Branch Account 1 Branch A trading bank may

Branch Account 1

Branch • A trading bank may try to expand its business by opening BRANCHES as another establishment of the company in different locations 2

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Account kept by Branch 4

Account Kept by Branch • Head office and Branch will open a full set of books to record their transactions instead of branch books are kept by the Head office 5

Preparation of the Final Accounts • Separate profit and loss accounts and balance sheets would be prepared for the head office and the branch(es) 6

• In Head Office books: • Branch Current Account is opened to record transactions between the Head Office and the Branch • In Branch books: • Head Office Current Account is opened to record transactions between them 7

Transactions Head office (HO) Branch books 1 Assets purchased directly by HO Dr Purchase(Assets) No entry Cr Cash 2 Assets purchased directly by Branch NO entry Dr Purchase(trading) Cr Cash 8

Transaction 1 - Assets purchased directly by the Head Office purchased a computer system amounting $12, 000 Dr Computer System Cr Cash $12, 000 9

Transaction 2 -Assets purchased directly by the Branch Kyrenia Branch purchased fixtures and fittings amounting $1, 000 Dr Fixtures & Fittings Cr Cash $1, 000 10

Transactions Head office (HO) books Branch books 3 Inventory (Chq. Books) sent from HO to Branch Dr Branch Current Dr Inventory received Cr Inventory sent from HO to Branch Cr HO Current 4 HO customer deposits money to Branch Dr Branch Current Dr Cash Cr Deposits by Cr HO Current Customers 5 Branch customer deposits money to HO Dr Cash Cr Branch Current Dr HO Current Cr Deposits by Customers 11

Transaction 3 - Inventory (Chq. Books) sent from HO to Branch Nicosia Head Office sent stock of cheque books to Kyrenia Branch, amounting $4, 000 HO BR Dr Branch Current Account $4, 000 Cr Cheque Book Stock $4, 000 Dr Cheque Book Stock Cr HO Current Account $4, 000 12

Transaction 4 - HO customer deposits money to Branch Jane has a current deposit account at Nicosia Head Office of the ABC Bank. While Jane was at Kyrenia, she deposited $500 to her account at Kyrenia Branch. HO Dr Branch Current Account $500 Cr Deposits by Customers $500 BR Dr Cash Cr HO Current Account $500 13

Transaction 5 - Branch customer deposits money to HO Baker LTD has a current deposit account at Kyrenia Branch of the Bank. One of the accounts receivable customer of Baker Ltd. invested $7, 000 cash to company`s bank account at Nicosia Head Office HO Dr Cash BR $7, 000 Cr Branch Current Account $7, 000 Dr HO Current Account $7, 000 Cr Deposits by Customers $7, 000 14

Transactions Head office (HO) books Branch books 6 HO expenses paid Dr Expenses (P&L) No entry by HO Cr Cash/Bank 7 Branch expenses paid by Head Office Dr Branch Current Dr Expenses (P&L) Cr Cash/Bank Cr HO Current 8 Branch expenses paid by Branch No entry Dr Expenses (P&L) Cr Cash/Bank 15

Transaction 6 -HO expenses paid by HO Main Head Office of the Bank paid monthly rent of the building. Rent was amounting to $5, 000 Dr Rent Expense Cr Cash $5, 000 16

Transaction 7 - Branch expenses paid by Head Office Main Head Office of the Bank paid monthly rent of the Kyrenia Branch building. Rent was amounting to $3, 000 HO BR Dr Branch Current Account $3, 000 Cr Cash $3, 000 Dr Rent Expense Cr HO Current Account $3, 000 17

Transaction 8 - Branch expenses paid by Branch Kyrenia Branch, received an invoice amounting $600 from Cleaning Company for the services provided. Branch signed a note to pay the corresponding amount next month Dr Cleaning Expense Cr Notes Payable $600 18

Transactions Head office (HO) books Branch books 9 HO customer withdraws money from Branch Dr Deposits by Customers Cr Branch Current Dr HO Current Cr Cash 10 Branch customer Dr Branch Current Dr Deposits by withdraws money Customers Cr Cash from HO Cr HO Current 19

Transaction 9 -HO customer withdraws money from Branch Martha, who is a deposit customer of the Bank`s main head office, withdrew $400 from Kyrenia Branch. HO Dr Deposits by Customers BR $400 Cr Branch Current Account $400 Dr HO Current Account $400 Cr Cash $400 20

Transaction 10 -Branch customer withdraws money from HO Frank has a deposit account at Kyrenia Branch of the Bank. Frank, withdrew $300 cash from Automated Cash Machine (ATM) of Nicosia Head Office HO BR Dr Branch Current Account $300 Cr Cash $300 Dr Deposits by Customers $300 Cr HO Current Account $300 21

Transactions Head office (HO) books Branch books 11 HO customer Dr Branch Current Dr Cash pays loan instalment Cr Loan to Cr HO Current to Branch Customers 12 Branch customer Dr Cash pays loan instalment Cr Branch Current to HO Dr HO Current Cr Loan to Customers 22

Transaction 11 - HO customer pays loan instalment to Branch Karen, has a Loan Account at ABC Bank`s main head office. She borrowed $6, 000 cash to be paid in 6 instalments and signed a primosory note. She paid first instalment to Kyrenia Branch ($1, 000 each month excluding interest expense) HO BR Dr Branch Current Account $1, 000 Cr Loans to Customers $1, 000 Dr Cash $1, 000 Dr HO Current Account $1, 000 23

Transaction 12 -Branch customer pays loan instalment to HO Linda borrowed $36, 000 cash from Kyrenia Branch of the Bank to be paid in 12 installments in one year. After paying half of the loan, she requested to pay the rest of the amount fully in one instalment to Head Office Nicosia. HO Dr Cash BR $18, 000 Cr Branch Current Account $18, 000 Dr HO Current Account $18, 000 Cr Loans to Customers $18, 000 24

Let’s record the Journal Entries for Head Office and Branch 25

ABC Bank Ltd. has its head office in Nicosia and a branch in Kyrenia and separate final accounts are prepared for the HO and Branch. Trial Balance as at 1 December 2012 HO Branch $ Dr Cash Reserves at Central Bank Loans to Customers HO Current Branch Current Cheque Book Stock Fixed assets Notes Payable Deposits by Banks Deposits by Customers Bank Cheque Account Capital Stock $ Cr $ Dr $ Cr 1, 214, 300 1, 080, 000 320, 000 58, 000 660, 000 240, 000 100, 000 16, 000 152, 000 1, 532, 000 5, 000 100, 000 596, 000 110, 000 438, 300 223, 800 25, 000 10, 000 1, 200, 000 500, 000 26

ABC Bank Ltd. has its head office in Nicosia and a branch in Kyrenia and separate final accounts are prepared for the. HO and Branch. Trial Balance as at 1 December 2012 HO Branch $ Dr Bank Service Revenue Bank Interest Income Commission Income Rent Expense - Branch Rent Expense - HO Salary Expense Total $ Cr $ Dr $ Cr 980, 000 390, 000 490, 000 210, 500 43, 000 17, 700 12, 000 30, 000 3, 872. 300 15, 000 3, 872. 300 1, 562. 000 27

Head Office Accounts: 1 - Cash Balance c/f : 1, 214, 300 Transaction 1 : -12, 000 Transaction 5 : + 7, 000 Transaction 6 : - 5, 000 Transaction 7 : - 3, 000 Transaction 10 : -300 Transaction 12 : +18, 000 1, 219, 000 28

Head Office Accounts: 2 - Loans to Customer Balance c/f : 660, 000 Transaction 11 : - 1, 000 659, 000 29

Head Office Accounts: 3 - Reserves at Central Bank – 320, 000 – No Change 4 - Head Office Current Account – Branch Books 30

Head Office Accounts: 5 - Branch Current Account – Balance c/f : 100, 000 Transaction 3 : + 4, 000 Transaction 4 : + 500 Transaction 5 : - 7, 000 Transaction 7 : + 3, 000 Transaction 9 : - 400 Transaction 10 : + 300 Transaction 11 : + 1, 000 Transaction 12 : - 18, 000 83, 400 31

Head Office Accounts: 6 - Fixed Assets Balance c/f : 1, 532, 000 Transaction 1 : + 12, 000 1, 544, 000 7 - Cheque Book Stock Balance c/f : 16, 000 Transaction 1 : - 4, 000 12, 000 32

Head Office Accounts: 8 - Deposit by Banks – 596, 000 – No Change 9 - Deposit by Customers – Balance c/f : 438, 300 Transaction 4 : + 500 Transaction 9 : 400 438, 400 10 - Bank Cheque Account – 25, 000 – No Change 33

Head Office Accounts: 11 - Notes Payable – 100, 000 – No Change 10 - Capital Stock – 1, 200, 000 – No Change 11 - Service Revenue – 980, 000 – No Change 12 - Interest Income – 490, 000 – No Change 13 - Commission Income – 43, 000 – No Change 14 - Rent Expense Balance c/f : 0 Transaction 6 : + 5, 000 15 - Salary Expense - 30, 000 – No Change 34

ABC Bank Ltd. has its head office in Nicosia and a branch in Kyrenia and separate final accounts are prepared for the HO and Branch. Trial Balance as at 31 December 2012 HO HO $ Dr $ Cr Cash 1, 214, 300 1, 219, 000 Cash 320, 000 Reserves at Central Bank 659, 000 660, 000 Loans to Customers HO Current 83, 400 100, 000 Branch Current 12, 000 16, 000 Cheque Book Stock 1, 544, 000 Fixed assets 1, 532, 000 Notes Payable 100, 000 Deposits by Banks 596, 000 Deposits by Customers 438, 400 438, 300 Bank Cheque Account 25, 000 35 Capital Stock 1, 200, 000

ABC Bank Ltd. has its head office in Nicosia and a branch in Kyrenia and separate final accounts are prepared for the. HO and Branch. Trial Balance as at 1 December 2012 HO HO $ Dr Bank Service Revenue Bank Interest Income Commission Income Rent Expense - HO Salary Expense Total $ Cr $ Dr $ Cr 980, 000 490, 000 43, 000 5, 000 30, 000 3, 872. 300 3, 872. 400 36

Branch Accounts: 1 - Cash Balance c/f : 1, 080, 000 Transaction 2 : - 1, 000 Transaction 4 : + 500 Transaction 9 : - 400 Transaction 11: + 1, 000 1, 080, 100 37

Branch Accounts: 2 - Loans to Customer Balance c/f : 240, 000 Transaction 11 : - 18, 000 222, 000 38

Branch Accounts: 3 - Reserves at Central Bank – 58, 000 – No Change 39

Branch Accounts: 4 - Head Office Current Account – Balance c/f : 100, 000 Transaction 3 : + 4, 000 Transaction 4 : + 500 Transaction 5 : - 7, 000 Transaction 7 : + 3, 000 Transaction 9 : - 400 Transaction 10 : + 300 Transaction 11 : + 1, 000 Transaction 12 : - 18, 000 83, 400 40

Branch Accounts: 5 -Branch Current Account- Head Office Books 6 - Fixed Assets Balance c/f : 152, 000 Transaction 2 : + 1, 000 153, 000 7 - Cheque Book Stock Balance c/f : 5, 000 Transaction 4 : + 4, 000 9, 000 41

Branch Accounts: 8 - Deposit by Banks – 110, 000 – No Change 9 - Deposit by Customers – Balance c/f : 223, 800 Transaction 5 : + 7, 000 Transaction 9 : 300 230, 500 10 - Bank Cheque Account – 10, 000 – No Change 42

Branch Accounts: 11 - Notes Payable – Balance c/f : 0 Transaction 8 : + 600 10 - Capital Stock – 0 – No Change 11 - Service Revenue – 390, 000 – No Change 12 - Interest Income – 210, 500 – No Change 13 - Commission Income – 17, 700 – No Change 14 - Cleaning Expense Balance c/f : 0 Transaction 8 : + 600 43

Branch Accounts: 14 - Rent Expense – Balance c/f : 0 Transaction 7 : + 3, 000 15 - Salary Expense - 15, 000 – No Change 44

ABC Bank Ltd. has its head office in Nicosia and a branch in Kyrenia and separate final accounts are prepared for the HO and Branch. Trial Balance as at 1 December 2012 Branch $ Dr Cash $ Cr $ Dr $ Cr 1, 080, 000 1, 080, 100 Cash 58, 000 Reserves at Central Bank 240, 000 222, 000 Loans to Customers 100, 000 83, 400 HO Current Branch Current 5, 000 9, 000 Cheque Book Stock Fixed assets 152, 000 153, 000 Notes Payable 600 Deposits by Banks 110, 000 Deposits by Customers 223, 800 230, 500 Bank Cheque Account 10, 000 45 Capital Stock 500, 000

ABC Bank Ltd. has its head office in Nicosia and a branch in Kyrenia and separate final accounts are prepared for the. HO and Branch. Trial Balance as at 1 December 2012 Branch $ Dr Bank Service Revenue Bank Interest Income Commission Income Cleaning Expense Rent Expense - Branch Salary Expense Total $ Cr $ Dr $ Cr 390, 000 210, 500 17, 700 600 12, 000 15, 000 1, 562. 000 1, 552. 700 46

Let`s consolidate the accounts of the Head Office and Branch 47

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