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BRANCH ACCOUNTSOBJECTIVE TYPE QUESTIONS
BRANCH ACCOUNTING Branch: A branch is a separate segment of a
business. In order to increase the sales, business houses arerequires to market their products over a larger territory and may
generally split their business intocertain divisions or parts. These various parts or divisions may be located in different part of the samecity or
in different cities of the same country or in different countries in the world. These are known asbranches. The head office controls the
activities of various branches.Branch accounting: Branch accounting is the process through which the accounting
system of a branchis maintained.Objectives of branch accounting: The main objects of branch accounts are dependent
on the nature of the business and specific need of a particular branch. The objectives of keeping the branch accountsaccepta
ble to all businesses are as follows.1. To know the profit or loss of each branch separately.2.
To ascertain the financial position of each branch separately on a particular date.3. To know the cash & goods
requirements of the various branches.4. To evaluate the progress and performances of each branch5.
To calculate commission for payment to the managers, if based on profits of branch.6. To give concrete suggestions for
the improvement in the working of the various branches.7. To meet the requirements of specific
enactments as all branches of a company must keep theaccounts for audit purpose.Types of Branches:i.
F
rom accounting point of view the following are the main types of branches:a) Dependent Branch
(Branch not keeping full system of accounting)b) Independent Branch (Branch keeping full
system of accounting)c) Foreign Brancha) Dependent Branch (Branch not keeping full
system of accounting).The following are the main features of such branches:I. Such branches sell only those goods which are
received from the head office and are notusually allowed to make purchases in the open market except with the express
permissionof the head office.II. Goods are supplied by the head office to such branches either at cost
price or at invoiceprice.III. All expenses of the branch such as rent, salary of staff, advertisement
etc., are paid by thehead office.You're reading a free preview. Pages 2 to 7 are not shown in this preview.
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IV. Petty expenses such as cartage, entertainment, freights etc. are
paid by the branchmanager out of petty cash book balance. Such book is maintained at the branch either assimple petty cash book
or on imprest system.V. The amount received from cash sales or cash received from debtors is either remitted
tothe head office daily or deposited in the account of the head office in some local bank.VI.
The branch manager is normally expected to sell the goods for cash only but he may beauthorized to sell goods on credit as well.
Accounting records for branch:The branch with the above features, do not keep proper set of books of accounts. In order tosupply
the requisite accounting information to the head office at regular interval, each branch keepsome memoranda of records, such as
Stock Register, theCash Bookand thePetty Cash Book.Stock Register :
It is maintained with a view to keep a record of all goods received from the head office,or returns made to the head office during that
period, sales made at the branch during the period,breakages and losses of goods and balances of stock available in hand at the
close of the accountingperiod.Cash Book:It is maintained to keep records of cash transactions such as cash sales, receipts
fromdebtors, & cash remitted to head office from time to time.Petty Cash Book:It is maintained to record small paymen of expenses such
as carriage, postage,conveyance and entertainment etc.If however the branch is authorized to make credit sales,
a Sales Day Bookand aDebtors Ledgerwillalso be required to be maintained.Accounting Records For
Head Office or System Of Accounting For Branch:A dependent branch does not keep proper accounts but
accounts are maintained in the headoffice books only. Thus the system of accounting for the branch to be adopted by
the headoffice depends on:y
The size of the branchy
The degree of control sought to be exercisedy
The nature and volume of business transactionsy
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The following are the main ways in which the head office may keep the branch accounts in itsbooks
Debtor System (Synthetic Method
Final Account System
Stock & Debtor System (Analytical Method)
W
holesale Branch System
Debtor System
This system is also called synthetic methods, is adopted generally in those brancheswhich are fairly small
in size. Under this system, the head office opens a separateaccount for each branch in order to record all transactions
relating to the branch. Thisaccount is a nominal account in nature and is prepared to calculate profit and loss
foreach branch. The goods supplied by the head office to the branch may be either at costprice or at cost plus profit.
The following are the journal entries which are passed in thebooks of the head office to record branch transactions.
Transactions Debit Credit1) When goods are sent to branch Branch A/c Goods sent to branch A/c2)F
or return of goods to H.O. Goods Sent to Branch A/c Branch A/c3)F
or transferring the balance of goods sent to branchA/c
Goods Sent to Branch A/c Purchases (in Trading Concerns)or Trading A/c (in mfg. concern)4) When cheque or draft is sent for branch
expenses Branch A/c Bank A/c5) When cheque or draft is received for remittance Bank A/c Branch A/c6)F
or closing balances of
Assets Branch Asset A/c Branch A/c7)F
or beginning balances of assets next year Branch A/c Branch Assets A/c8)
F
or closing balances of liabilities A/c Branch A/c Branch Liabilities A/c9)F
or opening balances of
liabilities A/c nest year Branch Liabilities A/c Branch A/c10)F
or branch profit Branch A/c General Profit & Loss A/c11)
F
or Branch Loss General Profit & Loss A/c Branch A/cIt should be carefully noted that sales, discounts, bad
debts, expenses paid by branch andreturn from debtors to the branch are not direct transactions between the
branch and the headoffice, and therefore they are not taken care off while preparing for the Branch Account in thebooks of
the head office according to this system.Moreover, losses due to pilferages, wastage and other losses of stock due to
normal orabnormal reasons are also completely ignored under this method.
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The main defect of this method is that it does not
provide full information for analysis of branchprofit & loss. To overcome this problem, a separate Branch Trading
& Profit and Loss Accounthas to be prepared, which is, of course, a memorandum account not forming a part
of the fullsystem of accounting.In short, branch account is debited with the opening balance and branch assets,
goods sent tobranch account less returns, cheque received for remittance and closing balances of
branchassets. The difference between the two sides will be profit or loss of the branch.Branch account (In the books of the
head office) will appear as under after posting of theentries.Branch Accocunt(IN H.O. BOOKS)
Treatment of of Certain Branch Transactions1) Branch Expenses paid by the branch out of Petty Cash.
Such expenses will be deducted fromthe branch cash and at the close reduced balance of cash will be shown on the credit side of thebranch account. Such
expenses need not be shown in the branch account. If such expenses arere-imbursed by the head office to the branch (if the petty cash is maintained on
imprestsystem), then these must be debited to the branch account. However, same opening and closingbalances of petty cash will be shown on
the debit and credit side respectively of the branchaccount. 2) Depreciation of Fixed assets.
This is not shown in the branch account. But the closing balanceof the fixed assets will be shown on the credit side of the branch account after deduction
of theamount of depreciation. To Branch Cash in Hand By Branch Liabilities A/cTo Branch Stock By Bank (Remittances by
the branch i.e. ,To Branch Debtors cash sales + cash received from debtorsTo BranchF
urniture either through branch
debtors or directTo Branch Prepaid Insurance .etc from branch debtors - any amount spentTo Goods Sent to Branch A/c Less by branch
managerGoods returned to Head Office By branch cash in handTo Bank (Expense paid by H.O.) By Branch StockTo Branch Liabilities By
Branch DebtorsBy BranchF
urnitureBy Branch Prepaid Rent/Insurances
.etc*To General Profit & Loss A/c (Profit)
*By General Profit & Loss A/c (Loss)*Balancing figure is either or loss
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3
) Credit sales, bad debts, sales returns, allowances, and discount allowed pertaining to branch.
These items are pertaining to debtors account and will not be shown in the branch account.However, these items will be taken into
consideration while ascertaining the amount of openingor closing balance of debtors or amount received from debtors which are shown
in the branchaccount. 4) Goods in transit.Goods in transit is the difference between goods sent by head
office andreceived by the branch. Such goods will be shown either on the both sides of the branch accountor will be ignored
totally while preparing the branch account. 5) Purchase of fixed asset by the branch.If the branch has purchased any
fixed assets, then onone hand branch account will be credited by the head office and on the other the remittancefrom the branch will be reduced by
the amount. If branch has purchased the asset on creditbasis and liability arising from such purchase will be shown on the
debit side of branch account. 6) Sale of Fixed Asset.If the sale is for cash, cash remittance will increase from
the branch butasset will reduce in value to be shown on the credit side of the branch account as this isautomatically adjusted through the
above adjustments.Invoice Price MethodWhen the goods are sent by the head office to the
branch at invoice price i.e. cost plus somepercentage of profit, the branch manager is required to sell the goods at
invoice price only.Goods are marked on invoice price to achieve the following objectives.I.
In order to keep secret from the branch manager the cost price of the goods and profitmade, so that the branch
manger may not start a rival and competitive business withthe concern.II.
In order to have effective control on stock i.e. stock at any time must be equal toopening stock plus goods received
from the head office minus sales made at the branch.Accounting Adjustments required in Head Office Books
The branch records are not in any way affected due to invoicing of goods at cost plus profit.But, in order to calculate the
profit or loss made by branch, some accounting adjustments, asstated below, are required to be passed in the
books of the HO for eliminating the profitelement included in (i) branch opening stock, (2) goods sent to branch less
returns made bybranch to head office and (3)branch closing stock.I. F
or adjustment of excess price
of the opening stock at branchStock reserve A/c Dr.To Branch A/cYou're Reading a Free Preview
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II.
F
or adjustment of excess price of the closing stock of unsold goods at branchBranch Account Dr.To
Stock Reserve A/cIII. F
or adjustment of excess price of goods sent to branch less returns to head
officeGoods sent to branch A/c Dr.To Branch A/cClosing stock should always be valued at cost or market price
whichever is lower. This is basedon the principle sof conservatism, i.e. no profit should be anticipated and all losses
should beprovided. Moreover the unsold stock lying in the branch will not earn any profit unless sold.Therefore,
it is necessary to make provision for the profit element included in the unsold stock.
Calculation of Mark up or Load F
or calculating excess price, the following procedure is
adopted:Suppose the good are invoiced at cost plus 25%. If the cost is Rs. 100, profit is Rs. 25, and thenselling price would be
Rs. 125. The ratio of profit to selling is 25/125 or 1/5. The adjustments forthe difference or the excess
price in value between the invoice price and cost price thereforewill be made on the basis of 1/5 of the invoice price. If the
percentage is given on sale price as25% on sale price, then suppose the sale price is Rs. 100, the profit will be Rs. 25.
Therefore,cost will be Rs. 75. So the percentage on cost will be 33.33% (1/3 of cost).
Final Account SystemAccording to this system, the profit or loss made by the branch is
determined by preparingBranch Trading & Profit Loss Account at cost price. It should be carefully noted
that allexpenses whether paid by the head office or by the branch are debited to the Trading andProfit &
Loss Account prepared for the branch.The profit or loss as disclosed by this account isexactly same as that of the branch account
prepared according to Debtor/ Synthetic system. Itshould be further noted that the branch trading and
profit loss account is only a memorandumaccount not forming part of the full accounting system. If the
branch account is also prepared inaddition to the Branch Trading & Profit and Loss A/c, then such a branch
account will be treatedas a personal account and not considered in the nature of a nominal account under the
debtorsystem. Then Branch account under such circumstances, will show a debit balance which will beequal to net
worth or net asset available at branch at the end of the accounting period.You're Reading a Free Preview
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Stock and Debtors SystemThere is yet another method of calculating
profit and loss of a branch which is popularly knownas
Stock & Debtors system or
Analytical Method.It is an elaborate method of keeping branchaccounts and is considered
very useful where the branch turnover is sufficiently large andwhere a greater degree of control is
sought to be exercised by the head office over the branch.According to this system, instead of opening one
branch account, as is done in case of debtorssystem, separate accounts are opened for various transactions at
branch. According to thissystem, a separate ledger for each branch will have to be maintained at head office for
keepingaccounts such as Branch Stock, Branch Debtors, and Goods Sent to Branch, Branch Expenses,and Branch Assets
etc. Branch Cash or petty Cash Account may sometimes be required to bemaintained if the branch is permitted to
use the available cash for making certain payments.Preparation of Branch Stock Account will however, vary
from branch to branch depending uponthe method of charging goods sent to branch.You're Reading a Free Preview
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Pro-forma Invoice Price
Head office may send goods to branch either at "cost" or at "pro-forma invoice price".
In previous section of this chapter we have discussed accounting treatment for a
dependent branch to which the goods are sent to branch at cost price. In the
forthcoming section we will discuss the accounting treatment for the dependent
branch to which goods are sent at pro-forma invoice price. The treatment is slightly
different but before discussing the accounting treatment we must know what pro-
forma invoice price is and why head office prefers to send goods at pro-forma invoice
price.
Pro-forma invoice price is higher than the cost price. Adding a reasonable profit in the
cost makes the price equal to the pro-forma invoice price. Here we must know what is
selling price? Selling price is the price at which goods are sold to the customers. So the
selling price will be higher than the pro-forma invoice price in normal circumstances.
Difference between cost and pro-forma invoice price is known as loading and the
difference between cost and the selling price is the profit in real terms.
Head office usually sends goods to its branches at the pro-forma invoice price to keep
its profit margin secret from the branch managers. Had the cost been known to the
branch manager he would have been in a position to determine the exact profits
enjoyed by the head office, which may induce the branch manager to confront the
business as a competitor. Moreover by sending goods to the branches at pro-forma
invoice price, the head office can dictate pricing policy to its branches, as well as save
work at the branch because prices have already been decided. Sending goods at pro-
forma invoice price is generally done where goods are of standard type, pre-packed
and unlikely to fluctuate in price.
Here it is worth mentioning that "pro-forma invoice" is name of the document which
is sent to branches along with the goods sent; in this document description and
quantity of the goods sent is written along with the price. Therefore the price
appearing on the pro-forma invoice is named as pro-forma invoice price.
The document which is sent to the customers to evident the sales of goods to them is
known as "invoice"; this document discloses the quantity, description and selling
price of the goods sold, along with the settlement terms. Technically speaking "selling
price" may also be termed as "invoice price", but "invoice price" and "pro-forma
invoice price" are different. It is a common error that often people do not care while
using the terminology and confuse "invoice price" with the "pro-forma invoice price".
The method of preparing Branch a/c while goods are sent at pro-forma invoice price is
the same with the exception that the accounting entries relating to the goods sent to
and goods returned from the branch are recorded at pro-forma invoice price and a
reverse adjustment is required with the amount of loading (difference between cost
and pro-forma invoice price).
Remember; the accounting entries for opening and closing stocks are recorded at cost
price. Do not record stocks at pro-forma invoice price.
Rationale; an accountant is supposed to record accounting entries evidenced by a
source document. Goods sent to branch are evidenced through "pro-forma invoice"
therefore price mentioned on the document cannot me ignored while recording this
56
Advance Financial Accounting (FIN-611)
VU
transaction. Whereas, valuation of opening and closing stocks is not reported through
pro-forma invoice therefore to make it simple stocks are accounted for at cost.
Accounting Entries in the Books of Head Office
11. For opening balances of assets at the branch
Branch a/c
Branch assets a/c (individual accounts)
12. For opening balances of liabilities at the branch
Branch liabilities a/c (individual accounts)
Branch a/c
13. For goods sent to the branch (at pro-forma invoice price)
Branch a/c
Goods sent to branch a/c
14. For return of goods by the branch (at pro-forma invoice price)
Goods sent to branch a/c
Branch a/c
15. For reversal of loading on (net) goods set to branch (with the amount of loading)
Goods sent to branch a/c
Branch a/c
16. For remittance of cash or cheque to the branch
Branch a/c
Cash/Bank a/c
17. For cash or cheque received from the branch
Cash/Bank a/c
Branch a/c
18. For closing balances of assets at the branch
Branch asset a/c (individual accounts)
Branch a/c
19. For closing balances of liabilities at the branch
Branch a/c
Branch liabilities a/c (individual accounts)
20. For closing goods sent to branch account.
Goods sent to branch a/c
Purchases a/c
57
Advance Financial Accounting (FIN-611)
VU
21. For closing branch account into the profit and loss account
Incase of profit
Branch a/c
Profit & loss a/c
Incase of loss
Profit & loss a/c
Branch a/c
22. For abnormal loss (should always be accounted for at cost)
Abnormal loss a/c
(at cost)
Branch a/c
Insurance claim a/c (claim admitted)
Profit & loss a/c
(balance if not admitted by the insurance company)
Abnormal loss a/c (cost of the abnormal loss)
Note: No accounting entry is required for normal losses.
Solved Problem # 1
Excellent Garments of Multan has a branch at Lahore. Goods are supplied to the
branch at cost. The expenses of the branch are paid from Multan and the branch keeps
a sales journal and the debtors' ledger only. From the following information supplied
by the branch, prepare a Branch Account in the books of the head office. Goods are
sent to branch at pro-forma invoice price which is cost plus 20%. (All figures in
rupees)
Opening Stock (at Pro-forma invoice) 28,800 Closing Debtors
9,150
Closing Stock (at Pro-forma invoice)
21,600 Opening Debtors
?
Goods received from HO (at Pro-forma invoice)
40,320
Bad Debt
140
Credit Sales
41,000
Expenses paid by Head office
10,400
Cash Sales
17,500
Cash received from Debtors
37,900
Pilferage of goods by the employees (Normal Loss) 2,000
Solution: (Debtors System)
In the books of Head Office (Multan)
Lahore Branch Account
Particulars
Rs.
Particulars
Rs.
Opening Stock
24,000
Cash Received from Branch
17,500
Opening Debtors
6,200
Cash Received from Debtors
37,900
Cash sent to Branch
10,400
Goods sent to Branch
6,720
Goods sent to Branch a/c 40,320
(loading)
18,000
General Profit & Loss a/c 8,360
Closing Stock
9,160
(Profit)
Closing Debtors
89,280
89,280
58
Advance Financial Accounting (FIN-611)
VU
Working:
Debtors Account
Particulars
Rs.
Particulars
Rs.
Op. Debtors (Balancing 6,200
Cash Received from Debtors
37,900
fig)
41,000
Bad Debts
140
Sales (credit)
Cl. Debtors c/f
9,160
47,200
47,200
Opening stock at cost
28,800 x 100/120 = 24,000 (pro-forma invoice x % of cost by % of pro-forma invoice)
Closing stock at cost
21,600 x 100/120 = 18,000 (pro-forma invoice x % of cost by % of pro-forma invoice)
Loading on goods sent to branch (net)
Rupees
Goods sent to branch (at pro-forma invoice)
40,320
Less Goods returned by branch (at pro-forma invoice)
0
Net goods sent
(at pro-forma invoice)
40,320
40,320 x 20/120 = 6,720 (pro-forma invoice x % of loading by % of pro-forma invoice)
Income Statement System
The head office may also prepare an Income Statement to find out the profits of
branch. Such Income Statement is merely a memorandum; the only reason for
preparing the statement is to have full information of all transactions which are
ignored in Debtor System (already discussed in the previous section). While preparing
the Income Statement of the branch we shall be using all those skills which we have
learned in the single entry system of accounting during conversion of single entry into
double entry.
We know very well that in Income Statement incomes and expenses are measured on
the basis of accrual concept and the profits are measured according to the matching
concept. So the cost of goods sold will be determined keeping in view that the goods
sent to branch are equivalent to purchases of the branch and should be included at
cost. Obviously the opening and closing stocks can not be measured at a value that is
above its cost.
Above problem can be solved through Income Statement System as well. Following
Fill in the Blanks:
1. The system of operating at several places through one’s own establishments is called .
2. The main establishment located at the main place of activity is called the and the subsidiary establishment located at various places are called .
3. Branches may be divided into 3 categories, branches, branches and foreign branches.
4. Goods supplied to Dependent Branches by the Head Office may be either at or at price.
5. The One Account System or Debtors System is generally adopted when the branch is fairly in size.
6. Branch Account is a in nature and is prepared in the Head Office Books.
7. Under Debtors System, bad debts and discounts allowed in the Branch Account.
8. Under the Debtors System the debtors (at close) are shown on the of the Branch Account after adjusting bad debts, discount allowed etc.
9. Under Debtors System fixed assets is shown on the credit side only after the amount of depreciation, if any.
10. Under the Debtors System, the Head Office will record all the transactions relating to the branch in the Branch Account through and relationship between the Branch and the Head Office.
11. Under the Debtors System, the Reserve for Doubtful Debts /Reserve for Discount on Debtors, should be from closing Debtors and only the good closing debtors will be recorded in the Branch Account.
12. Actual petty expenses incurred by the branch will in the Branch Account under the Debtors System.
(Answers: 1 - Branch Organization; 2 - Head Office, Branches; 3 - Dependent, Independent; 4 - Cost, Invoice; 5 - Small; 6 - Nominal Account; 7 - Do not figure or not taken, shown; 8 - Credit side; 9 - Deducting; 10 - Debtors, Creditors;
Amazon.in
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11 - Deducted; 12 - Not be recorded)
State whether the following Statements are ‘True’ or ‘False’:
1. Under Debtors System, bad debts and discount allowed figure in the Branch Account.
2. Under Debtors System, Debtors at close are shown on the Debit Side of the Branch Account after adjusting for Bad Debts, discount allowed etc.
3. Under Debtors System, Depreciation is not shown in the Branch Account.
4. Reserve for Bad Debts and Reserve for Discount on Debtors will be recorded separately in the Branch account under the Debtors system.
5. Actual petty expenses incurred by the Branch Account under the Debtors system will not be recorded in the Branch Account.
6. Sales Returns will not appear directly in the Branch Account under the Debtors System.
7. Branch Account under Debtors System is a Real Account.
8. Under Debtors System Branch Account is debited with losses like bad debts, discounts allowed and depreciation.
9. When the Branch Manager is allowed petty cash on Imprest System, the amount remitted by Head Office to reimburse the actual expenses will be debited to the Branch Account.
10. Branch Account is a nominal account in nature and is prepared in the Branch Books.
(Answers: False – 1, 2, 4, 7, 8, 10 True – 3, 5, 6, 9)
Indicate the correct answers:
1. Under Debtors System, the Debtors at close are shown(i) On the credit side of the Head Office Account
(ii) On the debit side of the Branch account(iii) On the credit side of the Branch account after adjusting for bad
debts, discount allowed etc.(iv) Are not shown in the Branch account
2. Under Debtors System treatment of Reserve for Bad debts is(i) Shown it on the credit side of Branch a/c(ii) It is not shown in Branch a/c(iii) It is deducted from the Branch Debtors and the good Branch
debtors are shown in the Branch account(iv) It is shown on the debit side of the general Profit and Loss account
3. The treatment of petty expenses made by the Debtors System is as follows
(i) It is not recorded in the Branch account(ii) It is shown on the debit side of the Branch account(iii) It is shown on the general Profit and Loss account of Head Office(iv) Only the closing balance of Petty Cash (Opening balance plus
amount reduced from Head Office less petty expenses) will appear in the credit side of the Branch account
4. The Head Office sends goods at cost and instructs the branch to sell the goods at a profit of 20% on selling price. What is the total sales, if:Opening stock at Rs.36,000, Goods sent to branch Rs.6,00,000, Closing stock Rs.60,000
(i) Rs.6,00,000(ii) Rs.7,20,000(iii) Rs. 6,72,000(iv) None of the above
5. Furniture on 1/04/2005 – Rs.20,000; Furniture sold on 1/10/2005 – Rs.9,000 (book value on 1/10/2005 – Rs.9,500); Furniture purchased on 1/10/2005 – Rs.17,000; Depreciation on Furniture – 10% p.a.From the above information, the value of Furniture shown on the Credit side of Branch Account under Debtors System will be
(i) Rs.27,000(ii) Rs.24,200(iii) Rs.23,850(iv) None of the above
6. Under Debtors System, the Branch Account is(i) Real Account(ii) Nominal Account(iii) Personal Account(iv) None of the above
7. Stock Reserve in relation on opening Stock appears (under the Debtors System)
(i) On the debit side of the Branch Account(ii) On the credit side of the Branch Account(iii) On the Credit side of Head Office Account(iv) None of the above
8. Stock reserve in relation to closing stock appears (under the Debtors System)
(i) On the debit side of the Branch Account(ii) On the credit side of the Branch Account(iii) On the debit side of Head Office Account(iv) None of the above
9. The cash and credit sales of the branch are Rs.5,000 and Rs.15,000 respectively. The amount collected from debtors is Rs.10,000. The amount to be credited to Branch Account under the Debtors System will be
(i) Rs.20,000 (ii) Rs.15,000 (iii) Rs.10,000 (iv) Rs.25,000
10. The opening balance of Petty Cash at the Branch is Rs.2,000, amount received from the Head Office for Petty Expenses is Rs.10,000, the closing balance of Petty Cash is Rs. 3,000;Which of the following is the right answer under the Debtors System?
(i) Rs.9,000 on the Debit side of the Branch Account as Petty Expenses
(ii) Rs.3,000 on the Credit side of the Branch Account as Petty Cash
(iii) Rs.7,000 on the Credit side of the Branch Account as Petty Cash Expenses.
(iv) None of the above.
(Answers: 1-(iii); 2-(iii); 3-(iv); 4-(ii); 5-(ii); 6-(ii); 7-(ii); 8-(i); 9-(ii); 10-(ii) )
Followings are the main differences between branch and department:
1. Branches are separated from the main organization. Departments are
attached with the main organization under a single roof.
2. Branches are the outcome of tough competition and expansion of business.
Departments are the result of fast human life.
3. Branches are geographically separated. Departments are not separated rather
existed under a same roof.
4. Branches are of different types like dependent, independent and foreign.
There is no such classification in department because all are common under the
same roof.
5. Allocation of branch common expenses does not arise. Allocation of
departmental common expenses is a tough job.
6. To find out the net result of the organization, the reconciliation of different
branch account is a main job.In departmental accounting, no reconciliation is
necessary because there is a central account division.
