Mr. GOKU, with its head office at Ahmedabad, has a branch at Nagpur. Goods are invoiced to the branch at cost plus 25%. The branch makes sales both…

CA Intermediate · Advanced Accounting · PYQS · January 2026
Mr. GOKU, with its head office at Ahmedabad, has a branch at Nagpur. Goods are invoiced to the branch at cost plus 25%. The branch makes sales both for cash and on credit. Branch expenses are paid direct from head office and the branch has to remit all the cash received into head office's bank account at Ahmedabad. The following information pertaining to the year ended 31 st March, 2025, in respect of the Nagpur Branch is made available to you: Particulars ₹ Goods sent to branch (at Invoice Price) 67,50,000 Goods returned by the branch during the year (at Invoice Price) 2,40,000 Cash sales effected by the branch 18,50,000 Discount allowed to customers 25,000 Amount received from branch debtors 32,50,000 Cheques of customers returned unpaid by the bank 80,000 Branch expenses met in cash 7,25,000 Sales return at Nagpur branch 1,00,000 Bad debts 55,000 31 st March, 2025 31 st March, 2024 Branch debtors 10,50,000 5,00,000 Stock at branch (at Invoice Price) 23,60,000 15,00,000 Applying the Stock and Debtors System, you are required to prepare the following Ledger Accounts in the books of Head Office for the year ended 31 st March, 2025: (i) Nagpur Branch Stock A/c; (ii) Nagpur Branch Debtors A/c; (iii) Nagpur Branch Adjustment A/c; and (iv) Nagpur Branch Profit and Loss A/c.

Suggested Answer and Working Notes:

Nagpur Branch Stock Account Particulars Amount (₹) Particulars Amount (₹) To Balance b/d 15,00,000 By Goods sent to branch A/c (Returns) 2,40,000 To Goods sent to branch A/c 67,50,000 By Bank A/c (Cash sales) 18,50,000 To Branch debtors A/c (Returns) 1,00,000 By Branch debtors A/c (credit sales) 39,00,000 By Balance c/d 23,60,000 83,50,000 83,50,000 Nagpur Branch Adjustment Account Particulars Amount (₹) Particulars Amount (₹) To Goods Sent to Branch A/c (Goods returned to HO) (20% of 2,40,000) 48,000 By Stock reserve 20% of 15,00,000 (Opening stock) 3,00,000 To Branch profit & loss A/c (Gross profit) 11,30,000 By Goods sent to branch A/c 20% of 67,50,000 13,50,000 To Stock reserve 20% of 23,60,000 (Closing stock) 4,72,000 16,50,000 16,50,000 Branch Profit & Loss Account Particulars Amount (₹) Particulars Amount (₹) To Branch expenses A/c 7,25,000 By Branch adjustment A/c (Gross Profit) 11,30,000 To Branch debtors A/c (Discount) 25,000 To Branch Debtors A/c (Bad debts) 55,000 To Net profit (transferred to Profit & Loss A/c) 3,25,000 11,30,000 11,30,000 Branch Debtors Account Particulars Amount (₹) Particulars Amount (₹) To Balance b/d 5,00,000 By Bank A/c 32,50,000 To Branch stock A/c (W.N) 39,00,000 By Branch profit and loss A/c (Bad debts and discount) 80,000 To Bank A/c (Cheques dishonoured) 80,000 By Branch stock A/c (Sales returns) 1,00,000 By Balance c/d 10,50,000 44,80,000 44,80,000 Working note 1. Calculation of Credit sales = Closing Balance + Collections + Discount + Bad Debts + Sales Return - Opening Balance - Cheque Return (reinstatement) = Credit Sales = 10,50,000 +32,50,000+25,000 +55,000+1,00,000 -5,00,000-80,000 = 39,00,000

Topics: Accounting for Branches including foreign branch

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