Lesson Notes By Weeks and Term - Senior Secondary School 3










  • Meaning of Branch Accounts
  • Division of Branch Accounting 
  • Formats and Illustration


Meaning of Branch Accounts

A branch Account is a system of accounting adopted to record the transactions of a small part of a business organization which has or has not some degree of independence.


Divisions of Branch Accounting

The divisions can be:


  • Where the head office keeps all the accounts: This happens where the branch is fully dependent on the head office. In this case the following accounts are kept.


  1. Branch stock A/C
  2. Goods sent to branch A/C
  3. Branch stock adjustment A/C
  4. Branch debtors A/C (where credit sales are allowed)
  5. Branch bank A/C
  6. Branch profit & loss A/C



  • Where the branches keep separate accounts: This happens where a branch is semi-autonomous. In this situation the following accounts are kept to show the relationships:


    1. Branch current A/C in head office books
    2. Head office current A/C in branch books 

Pricing Methods

Three different pricing methods are available for charging goods to branches. They are: 

  1. At cost Price: This is used when the goods concerned are perishable so that branch managers can use their discretions to avoid losses.
  2. At cost plus a percentage: This helps the head office to exercise control over the branch by stating the required percentage profit.
  3. At selling price: This is a measure of control also where the branch has no choice but to sell the goods at the selling price given.


Note: Where the cost plus a percentage method of pricing is used, two method of accounting can be used also:

  1. Double column or a memorandum column method
  2. Branch adjustment method.


Memorandum or double column method.

This method combines two accounts:

  1. Branch Stock Account which appears in the invoice price column and 
  2. Branch Stock Adjustment Account which appears in the “cost price” column However the use of this method requires some items or transactions to be shown at the same price in the two separate columns. These items are:
  1. Cash sales     2.    Credits sales         3.    Cash remitted to head office
  2. Cash in transit 5.    Sundry expenses from takings (ie sales) 
  3. Sundry expenses paid out of cash 7.    Cash taken stolen.


Thus, the adoption of the memorandum or double column method, in cost plus percentage pricing system, requires the following accounts:

  1. Branch stock A/C with double column i.e. memorandum branch A/C
  2. Goods sent to branch A/C (entries in this A/C are made at cost price only)
  3. Branch P & L A/C//


Formats of the three Account above:

Memorandum Branch Stock A/C

                Invoice    cost                     Invoice    cost

                Price        Price                    Price        Price

                N        N                    N        N

Stock at start            X        X    Rent to head office        X        X

Goods sent to Branch    x        x    credit sales            x        x

Gross profit C/D                x    cash sales            x        x

                            Allowance of selling price    x        x

                            Goods stolen            x        x

                            Cash stolen            x        x

                            Expenses paid       

                            Out of takings        x        x

                            Normal loss            x        x                            stock at close            x        x

                X        x                    x        x


Goods sent to branch A/C (at cost)

                N                N

Returns to branch        x    branch stock    A/C    x

Transport to head Office

Trading A/C            x

                X                x


Branch profit & Loss A/C

                N                N

Branch  stock A/C            Gross profit        x

Sundry expenses        x    (from memo.

                    Branch Stock A/C)

Stock stolen at cost price    x

Cash stolen             X               

Net profit            x

                X                x



  1. What is a branch accounts
  2. State the pricing methods in branch accounts



Suzi Ltd operates a head office in Lokoja and branch office in Lagos. All goods are purchased by Lokoja and sent to Lagos at cost plus 25%. The following information were given for the year ended 31/12/04.


Credit sales                        3,500

Goods sent to branch at cost            50,000

Returns to head office at cost            500

Cash takings remitted to H.O.            10,000

Stock at close at cost price                12,500

Cash takings stolen                    150

Sundry expenses paid out of takings            950

Goods stolen at cost                    40

Allowances off selling price                100

You are required to prepare

  1. Branch A/C in the head office books including the necessary A/Cs
  2. The P & L A/C for the ended 31/12/04

The system of accounting the head office uses is the memorandum column method. 



Step 1: Calculate the selling price (or invoice price) using the mark-up of 25% on cost 

  1. Selling price of goods sent to branch

Profit = mark-up x cost price

        = 25/100 x 50,000 = N12500


  1. Selling price = cost + profit

=    50,000 + 12500

= N623,500


  1. Selling price of returns to Head office

=    cost + mark-up

=    N500 + (25/100 x 500)

  1. P = N500 + 125 = N625


  1. Selling price of stock at close

=    cost + mark-up

=    N12500 + (25/100 x 12500

  1. P = N12500 + 3,125 = N15,625


  1. Selling price of goods stolen

=    cost + mark-up

        =    N40 + (25/100 x N40)

  1. P. =    N40 + 10 = N50


step II: Preparation of branch stock A/C using memorandum colum 

Memorandum branch stock A/C


Invoice    cost                     Invoice    cost

                Price        Price                    Price        Price

                N        N                    N        N

Goods sent to branch    62,500    50,000 Rent to head office        625        500

Gross profit C/D        -        9140    credit sales            3500        3500

                x    cash remitted to H. Office    10,000      10,000

                            cash takings stolen        150        150

                            sundry expenses        950        950

                            goods stolen            50        40

                            Allowance off selling price    100            -                                stock at close            15624        12500

                62500        59140                    62500          59140


Profit & loss A/C

                N                    N

Sundry expenses        950        Gross profit B/D    9140

Cash stolen            150

Goods stolen at cost        40

Net profit            8000

  1. 9150



  1. State four objectives of Branch Accounting.
  2. State five reasons why branches may decide to keep their accounts rather than the Head office doing so.



  1. State five characteristics of depreciable assets
  2. Explain three reasons why an accountant will consider end- of- year adjustments
  3. Differentiate between bad debts and provision for bad debts
  4. Differentiate between bank statement and bank reconciliation statement
  5. State four reasons for making provision for depreciation



Simplified and Amplified Financial Accounting – page 466-487

Essential financial Accounting by O.A. Longe and others pages 375-379



  1. If the cost of goods is N10,000 and there is a 25% mark-up on it, then the selling price is ----------(a)N10,000 (b)N10,200 (c)N12,500 (d)N13,500
  2. If the cost of an article is N500 the company’s profit margin is 20% then the selling price is ----------(a)N6250 (b)5000 (c)72250 (d)6000
  3. If the margin allowed by a business is 25% then the business mark-up is ----------(a)20% (b)30% (c)311% (d)50%
  4. If the profit on cost price is 1/5 then the profit on selling price is ----------(a)1/2 (b)1/3 (c)5% (d)1/4 (e)1/6
  5. The margin on sales of a trader is 15% therefore the trader’s mark-up is ----------(a)12/7 (b)15/17 (c)3/20 (d)3/17



  1. Fill the following gaps

    Mark-up            Margin

If    i.    10%            i.    Then ----------?

  1. ----------?     ii.    If 30%

iii.    3/7            iii.    Then----------?


  1. State the main pricing methods in branch accounting.

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