Question

explain the procedure for incorporation of branch balance in head office books?

Answer 1

Usually when the branch is small, their accounts are maintained by the head office. If the branch is big and specially, if manufacturing it prepares its own books of accounts. There are two methods for incorporation of branch balance in head office books:

1. Under this method, to incorporate all the items, Branch Trading PL account must be prepared. Profit/ loss account, assets and liabilities are incorporated through Branch account to the consolidated Balance Sheet purposes.

2. Under this method, only net profit or net loss of the branch is incorporated in head office books. Branch assets and branch liabilities will also appear for which branch account will show a net balance i.e. Net Worth (Total Assets - Total Liabilities).