HOME OFFICE BOOKS BRANCH BOOKS
Pro-forma
Home office sent cash to the branch for its operation.
Investment in Branch 000 Cash 000
Cash 000 Home Office 000
The branch remitted cash to the home office.
Cash 000 Home Office 000
Investment in Branch 000 Cash 000
Merchandise was shipped by the home office to the branch, at cost. Periodic inventory system is used.
Investment in Branch (cost) 000 Shipment from Home Office (cost) 000
Shipment to Branch (cost) 000 Home Office (cost) 000
Merchandise was shipped by the home office to the branch, at cost. Home office paid for freight. Periodic inventory system is used.
Investment in Branch (cost + freight) 000 Shipment from Home Office (cost) 000
Shipment to Branch (cost) 000 Freight-in 000
Cash (freight) 000 Home Office (cost + freight) 000
Merchandise was shipped by the home office to the branch, at billed price. Periodic inventory system is used.
Investment in Branch (billed price) 000 Shipment from Home Office (billed price) 000
Shipments to Branch (cost) 000 Home Office (billed price) 000
Allowance for Overvaluation of Branch Inventory
(mark-up) 000
Branch returned merchandise to the home office. Merchandise was shipped at cost.
Shipment to Branch 000 Home Office 000
Investment in Branch 000 Shipment from Home Office 000
Branch returned merchandise to the home office. Merchandise was shipped at billed price.
Shipment to Branch 000 Home Office (billed price) 000
Allowance for Overvaluation of Branch Inventory 000 Shipment from Home Office 000
Investment in Branch 000
Home office sales
Cash/Accounts Receivable 000 No entry
Sales 000
Branch sales
No entry Cash/Accounts Receivable 000
Sales 000
Home office purchased merchandise from outside suppliers
Purchases 000 No entry
Cash 000
The branch purchased merchandise from outside suppliers
No entry Purchases 000
Cash 000
Home office collected sales on account
Cash 000 No entry
Accounts Receivable 000
Branch collected sales on account
No entry Cash 000
Accounts Receivable 000
Home office collected branch's sales on account
Cash 000 Home Office 000
Investment in Branch 000 Accounts Receivable 000
Branch collected home office's sales on account
Investment in Branch 000 Cash 000
Accounts Receivable 000 Home Office 000
Home office paid branch's liability
Investment in Branch 000 Accounts Payable 000
Cash 000 Home Office 000
Branch paid home office's liability
Accounts Payable 000 Home Office 000
Investment in Branch 000 Cash 000
Branch paid for own expenses
No entry Expenses 000
Cash 000
Branch expenses paid by home office
Investment in Branch 000 Expenses 000
Cash 000 Home Office 000
Home office allocated expenses to the branch
Investment in Branch 000 Expenses 000
Expenses 000 Home Office 000
Fixed asset accounts are carried in the home office books
Home office transferred fixed assets to the branch for their own use
Memo entry Memo entry
The branch purchased fixed assets for their own use
Fixed Assets 000 Home Office 000
Investment in Branch 000 Cash/Accounts Payable 000
Home office purchased fixed asset for the branch
Fixed Assets 000 Memo entry
Cash/Accounts Payable 000
Depreciation reported for the above assets
Investment in Branch 000 Depreciation Expense 000
Accumulated Depreciatiom 000 Home Office 000
Fixed asset accounts are carried in the branch books
Home office transferred fixed assets to the branch for their own use
Investment in Branch 000 Fixed Assets 000
Fixed Assets 000 Home Office 000
The branch purchased fixed assets for their own use
No entry Fixed Assets 000
Cash/Accounts Payable 000
Home office purchased fixed asset for the branch
Investment in Branch 000 Fixed Assets 000
Cash/Accounts Payable 000 Home Office 000
Depreciation reported for the above assets
No entry Depreciation Expense 000
Accumulated Depreciation 000
Common Adjustments
Shipments in transit
No entry Shipment from Home Office 000
Home Office 000
Branch remittance in transit
Cash 000 No entry
Investment in Branch 000
Merchandise returns in transit
Shipment to Branch 000 No entry
Investment in Branch 000
Allocated expenses/debit memo not yet recorded by the branch
No entry Expenses 000
Home Office 000
Closing Entries
To close income and expense accounts
Merchandise Inventory, ending 000 Merchandise Inventory, ending 000
Sales 000 Sales 000
Shipments to Branch 000 Merchandise Inventory, beginning 000
Merchandise Inventory, beginning 000 Shipments from Home Office 000
Purchases 000 Purchases 000
Expenses 000 Expenses 000
Income Summary 000 Income Summary 000
To recognize branch reported income To close income summary
Investment in Branch 000 Income Summary 000
Branch Income 000 Home Office 000
To adjust branch income
Allowance for Overvaluation of Branch Inventory 000
Branch Income 000
To close branch income
Branch Income 000
Income Summary 000
To close income summary
Income Summary 000
Retained Earnings 000
Eliminating entries (recorded only in working paper)
To eliminate Investment in Branch and Home Office accounts
Home Office 000
Investment in Branch 000
To eliminate Shipment to Branch and Shipment from Home Office accounts, initially shipped at cost
Shipment to Branch 000
Shipment from Home Office 000
To eliminate Shipment to Branch and Shipment from Home Office accounts, initially shipped at billed price
Shipment to Branch 000
Allowance for Overvaluation of Branch Inventory 000
Shipment from Home Office 000
To remove the mark-up in beginning inventory of the branch
Allowance for Overvaluation of Branch Inventory 000
Merchandise Inventory, beg 000
To remove the mark-up in ending inventory of the branch
Merchandise Inventory, end (IS) 000
Merchandise Inventory, end (BS) 000
Beginning inventory was billed at 25% mark-up rate.
Merchandise is billed at a gross profit rate of 25% However, current shipment is billed at 25% mark-up
on cost.
BILLED COST MARKUP BILLED COST MARKUP
Beg. Inventory 100.00 75.00 25.00 Beg. Inventory 100.00 75.00 25.00
Shipment 60.00 45.00 15.00 Shipment 60.00 48.00 12.00
Available for Available for
sale 160.00 120.00 40.00 sale 160.00 123.00 37.00
End. Inventory (50.00) (37.50) (12.50) End. Inventory (50.00) (40.00) (10.00)
COGS 110.00 82.50 27.50 COGS 110.00 83.00 27.00
Merchandise is billed 125% of cost (25% above cost)
BILLED COST MARKUP
Beg. Inventory 100.00 80.00 20.00
Shipment 60.00 48.00 12.00
Available for
sale 160.00 128.00 32.00
End. Inventory (50.00) (40.00) (10.00)
COGS 110.00 88.00 22.00
