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

Under the Stock and Debtors System, Pune branch: goods sent at invoice price Rs 2,40,000 (cost plus 20% on cost), opening stock at invoice price Rs 36,000, closing stock at invoice price Rs 48,000, no returns or shortages. Which amount of loading is to be recorded in the Goods Sent to Branch adjustment for goods sent during the year?

The loading on goods sent is Rs 40,000. Since the invoice price is cost plus 20% of cost, loading is 20/120 of the invoice price, so 20/120 of Rs 2,40,000 equals Rs 40,000. Taking 20% of invoice price would use the wrong base.

  1. ARs 48,000
  2. BRs 40,000Correct
  3. CRs 20,000
  4. DRs 24,000

Explanation

Invoice price is cost plus 20% of cost, so loading is 20/120 of invoice price. 2,40,000 x 20/120 = 40,000. Using 20% of invoice price gives 48,000, the wrong-base mistake.

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