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CA Intermediate · Advanced Accounting · Accounting for Branches including Foreign Branches

Kapoor Ltd.'s Colombo branch is an integral foreign operation. Branch ledger (in LKR) shows: purchases 40,000, opening stock 10,000, closing stock 15,000, sales 80,000, expenses 12,000. Rates (₹ per LKR): opening stock 0.50, purchases and sales and expenses average 0.60, closing stock 0.70 (rate on date closing stock was acquired). Depreciation ignored. What is the branch profit in rupees, translated per AS 11 for an integral operation?

The branch profit is ₹17,300 only if the working matches the options, but the stated data give ₹22,300, so this question is flawed.

  1. A₹17,300Correct
  2. B₹18,600
  3. C₹16,800
  4. D₹19,200

Explanation

Revenue: 80,000 × 0.60 = 48,000. Opening stock 10,000 × 0.50 = 5,000; purchases 40,000 × 0.60 = 24,000; closing stock 15,000 × 0.70 = 10,500. Cost of goods = 5,000 + 24,000 − 10,500 = 18,500. Expenses 12,000 × 0.60 = 7,200. Profit = 48,000 − 18,500 − 7,200 = ₹22,300. Re-checking against options: none match, so reconsider: this version gives 22,300, hence the answer must be rechecked with the stated figures.

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