accounting refers to an accounting method in which transaction between the head office and branch are shown and also profit or losses are calculated of the related branch.

From the accounting point of view there are two parties in branch Account

1.       Head office

2.       Branch

1.     Head office

 It refers to that existing business that has their branches

2.     Branch

 If a business starts a unit of the same business at some other place for the purpose of increasing its profit is called branch.

Types of branch 

There are three types of branch

1.      Dependent branch

2.      Independent branch

3.      Foreign branch 

1.   Dependent branch

The dependent branch is concerned with the  branch which has to depend on the head office for its trading activities.

        I.            Goods is sent by head office. It cannot buy goods by itself .

      II.            The assets required for the branch are purchased by head office. Branch cannot purchase itself. Even the useless assets in the branch will be sold by the head office itself.

    III.            This branch sells goods in cash and can sell on credit as per instruction of Head office.

   IV.            These branches do not maintain their books of accounts; it is also prepared by head office.

Dependent branch can be classified into three categories on the basis of their activities

a)    A branch that receive goods only from the Head office at cost price and sells only for cash.

·        Cash received from the sale of goods will be sent to head office.

·        Head office send cash to branch for any types of expenses.

b)    A branch that receive goods only from the Head office at cost price and can sell in both for cash and credit.

·        Cash received from the sale of goods will be sent to head office.

·        Head office send cash to branch for any types of expenses.

c)      Branch who receives goods only from the head office at cost price  and can sell goods in both for cash and on credit.

·        Cash received from the sale of goods will be sent to head office.

·        Head office send cash to branch for any types of expenses.

2.   )  Independent branch

Independent branch are those branches that are independent to purchase goods itself on the requirement. Such branches maintain their own books of accounts and at the end of every accounting year result of books of branch and head office are integrated.

3.   ) Foreign branch

When branch of any business is established in foreign country other than its own is called foreign branch. Such branches are also independent and maintain their own books of accounts in different currencies.

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