Smart Limited is an Indian Company and has its Branch at New York. The following balances in respect of Smart Limited's USA Branch office are…

CA Intermediate · Advanced Accounting · MTP · January 2026
Smart Limited is an Indian Company and has its Branch at New York. The following balances in respect of Smart Limited's USA Branch office are provided: (i) Debit Balances (in USD) Expenditure (excluding Depreciation) : 1,03,095 Cash & bank balances : 2,175 Debtors : 7,365 Fixed Assets (Gross) : 34,200 (Rate of Depreciation on Fixed Assets: 20%) Inventory-Stock 'P' : 5,520 Inventory- Stock 'Q' : 1,035 (ii) Credit Balances (in USD) Incomes : 1,32,000 Creditors : 15,570 HO Control a/c : 5,820 The following additional information is provided: (1) The average exchange rate during the above financial year was 1 USD = 56. (2) The fixed assets were purchased when the exchange rate was 1 USD = 55. (3) The closing exchange rate on reporting date is 1 USD = 58. (4) Stock item 'P' is valued at cost of USD 5,520, purchased when the exchange rate was - 56.50. The present net realizable value of this item is 2,85,000. (5) Stock item 'Q' is carried at net realizable value of USD 1,035, but its cost in USD is 1,065, It was purchased when exchange rate was 1 USD = 53. (6) Branch Control Account as per HO books was - 2,66,265. You are required to show how it will be reflected in the books of Head Office in the form of Trial Balance, if the USA Branch Office is classified as an Integral Foreign Operation.

Suggested Answer and Working Notes:

Converted branch trail balance (in the books of head office) Particular Dr. $ Cr. $ Rate per $ ₹ Dr. ₹ Cr. Expenditure 1,03,095 56 57,73,320 Cash & bank balance 2,175 58 1,26,150 Debtors 7,365 58 4,27,170 Fixed assets 27,360 55 15,04,800 Depreciation 20% 6,840 55 3,76,200 Inventory P 5,520 Direct 2,85,000 Inventory Q 1,065 53 56,445 Income 1,32,000 56 73,92,000 Creditors 15,570 58 9,03,060 HO control A/c 5,820 2,66,265 Exchange difference 12,240 85,61,325 85,61,325 Working Note: Inventory P Inventory Q $ 5,520 $ 1,065 Purchased Cost rate 56.50 NRV $ 1,035 NRV 2,85,000 Closing rate 58 Cost 3,11,880 Purchased Cost rate 53 Value at cost or NRV whichever is less 2,85,000 Value at cost or NRV whichever is less $ 1,035 @ 58 or $1,065 @ 53 = 56,445 or 60,030

Topics: Accounting for Branches including foreign branch

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