Stock and Debtors Method of Branch Accounting for B. Com. , B. Com (H) and other students of Financial Accounting

1. Mahesh Chandra Sharma
Associate Professor
Department of Commerce
Shaheed Bhagat Singh Eve. College
(University of Delhi) India

2. Important Terms
 Branch Stock
It is unsold goods at a Branch at the beginning/end of the
year.
 Branch Debtors
These are debtors of the branch.
 Goods Sent or supplied to Branch
It is the goods supplied by the Head Office to its Branch
for sale. It may be recorded at Cost or Invoice Price.

3. Important Terms (Contd.)
 Cost Price
It is cost of goods to the Head Office
 Invoice Price
It is the price at which the HO invoices goods to the
Branch. It includes Cost plus a fixed margin. Usually
Branch is expected to sell the goods at Invoice Price.
 Loading
It is the difference between Invoice Price and Cost Price.

4. Ledger Accounts to be prepared
 Branch Stock A/c
 Branch Debtors A/c
 Branch Expenses A/c
 Branch Adjustment and Profit and Loss A/c
 Branch Petty Expenses A/c

5. Branch Stock A/c
Branch Stock A/c (At Invoice Price)
Dr. Cr.
Particulars Amt. Particulars Amt.
To Balance b/d (Op.) By Branch Cash A/c (Cash Sales)
To Goods Sent to Branch A/c By Br Debtors A/c (Credit Sales)
To Sales Return By Goods Sent to Branch A/c
(Return by Branch)
To Br Adjustment A/c
(Surplus)*
B/F By Br Adjustment A/c (Normal
Loss of Goods)
By Br Profit & Loss A/c (Abnormal
Loss of Goods - cost)
By Br Adjustment A/c (Abnormal
Loss of Goods – loading only)
By Shortage of Goods* B/F
By Balance c/d (Clo.)

6. Notes to Branch Stock A/c
 If out of the abovementioned items (other than Surplus and
Shortage), only one item is missing, then it will be balancing
figure.
 If all the abovementioned items are given, then balancing figure
on the Debit side will be assumed “Surplus” and balancing
figure on the Credit side will be assumed “Shortage of Goods.”
 Normal Loss of goods is transferred to Branch Adjustment A/c
 Abnormal Loss of Goods (cost part) is transferred to Branch P
& L A/c and loading part is transferred to Br. Adjustment A/c.
 Shortage of Goods may be treated as Normal Loss or Abnormal
Loss and it will be treated accordingly.
 Surplus (assuming as normal gain or overcharging of price) is
transferred to Branch Adjustment A/c.

7. Branch Debtors A/c
We may also find any information relating ‘Branch Debtors, Credit Sales,
‘Cash Received from Debtors’ if missing from Branch Debtors A/c .
Branch Debtors A/c
Dr. Cr.
Particulars Amount Particulars Amt.
To Balance b/d (Op.) By Cash Received
To Br Stock A/c
(Credit Sales)
By Sales Return
By Bad Debts
By Allowances
By Discount Allowed
By Balance c/d (Clo.)
XXX XXX

8. Branch Expenses A/c
Particulars Amt. Particulars Amt.
To Bank A/c – expenses paid x x x By Branch Adjustment A/c
(Gross Profit)
x x x
To Bad Debts x x x By Insurance Claim x x x
To Discount Allowed x x x By Profit and Loss A/c x x x
To Allowances x x x
To Depreciation x x x
X X X X X X

9. Branch Adjustments A/c
Particulars Amt. Particulars Amt.
Stock Reserve A/c (Loading
on Closing Br. Stock)
x x x Stock Reserve A/c
(Loading on Opening Br.
Stock)
x x x
Br. Stock A/c
(Normal Loss of Goods)
Inv.
Price
Goods Sent to Branch A/c
(Loading on goods sent to
Branch)
x x x
Br. Stock A/c
(Abnormal Loss of Goods)
Loading Surplus (Assuming normal
gain)
Inv.
Price
Shortage (Abnormal Loss) Loading
Br. Profit and Loss A/c
(Gross Profit)
x x x Br. Profit and Loss A/c
(Gross Loss)
x x x
X X X X X X

10. Branch Profit and Loss A/c
Particulars Amt. Particulars Amt.
To Branch Adjustment A/c
(Gross Loss
x x x By Branch Adjustment A/c
(Gross Profit)
x x x
To Br. Expenses A/c By Insurance Claim x x x
To Abnormal Loss of Goods Cost
part
By Gen. Profit and Loss A/c
(Loss)
x x x
To Shortage (Abnormal
Loss)
Cost
part
To General Profit and Loss
A/c (Profit)
x x x
X X X X X X

11. Stock Reserve A/c
Date Particulars Amt. Date Particulars Amt.
31.3.20x2 Br. Adjustments
A/c ( transfer of
Loading on
Opening Stock)
x x x 1.4.20x1 Balance b/d
(Loading on
Opening tock)
x x x
31.3.20x2 Balance b/d
(Loading on
Closing Stock)
x x x 31.3.20x2 Br. Adjustments A/c
(Creation of
Loading on Closing
Stock)
x x x
XXX XXX
• This account is prepared for recording loading on Opening and
Closing HP Stock.

12. Thanks
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to
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