Here is brief explain with example of branch accounts journal entries. When a company has multiple branches, it needs to maintain separate accounts for each branch to track their individual performance. Branch accounts help in understanding the profitability and financial position of each branch separately. The main types of transactions involving branch accounts include goods sent to branch, cash sent to branch, branch expenses, branch revenue, and goods returned from branch.
Key Concepts
- Head Office (HO): The main office responsible for the overall management of the company.
- Branch: A separate location of the business, managed independently but under the control of the head office.
Common Journal Entries for Branch Accounts
Example Scenario: Goods Sent to Branch
Assume the head office sends goods worth ₹200,000 to its branch on 01-07-2023.
Step-by-Step Journal Entry
- Record the Goods Sent to Branch
In the Head Office Books:
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 01-07-2023 | Branch Account | 200,000 | Goods sent to branch | |
| 01-07-2023 | To Goods Sent to Branch | 200,000 | Goods sent to branch |
In the Branch Books:
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 01-07-2023 | Goods Received from HO | 200,000 | Goods received from head office | |
| 01-07-2023 | To Head Office Account | 200,000 | Goods received from head office |
Explanation
- Head Office Books:
- Debit to Branch Account: This increases the amount due from the branch.
- Credit to Goods Sent to Branch: This records the cost of goods sent to the branch.
- Branch Books:
- Debit to Goods Received from HO: This records the receipt of goods from the head office.
- Credit to Head Office Account: This reflects the liability to the head office for the goods received.
Example Scenario: Cash Sent to Branch
Assume the head office sends ₹50,000 cash to its branch on 05-07-2023.
Step-by-Step Journal Entry
- Record the Cash Sent to Branch
In the Head Office Books:
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 05-07-2023 | Branch Account | 50,000 | Cash sent to branch | |
| 05-07-2023 | To Cash/Bank Account | 50,000 | Cash sent to branch |
In the Branch Books:
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 05-07-2023 | Cash/Bank Account | 50,000 | Cash received from head office | |
| 05-07-2023 | To Head Office Account | 50,000 | Cash received from head office |
Explanation
- Head Office Books:
- Debit to Branch Account: This increases the amount due from the branch.
- Credit to Cash/Bank Account: This decreases the cash or bank balance.
- Branch Books:
- Debit to Cash/Bank Account: This increases the cash or bank balance.
- Credit to Head Office Account: This reflects the liability to the head office for the cash received.
Example Scenario: Branch Expenses
Assume the branch incurs expenses worth ₹30,000 on 10-07-2023.
Step-by-Step Journal Entry
- Record the Branch Expenses
In the Branch Books:
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 10-07-2023 | Branch Expenses | 30,000 | Expenses incurred at branch | |
| 10-07-2023 | To Cash/Bank Account | 30,000 | Payment for branch expenses |
Explanation
- Branch Books:
- Debit to Branch Expenses: This increases the expense account, reflecting the costs incurred.
- Credit to Cash/Bank Account: This decreases the cash or bank balance, reflecting the payment for expenses.
Example Scenario: Branch Revenue
Assume the branch makes sales worth ₹150,000 on 15-07-2023.
Step-by-Step Journal Entry
- Record the Branch Revenue
In the Branch Books:
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 15-07-2023 | Cash/Bank Account | 150,000 | Revenue from sales | |
| 15-07-2023 | To Branch Revenue | 150,000 | Sales revenue |
Explanation
- Branch Books:
- Debit to Cash/Bank Account: This increases the cash or bank balance, reflecting the receipt of sales revenue.
- Credit to Branch Revenue: This increases the revenue account, reflecting the sales made.
Example Scenario: Goods Returned from Branch
Assume the branch returns goods worth ₹20,000 to the head office on 20-07-2023.
Step-by-Step Journal Entry
- Record the Goods Returned from Branch
In the Head Office Books:
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 20-07-2023 | Goods Returned from Branch | 20,000 | Goods returned by branch | |
| 20-07-2023 | To Branch Account | 20,000 | Goods returned by branch |
In the Branch Books:
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 20-07-2023 | Head Office Account | 20,000 | Goods returned to head office | |
| 20-07-2023 | To Goods Sent to Branch | 20,000 | Goods returned to head office |
Explanation
- Head Office Books:
- Debit to Goods Returned from Branch: This increases the inventory account, reflecting the receipt of returned goods.
- Credit to Branch Account: This decreases the amount due from the branch.
- Branch Books:
- Debit to Head Office Account: This decreases the liability to the head office.
- Credit to Goods Sent to Branch: This reflects the reduction in goods sent to the branch.
Conclusion
Properly recording branch transactions ensures accurate and detailed financial statements for both the head office and each branch. This helps in evaluating the performance and financial position of each branch separately.