Accounting for branches:
branches with facilities of systems two are There :
– System izedCentral : the main branch (the center) hold and record
transactions for all branches by creating an account for each branch that is
debited and credited based on each transaction.
– system Decentralized : each branch is considered independed and keeps
separate records for their own transactions.
Example 1:
Al-Rasheed company and its home office in Amman are using centralized accounting
system ,to record the financial transactions which related to their branches , ( Al-Zarqa and
the Irbid). The following are financial transactions between the Home office and the branch
during 2017.
1 – Inventory with a home office cost of 60,000 & 40,000 was shipped by the home office to
Al-Zarqa and Irbid branches, respectively.
2- Cash of 45,000$ & 32,000 was collected by branches to the home office.
3- Credit sales by branches amounted to 15,000 & 9,000 respectively.
4- Payments by home office for branches operating expenses totaled 15,000 & 10,000
respectively.
5- Inventory with a home office cost of 5,000 was shipped by the Zarqa branch to Irbid
branch.
6-The value of inventory returned of the two branches is 3,000 & 2,500 respectively.
7- The cost of the inventory returned from the branches to the home office is 6,000 & 4,000
respectively.
8- The cost of the ending inventory in the warehouses of the two branches on 31/12/2017 are
8,000 & 10,000 respectively.
Required:
Assuming that the cost method is used for transferred inventory, record the previous
transactions in the home office books and present the accounts of the two branches.
Journal entries on the home office:
1. Record transferred inventory to the branches
Dr. Al-Zarqa Branch 60,000
Dr. Irbid Branch 40,000
Cr. Inventory 100,000
2. Record the cash receipts from branches
Dr. Cash 77,000
Cr. Al-Zarqa Branch 45,000
Cr. Irbid Branch 32,000
3. Record the credit sales of branches
Dr.Accounts Receivable – Al-Zarqa Branch 15,000
Dr. Accounts Receivable – Irbid Branch 9,000
Cr. Al-Zarqa Branch 15,000
