Final Accounts System
The profit or loss of a dependent Branch can also be known by preparing a Memorandum Branch Trading and Profit and Loss Account. This Account is usually prepared in cost price. Besides the final accounts, Branch Account is also to be prepared. This Branch Account is different from the Branch Account prepared under the Debtors System.
The Branch Account, appearing under Debtors System, is a nominal account. But the Branch Account, appearing under Final Account System, is a personal Account. Generally the Branch Account, under this system, will have debit balance.
A Kolkata trading firm has a branch at Patna to which the goods are charged out at cost plus 25%. Branch keeps its own Sales ledger and remits daily all cash received to the Head Office. All expenses are paid from the Head Office.
The transactions for the branch for the year 2005 are given below: