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In preparing working papaers to combine the adjusted trial balences of a home office and its...

In preparing working papaers to combine the adjusted trial balences of a home office and its branches, what's the advantage of combining the home office adjusted trial balance before recording the entry for branch profit or loss for the period?

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Answer #1

While preparing the profitability of the concern on month-end or the year-end, it would be always important/advantageous to combine the adjusted trial balances of a home office and its branches because on the combined adjusted trial balance, the head office can allocate the expenses made at the head office on behalf of the branches. The inter-branches and head office-Branches accounts are settled and reconciled. The revenues and expenses booked on each other behalf by either head-office or branches are transferred to the appropriate branch through adjusting entries. The outstanding and accrued and capital nature entries like depreciation, amortisations, etc. On having a proper adjustments of the accounts between the head office and the branches, we can have proper profit or loss of the branches.

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