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Arshad & Co
Arshad & Co. have a sales branch at Sialkot and charge all goods sent to branch at cost price plus 30%. It is arranged that all cash received by the branch is to be paid daily to the Head office Account with HBL and the necessary advice to the Head office. All expenses are paid from Head Office. From the following particulars, prepare Branch Account in the Head office ledger showing the actual profit of the branch for the month ending 31st January 2020. Stock on 1-1-2020 Goods sent to Branch Debtors on 1-1-2020 Cash sent to H.O 12,000 100,000 1,500 77,100 Rent, rates, etc. Salaries and wages Debtors on 31-01-2020 Stock on 31-01-2020 3,200 4,800 1,600 14,800
Expert Solution
1. The Branch account in the head office ledger showing the actual profit/loss of the branch for the month ending 31st January,2020 is as follows:-
| Date | Particulars (Debit) | Amount | Date | Particulars (Credit) | Amount |
| 1-1-2020 | To Balance b/d:- | 31-1-2020 | By Bank account | 77,100 | |
| Stock | 12,000 | By Branch Stock | 14,800 | ||
| Debtors | 1500 | By Branch Debtors | 1600 | ||
| By differnce in the value of opening stock (note) | 2769 | ||||
| To Goods sent to branch | 1,00,000 | By Goods sent to Branch account (Note) | 23077 | ||
| To Bank account:- | |||||
| Rent & Rates | 3200 | ||||
| Salaries & Wages | 4800 | ||||
| To difference in the value of closing stock (note) | 3415 | ||||
| By Net loss, transferred to General profit & loss account | 5569 | ||||
| 1,24,915 | 1,24,915 |
Note :- The value of opening balance, goods sent to branch and closing stock are given under Invoice Price i.e.
100 + 30%= 130 %
Therefore, the excess price included:-
In opening Stock= 12000 * 30/ 130= 2769
In Goods sent to branch= 1,00,000 *30/130= 23,077
In Closing Stock= 14800 *30/130= 3415
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