ILLUSTRATION 3
A is in business as a retailer in light machinery with a head office at Loliondo and a branch at Bagamoyo. All purchases are made at the head office. Any goods sent to branch are invoiced at cost. Branch manager is entitled to a commission of 10% of branch net profit after charging such commission. The following trial balance was drawn up on 31st March 2012.
TRIAL BALANCE AS AT 31ST MARCH 2012
DETAILS | H/OFFICE DR | H/OFFICE | BRANCH | BRANCH |
CR | DR | CR | ||
Capital | 100,000 | |||
Drawings | 12,000 | |||
Stock 1st April | 28,200 | 16,400 | ||
Purchases | 381,300 | |||
Sales | 328,100 | 155,900 | ||
Goods from H.O to branch | 110,600 | 110,600 | ||
Head office/branch a/c | 15,600 | 15,600 | ||
Debtors | 37,700 | 17,800 | ||
Creditors | 41,300 | |||
Administration expenses | 33,000 | 6,400 | ||
Selling and nglish-swahili/distribution” target=”_blank”>distribution expenses | 25,800 | 3,800 | ||
Motor vehicle, Net of depreciation | 20,000 | 7,500 | ||
Furniture, Net off depreciation | 10,500 | 3,400 | ||
Managers commission only | 1,200 | |||
Cash at bank | 15,900 | 4,400 | ||
580,000 | 580,000 | 171,500 | 171,500 | |
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NOTES:
- Stock on 31 March 2012 Head office 41,400 and branch 17,580. There were no stock in transit
- Charge 20% depreciation using reducing balance method on motor vehicle and furniture
- Charge 30% depreciation of H.O admin expenses (including depreciation of fixed asset to branch)
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Required;-
Draw up final a/c of A for the year ended 31st March 2012 showing the profit loss made by the Head Office and branch separately and balance sheet as at that date.
DR TRADING, PROFIT AND LOSS A/C FOR THE YEAR ENDED 31ST MARCH 2012 CR
DETAILS | HEAD OFFICE | BRANCH | DETAILS | HEAD OFFICE | BRANCH |
Opening stock | 28,200 | 16,400 | Sales | 328,100 | 155,900 |
Add: Purchases | 38,300 | – | 110,600 | ||
Good received | 110,000 | ||||
G.A.F.S | 409,500 | 127,000 | |||
Less: C/stock | 41,400 | 17,580 | |||
G.A.F.S | 409,500 | 127,000 | |||
Less: C/stock | 41,400 | 17,580 | |||
C.O.G.S | 368,100 | 109,720 | |||
Gross profit c/d | 70,600 | 46,480 | |||
438,700 | 155,900 | 438,700 | 155,900 | ||
Admin expenses | 23100 | 16300 | Gross profit b/d | 70,600 | 46,480 |
D&D Expenses | 25800 | 3,800 | |||
Depr: Furniture | 2100 | 680 | |||
Depr: M. Vehicle | 4000 | 1500 | |||
Managers com | – | 2200 | |||
Net profit | 15600 | 22000 | |||
70,600 | 46,480 | 70,600 | 46,480 |
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FINANCIAL POSITION AS AT 31ST MARCH 2012
NON-CURRENT ASSETS
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Motor vehicle | 22,000 | |||
Furniture | 11,120 | 33,120 | ||
CURRENT ASSETS | ||||
Closing stock | 58,980 | |||
Branch a/c | 15,600 | |||
Debtors | 55,500 | |||
Cash at bank | 20,300 | 150,380 | ||
CURRENT LIABILITIES | ||||
Creditors | 41,300 | |||
Owing | 1000 | |||
Head office a/c | 15,600 | -57,900 | 92,480 | |
125,600 | ||||
FINANCED BY | ||||
Capital | 100,000 | |||
Add: Net profit | 37,600 | |||
137,600 | ||||
Less Drawings | 12,000 | |||
125,600 | ||||
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ILLUSTRATION ON PREPARING BRANCH CURRENT A/C
AND H/O CURRENT A/C.
P Limited as a head office In Moshi and branch at Lindi. Lindi branch maintains a full set of accounts. During March 2009 the following transactions took place between Head office and branch.
Balance on branch current a/c was 12560
Motor vehicle bought by Head office at cost 2200
Goods returned by branch to head office was 530
Cash remitted by branch to head office was 5120
Goods Branch managers salaries paid by head office 350
Goods sent to branch……………………………………………….4990
Required;-
-Draw up Branch current a/c in head office books and
-Draw head office current a/c in the ledger of the branch.
IN THE BOOKS OF HEAD OFFICE
DR BRANCH CURRENT A/C CR
balance b/d | 12560 | Goods returned to h/o | 530 |
cash: motor vehicle | 2200 | cash remittance | 5120 |
cash: manager’s salaries | 350 | ||
Goods sent to branch | 4990 | ||
20,100 | balance c/d | 14,450 | |
20,100 | 20,100 | ||
balance b/d | 14,450 | ||
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IN THE BOOKS OF BRANCH
DR H/O CURRENT A/C CR
Goods returned by branch | 530 | balance b/d | 12560 |
cash remittance | 5120 | cash: motor vehicle | 2200 |
cash: manager’s salaries | 350 | ||
balance c/d | 14,450 | Goods sent to branch | 4990 |
20,100 | 20,100 | ||
balance b/d | 14,450 | ||