Branch Account -
Separate Accounts For Individual Branch

Definition of Branch Accounting:

            Branch Accounting is a system where separate accounts are maintained for individual branch, each reflecting its actual financial position, profit or loss and helps in control.

The primary objectives behind Branch Accounting are to have clear accountability and to exercise proper control so as to monitor minutely the profitability and efficiency at the branch level.

There are following way of maintaining Branch Accounting.

When our branches are not making full accounts of our branch and with rough information we make all accounts of branch in the head office.

Steps For Maintaining Branch Accounting:
  1. In that type of branches, it is necessary to make bank account in the name of head office so that amount got from cash sale can be deposited in head office bank account.
  2. All miscellaneous expenses are given by head office accountant to branch accountant on impress or advance system of cash book.
  3. All salaries, rent, advertising and other expenses must be paid by head office.
  4. Head office can send goods to branch on cost price or invoice price.
  5. It is necessary for branch to make the list of debtors if branch has all to sell the goods on credit .It is duty of branch accountant to send branch debtors list to head office weekly or monthly.
  6. These branches can make memorandums in different registers. On these memorandums and registers head office can make branch account.
  7. For making branch account in head office, we open each branch account in head office with given branch name.

            The dictionary meaning of the word branch is any subordinate division of a business, subsidiary shop, office etc. According to the provisions contained in sec29 of the Companies Act 1956 it would appear that a branch is any establishment carrying on either the same or substantially the same activity as that carried on by head office of the company.

Objects Of Branch Account:

            The following are the main objects of maintaining branch accounts:

  1. Profit or loss of each branch can be found out.
  2. They help in controlling branches.
  3. Actual financial position of the business can be found out on the basis of head office and branch accounting periods.
  4. Branch requirements of goods and cash can be estimated.
  5. Suggestions for increasing the efficiency of the branch can be sent on the basis of branch accounts.
  6. They help in complying with the requirements of law because acc to companies act 1956.
Types Of Branches:

            From the accounting point of view, branches may be classified into

  1. Dependent Branch
  2. Independent Branch
  3. Foreign Branch
(1) Dependent Branch:

            The term "Dependent Branch" means a branch which does not maintain its own set of books. All records have to be maintained by the head office. When the business policies and the administration of a branch are wholly controlled by the head office, its accounts also are maintained by it. In such a case, Branch accounts are written up at the head office out of reports and returns received from the branch.

Accounting For Dependent Branches:

            In case of a dependent branch, the head office may keep accounts of the branch acc to any of the following systems.

  1. Debtors System
  2. Stock and Debtors system
  3. Wholesale System
  4. Final Account system
1. Debtors System (Synthetic Method):

This system is adopted in case of branches of small size. Under this system, a branch account is opened separately for each branch in the books of head office. This account is nominal account in nature. The opening balance of stock, debtors (if any), petty cash are debited to the branch account.

2. Stock And Debtors System:

Profit and loss of a branch can be found out by preparing branch account but there is another method for the same purpose. This method is known as stock and debtors method. If it is desired to exercise a more detailed account control over the working of a branch, the accounts of the branch are maintained under which is described as the stock and debtors method.

3. WholeSale Branch System:

Manufacturers may sell goods to the consumers either through the wholesalers and approved stockists or through their branches. In order to know whether self-retailing through branch is more profitable than wholesaling, it is necessary to make distinction between profit due to wholesale and profit due to retail business of the branch.Wholesale price is always less than retail price.

4. Final Accounts System:

The head office can also ascertain the profit or loss of a dependent branch by preparing branch trading and profit and loss a/c at cost. In such cases, the head office may also maintain a branch account.