6.7.2 Branch - Decentralised System

Question 1

What is the relationship between branch and head office where the branch keeps its own book?

Answer 1

1. Debtor and Creditor

Question 2

Why does branch uses the decentralised system ? ( 2 )

Answer 2

1. Branch is large
2. Geographically seperate from Head Office

Question 3

What are the usage of a current account ?

Answer 3

1. To record transactions between them in order to link them together

Question 4

What are the transactions for Head Office / Branch expenses paid by Head Office / Branch in Current Account ?

Answer 4

1. No transaction

Question 5

Two way to check if the balance is correct in Current Account

Answer 5

1. Current Account = Branch Total Assets
2. Branch Current ( Head Office ) = Head Office Current ( Branch )

Question 6

When does Goods Sent to Branch need to deduct form Sales ?

Answer 6

1. If the question gives Mark-up or Margin

Question 7

List all the transit items

Answer 7

1. Goods in Transit
2. Cash in Transit
3. Returns in Transit

Question 8

What are the transit items treated in SOFP ?

Answer 8

1. Current Assets

Question 9

Goods in Transit need to be deduct / add at where ?

Answer 9

1. Income Statement ( - )
2. Branch Current ( - )
3. SOFP ( + )

Question 10

How to record Allowance of Unrealised Profit in Income Statement ?

Answer 10

1. Deduct in Closing Inventory ( Combined)
2. Write in Expenses (Allowance of Unrealised Profit )

Question 11

How to calculate Allowance of Unrealised Profit ?

Answer 11

1. Branch Closing Inventory x %

Question 12

How to calculate Combined Closing Inventory ?

Answer 12

Head Office Closing inventory + Branch Closing Inventory - ( Branch Closing Inventory x % )

Question 13

What are the accounting entries for Goods Sent to Branch by Head Office ?

Answer 13

Dr Branch Current
Cr Goods Sent To Branch

Question 14

What are the accounting entries for Branch Debtors make payment to Head Office ?

Answer 14

Dr Bank
Cr Branch Current

Question 15

What are the accounting entries for Branch Expenses paid by Head Office ?

Answer 15

Dr Branch Current
Cr Bank

Question 16

What are the accounting entries for Cash transferred to Branch by Head Office ?

Answer 16

Dr Branch Current
Cr Bank

Question 17

What are the accounting entries for Cash transferred to Head Office by Branch ?

Answer 17

Dr Bank
Cr Branch Current

Question 18

What are the accounting entries for Depreciation charged by Head Office to Branch ?

Answer 18

Dr Branch Current
Cr Accumulated Depreciation

Question 19

What are the accounting entries for Apportion Head Office Expenses to Branch ?

Answer 19

Dr Branch Current
Cr Expenses

Question 20

Do we need to write the balance of Allowance of Unrealised Profit in Combined at Income Statement ?

Answer 20

No