Branch Accounting – Key Vocabulary

These vocabulary flashcards cover the essential terms, accounts, and journal concepts involved in branch accounting, including dependent vs. independent branches, invoicing methods, ledger accounts, and treatments of losses and profits.

Branch

A segment or component of a business located in the same or another town/country as the head office; it has no share capital of its own.

Dependent Branch

A branch that does not keep its own accounts; all records are maintained by the head office.

Independent Branch

A branch that maintains full accounting records like an independent entity except it has a Head-Office Current Account instead of share capital.

Foreign Branch

A branch operating in a country different from the head office; it may be dependent or independent.

Head-Office Current Account

An equity-type account in an independent branch showing the net investment by the head office.

Invoice Price

The value at which goods are sent to a branch (cost, cost + mark-up, or selling price).

Mark-Up

Profit expressed as a percentage of cost that is added to arrive at the invoice price.

Margin

Profit expressed as a percentage of selling price that is added to cost to arrive at the invoice price.

Branch Stock (Inventory) Account

Ledger that records goods sent to branch, sales, returns, losses, and closing stock; acts as a trading account when goods are invoiced at cost.

Goods Sent to Branch Account

Ledger recording the cost of goods dispatched to the branch and goods returned by the branch to head office.

Branch Debtors Account

Ledger tracking credit sales, cash collected, returns, discounts, and bad debts of the branch.

Branch Creditors Account

Ledger used when a branch is allowed to buy goods locally on credit from suppliers.

Branch Expenses Account

Ledger that accumulates operating expenses of the branch paid by head office or the branch.

Branch Trading & Profit and Loss Account

Statement (or ledger) determining the branch’s gross profit and net profit after expenses.

Branch Mark-Up / Adjustment Account

Account that separates unrealized profit on closing stock from realized profit and helps compute branch gross profit when goods are invoiced above cost.

Provision for Unrealized Profit

The mark-up element in unsold branch closing stock that must be deducted from profit until the goods are sold.

Normal Loss

Losses expected in the normal course of business (e.g., evaporation, minor wastage) recorded by adjusting the mark-up only.

Abnormal Loss

Unexpected losses such as theft or fire; recorded at both cost and mark-up and charged to Profit & Loss.

Goods Stolen Account

Ledger that records the cost (and mark-up, if applicable) of inventory lost due to theft.

Cash Stolen Account

Ledger that records cash losses at the branch; charged to Profit & Loss.

Journal Entry – Goods Sent to Branch

Dr Branch Stock / Cr Goods Sent to Branch (and Cr Branch Mark-Up if invoiced above cost).

Journal Entry – Goods Returned by Branch

Dr Goods Sent to Branch / Dr Mark-Up (if any) / Cr Branch Stock for the invoice value returned.

Journal Entry – Branch Sales

Dr Cash/Bank or Debtors / Cr Branch Stock (invoice price).

Journal Entry – Goods Stolen

Dr Goods Stolen (cost) / Dr Branch Mark-Up (profit) / Cr Branch Stock (invoice price).

Journal Entry – Cash Stolen

Dr Cash Stolen / Cr Branch Stock for the selling price of the missing cash sales.

Journal Entry – Customer Returns to Branch

Dr Branch Stock / Cr Branch Debtors for the invoice value returned.

Journal Entry – Transfer Between Branches

Dr Receiving Branch Stock / Cr Sending Branch Stock (invoice price); adjust Mark-Up accordingly.

Balancing Goods Sent to Branch Account

Remaining debit or credit is transferred to Purchases (Goods Available for Sale) account at the end of the period.

Balancing Branch Stock Account (Cost Method)

Closing stock is shown on the credit side; any residual balance represents branch gross profit.

Balancing Branch Stock Account (Selling-Price Method)

Closing stock is carried down; any debit balance is normal price difference, any credit balance may indicate loss.

Memorandum Branch Trading Account

A working statement used when detailed ledgers exist, summarizing sales, cost of sales, and gross profit for the branch.

Unrealized Profit

Portion of mark-up contained in unsold branch inventory; removed from profit until realized via sale.

Realized Gross Profit

Mark-up portion related to goods actually sold by the branch during the period.

Cost of Goods Available for Sale

Opening stock (at cost) plus cost of goods sent to branch minus returns to head office.

Mark-Down (Price Reduction)

Reduction in selling price at branch; if still above cost, eliminate only profit; if below cost, recognize a loss.

Head Office

Central entity that purchases all goods and controls accounting for dependent branches.

Selling Agents

Another term for dependent branches whose main activity is selling goods supplied by head office.

Branch Closing Stock

Unsold inventory at branch at period end; recorded at cost or invoice price depending on the system.

Branch Gross Profit (Cost Method)

The balance remaining in Branch Stock Account after accounting for opening stock, transfers, and sales when invoiced at cost.

Cost Plus Pricing

Practice where head office invoices goods to branch at cost plus a specified mark-up percentage.

Margin Percentage

Profit as a percentage of selling price; e.g., a 20% margin equals 25% mark-up on cost.