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

Under the debtors system, the Kochi branch of Malabar Foods Ltd shows these figures for the year: opening debtors ₹40,000; cash received from debtors ₹1,80,000; discount allowed ₹4,000; bad debts ₹3,000; sales returns by customers ₹6,000; closing debtors ₹35,000. What are the credit sales for the year?

Credit sales are ₹1,88,000. In the branch debtors account, everything that reduces debtors (cash, discount, bad debts, returns) plus closing debtors, less opening debtors, gives credit sales. Leaving out sales returns would understate the figure at ₹1,82,000.

  1. A₹1,82,000
  2. B₹1,88,000Correct
  3. C₹1,76,000
  4. D₹1,85,000

Explanation

In the Branch Debtors account, credit sales are the balancing figure. Credit sales = closing 35,000 + cash 1,80,000 + discount 4,000 + bad debts 3,000 + returns 6,000 − opening 40,000 = ₹1,88,000. Ignoring returns gives ₹1,82,000, which is wrong because returns also reduce debtors.

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