INCORPORATION OF BRANCH TRIAL BALANCE
Branch and Head office belongs to the same owner. It is must to prepare the consolidated accounts of both. To prepare the consolidated accounts of the head office, the branch trial balance is incorporated in the books of the Head Office. The Incorporation of Trial Balance means the recording or transfer of all assets, liabilities, income and expenses of the branch to the final accounts of the Head Office. There are two ways of Incorporation of Branch Trial Balance in the books of Head Office:
METHOD 1: DETAILED INCORPORATION
Under this method, incorporation is done in such a way that the head office is in a position to prepare branch final accounts without unnecessary delay. The journal entries to be passed are as follows:
| FOR INCORPORATING ITEMS APPEARING ON DEBIT SIDE OF BRANCH TRADING ACCOUNT |
| Branch Trading A/c Dr. To Branch A/c (Items recorded are Opening stock, Net Purchases, Direct expenses like wages, power and fuel, octroi duty, carriage, cartage etc.) |
| FOR INCORPORATING ITEMS APPEARING ON CREDIT SIDE OF BRANCH TRADING ACCOUNT |
| Branch A/c Dr. To Branch Trading A/c (Items recorded are Sales and Closing Stock) |
| FOR TRANSFERRING GROSS PROFIT Branch Trading A/c Dr. To Branch Profit and Loss A/c |
| FOR TRANSFERRING GROSS LOSS Branch Profit and Loss A/c Dr. To branch trading A/c |
| FOR INCORPORATING ITEMS APPEARING ON DEBIT SIDE OF BRANCH PROFIT AND LOSS ACCOUNT Branch Profit and Loss A/c Dr. To Branch A/c (Items are like Salary, Commission paid, rent paid, bad debts, advertisement etc.) |
| FOR INCORPORATING ITEMS APPEARING ON CREDIT SIDE OF BRANCH PROFIT AND LOSS ACCOUNT Branch A/c Dr. To Branch Profit and Loss A/c (Items like interest received, commission received, discount received etc.) |
| FOR CLOSING THE BRANCH PROFIT AND LOSS ACCOUNT In Case of Net Profit Branch Profit and Loss A/c Dr. To general Profit and Loss Account In case of Net Loss General Profit and Loss A/c Dr. To Branch Profit and Loss A/c |
| FOR INCORPORATING THE BRANCH ASSETS Branch Assets A/c Dr. To Branch A/c (Assets like cash in hand, cash at bank, machinery, plant, building etc.) |
| FOR INCORPORATING THE BRANCH LIABILITIES Branch A/c Dr. To Branch Liabilities A/c (Items like creditors, bills payable, loans, overdraft etc.) |
METHOD 2: SHORT CUT METHOD
Under this method, the branch trading and profit and loss account is prepared only as a memorandum account. The entry is passed only for the net profit or net loss and assets and liabilities. The journal entries to be passed are as follows:
| FOR CLOSING THE BRANCH PROFIT AND LOSS ACCOUNT In Case of Net Profit Branch Profit and Loss A/c Dr. To general Profit and Loss Account In case of Net Loss General Profit and Loss A/c Dr. To Branch Profit and Loss A/c |
| FOR INCORPORATING THE BRANCH ASSETS Branch Assets A/c Dr. To Branch A/c (Assets like cash in hand, cash at bank, machinery, plant, building etc.) |
| FOR INCORPORATING THE BRANCH LIABILITIES Branch A/c Dr. To Branch Liabilities A/c (Items like creditors, bills payable, loans, overdraft etc.) |
