Synthetic Methods of Branch Account | SSKP

What is??

         Debtors or Direct Method. Under this method, Head Office opens only one account for every branch, called “Branch Account”. Branch Account is a combination of Personal Account (of a Branch as a debtor) and nominal account (as it is prepared to ascertain profit or loss made by the Branch).

In this method of accounting we firstly we have to create Few ledger Account with named of Branch Account,
Memorandum Debtors Account,
Goods Send To Debtors Account

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After that we have to put this few entries in the Debit side (Left Side) of the First Ledger Account, Branch Account

       • To Balance b/d (For all opening Balance)
                 [Stock, Debtors, Petty Cash]

       • To Goods send to Branch A/c
                           (For Goods Send to Branch)

        • To Bank A/c (All Expenses of Branch should be written here)
                 [Petty Cash, Salaries, Wages, Rent, Insurance, Expenses]

         • To Branch Profit & Loss A/c (Profit on Branch)
                [* If Debit Side < Credit Side ]

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After that we have to put this few entries in the Credit side (Right Side) of this Ledger Account.

       • By Bank A/c
                 [Cash Sales, Collection from Debtors]

       • By Goods Send to Branch A/c (Returned to Head Office)

       • By Balance C/f (For all Closing Balances)
                 [Stock, Debtors, Petty Cash]

       • To Branch Profit & Loss A/c (Profit on Branch)
                [* If Credit Side < Debit Side ]

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After the above account lets put this few entries in the Debit side (Left Side) of the Second Ledger Account, Memorandum Account

       • To Balance b/d
                   (For Opening Balance of Debtors)

       • To Sales A/c         (***********)
                           (Credit Sales)

                [* All Stars entries can make out on balance]

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After that we have to put this few entries in the Credit side (Right Side) of the This Ledger Account.

       • By Bank A/c
                 [Collection from Debtors]

       • By Bad Debt A/c

       • By Return Inward A/c [Sales Return]

       • By Discount Allowed A/c

       • By Bills Receivable A/c

       • By Balance C/f (Closing Balances of Debtors)

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After the above two accounts lets put this few entries in the Debit side (Left Side) of the Third Ledger Account, Goods Send to Branch Account

       • By Branch A/c
                 [Returned to Head Office]

       • By Trading A/c
                 [Transferred]

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After that we have to put this few entries in the Credit side (Right Side) of the This Ledger Account.

       • By Branch A/c
                 [Goods Send to Branch]

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[ Note : Pilferage, Wastage and Other Loss of Goods Due to 'Normal or Abnormal Reasons' totally Avoidable in "Synthetic Methos of Branch Accounting"]

✓ Petty Cash = {(Petty Expenses + Closing Petty Cash) - Opening Petty Cash}

✓ Petty Expenses = {( Petty Cash + Opening Petty Cash) - Closing Petty Cash}

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Synthetic Method at "Invoice Price"

Here some entries to Write Down in "Branch Account" with all entries discussed above...

1. For Loading on Opening Stock of Goods...

           a. Loading on Opening Stock A/c   (Dr.)

                      To Branch A/c

2. For Loading on Goods Send to Branch...

           a. Goods Send to Branch A/c   (Dr.)

                      To Branch A/c

3. For Loading on Goods Returned by Branch to Head          Office...

           a. Branch A/c   (Dr.)

                      To Goods Send to Branch A/c

4. For Loading on Closing Stock of Goods...

           a. Branch A/c   (Dr.)

                      To Branch Stock A/c

*** Remember ***

            • If Cost Price is 25 % [1/4].    then

                          Invoice/Selling Price is 20% [1/5]

            • If Cost Price is 50 % [1/2].    then

                          Invoice/Selling Price is 33⅓% [1/3]

            • If Cost Price is 33⅓ % [1/3].    then

                          Invoice/Selling Price is 25% [1/4]

            • If Cost Price is 20 % [1/5].    then

                          Invoice/Selling Price is 16.23% [1/6]

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Thats All