M/s Marena, having head office at Chennai has a branch at Hyderabad. The head office does wholesale trade only at cost plus 60%. The goods are sent…

Trading and Profit and Loss A/c for the year ended 31st March 2025 Head office ₹ Branch ₹ Head office ₹ Branch ₹ To Opening stock 75,000 By Sales 10,25,000 2,70,000 To Purchases 9,25,000 By Goods sent to branch 3,60,000 - To Goods received from head office 3,60,000 By Closing stock (W.N. 1 & 2) 1,34,375 1,20,000 To Gross profit c/d 5,19,375 30,000 15,19,375 3,90,000 15,19,375 3,90,000 To Office expenses 9,000 3,000 By Gross profit b/d 5,19,375 30,000 To Staff salaries 13,700 2,500 To Branch Stock Reserve (W.N.3) 45,000 - To Net Profit 4,51,675 24,500 5,19,375 30,000 5,19,375 30,000 Working Notes (1) Calculation of closing stock of head office: ₹ Opening Stock of head office 75,000 Goods purchased by head office 9,25,000 10,00,000 Less: Cost of goods sold [(10,25,000 + 3,60,000 x 100/160] (8,65,625) 1,34,375 (2) Calculation of closing stock of branch: ₹ Goods received from head office [At invoice value] 3,60,000 Less: Invoice value of goods sold [2,70,000 x 160/180] (2,40,000) 1,20,000 (3) Calculation of unrealized profit in branch stock: Branch stock - 1,20,000 Profit included 60% of cost Hence, unrealized profit would be = 1,20,000 x 60/16045,000