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

Mumbai HO invoices goods to its Surat branch at cost plus 25%. Branch opening stock at invoice price Rs 40,000; goods sent at invoice price Rs 5,00,000; goods returned by branch to HO at invoice price Rs 20,000; closing stock at invoice price Rs 60,000. All sales are on credit under the stock and debtors system. Normal and abnormal losses are nil. What is the sales value at invoice price (credit sales) recorded, as shown in the Branch Stock Account balancing figure?

Sales at invoice price are Rs 4,60,000. In the Branch Stock Account, opening stock and goods sent total Rs 5,40,000. Deducting returns of Rs 20,000 and closing stock of Rs 60,000 leaves Rs 4,60,000. Ignoring returns would wrongly give Rs 4,80,000.

  1. ARs 4,60,000Correct
  2. BRs 4,80,000
  3. CRs 5,00,000
  4. DRs 4,40,000

Explanation

Branch Stock Account debits: opening 40,000 + goods sent 5,00,000 = 5,40,000. Credits: returns 20,000 + closing 60,000 = 80,000. Sales = 5,40,000 - 80,000 = Rs 4,60,000. Rs 4,80,000 ignores the return.

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