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CMA Intermediate · Financial Accounting · Branch (including Foreign Branch) and Departmental Accounts

A wholesale branch of a firm does not maintain full books; the head office prepares a Branch Stock Account at invoice price. Opening stock Rs 40,000, goods sent Rs 2,00,000 and closing stock Rs 30,000, all at invoice price, and there are no returns. If there is a shortage of Rs 4,000 at invoice price in addition to normal items, and sales are all at invoice price, what is the sales figure that the Branch Stock Account would show?

Sales are the balancing figure in the Branch Stock Account: total debits of Rs 2,40,000 less closing stock of Rs 30,000 and shortage of Rs 4,000 give Rs 2,06,000. Ignoring the shortage would overstate sales at Rs 2,10,000.

  1. ARs 2,10,000
  2. BRs 2,06,000Correct
  3. CRs 2,14,000
  4. DRs 2,00,000

Explanation

Branch Stock Account: Debit opening 40,000 and goods sent 2,00,000 = 2,40,000. Credit closing stock 30,000 and shortage 4,000 = 34,000. Balancing figure for sales = 2,40,000 - 34,000 = Rs 2,06,000. Ignoring the shortage gives Rs 2,10,000, a missed adjustment.

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