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MATERI PRAKTIKUM AKUNTANSI KEUANGAN LANJUTAN FATA 2017

MATERI LAB 1
HOME OFFICE AND BRANCH OFFICE

 Definition of Branch Office


Branch Offices are a part of entities. Branch Offices are treated separately in terms of
accounting system, but not in terms of legal business entities.

 The Difference between Branch Office and Sales Agencies


Aspects Sales Agencies Branches
Sales to outside entities Sales are controlled by Branches can do their own
controlling entities sales to outside entities
Merchandise inventory Sales inventory does not Branches account for their
account for its inventory, but own inventories
they can display them
Sales requirement Controlling Entities Branches don’t have sales
requirement from controlling
entities
Operating Expense Controlled by Controlling Branches account for their
Entities, treatment similar to own expenses
petty cash
Customer Credit Sales agencies do not pass on Branches pass customer
customer credit credit
Accounting System Petty cash Branches have their own
accounting system

 Transactions between Home Office and Branch Office

Home Office
Outside
Entities
Branch Office 2 Branch Office 1

(Intercompany Profit Transaction) (Arms-length transaction)

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MATERI PRAKTIKUM AKUNTANSI KEUANGAN LANJUTAN FATA 2017

 Combining Home Office and Branch Office Financial Statement


1. Eliminate Reciprocal Accounts
Example: (Home Office, Branch Office; (Shipment to Branch Office, Shipment from
Home Office)
2. Combine non-reciprocal accounts

 Examples
- Creation of new branch
Ksatria Muda Company creates a new branch in Jakarta by transferring $20,000 in cash
and an equipment valued at $14,000.

Home Office (in $) Branch Office (in $)

Jakarta Branch 34,000 Cash 20,000


Cash 20,000 Equipment 14,000
Equipment 14,000 Home Office 34,000

Remitted $4,000 to Home Office.

Cash 4,000 Home Office 4,000


Jakarta Branch 4,000 Cash 4,000

Jakarta Branch transfers $6,000 cash to Surabaya Branch.

Home Office Jakarta Branch Surabaya Branch

Surabaya Branch 6,000 HO 6,000 Cash 6,000


Jakarta Branch 6,000 Cash 6,000 HO 6,000

- Merchandise Shipment
Ksatria Muda Company transfers Merchandise to Jakarta Branch at $40,000 its cost.
Jakarta Branch 40,000 Shipment from HO 40,000
Shipment to BO 40,000 Home Office 40,000

Excess Cost (At Cost and At Billing Price)


Ksatria Muda Company transfers merchandise to Jakarta Branch, $40,000 in cost excluding a
markup of 25% using at cost.

Jakarta Branch 50,000 Shipment from HO 50,000


Shipment to BO 40,000 Home Office 50,000
Loading in Branch 10,000

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MATERI PRAKTIKUM AKUNTANSI KEUANGAN LANJUTAN FATA 2017

Meanwhile, if Ksatria Muda Company uses at billing price:

Jakarta Branch 50,000 Shipment from HO 50,000


Shipment to BO 50,000 Home Office 50,000

(at the end of the period)

Shipment to BO 10,000 Shipment to a cost basis


Loading in Branch 10,000

Loading in Branch 6,000 To adjust for branch profit, assuming


Branch profit 6,000 $6,000 profit was recognized

- Freight Cost
Ksatria Muda Company paid $500 for $50,000 of merchandise shipped to Jakarta Branch.
Jakarta Branch 50,500 Shipment from HO 50,000
Shipment to BO 50,000 Freight In 500
Cash 500 Home Office 50,500

- Return
Jakarta Branch returned 50% of the merchandise from Ksatria Muda, Jakarta Branch paid
$300 for the shipment.

Shipment to BO 25,000 Home Office 25,550


Loss on excess freight 550 Shipment from HO 25,000
Jakarta Branch 25,550 Cash 300
Freight In 250

- Expense Allocation
Jakarta Branch pays $5,000 for advertising expense that relates equally to Branch and
Home Office.

Advertising Expense 2,500 Advertising Expense 2,500


Jakarta Branch 2,500 Home Office 2,500
Cash 5,000

Additional Information

Home Office Branch Office

Sales 250,000 188,000


50% of branch ending inventory was
Ending Inventory 10,000 6,000 acquired from outside entities
Purchase 30,000 21,000 Prepare adjusting and closing entries!

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MATERI PRAKTIKUM AKUNTANSI KEUANGAN LANJUTAN FATA 2017

Home Office (in $) Branch Office (in $)

Jakarta Branch 55,250 Sales 188,000


Branch Profit 55,250 Ending Inventory 6,000
Shipment from HO 115,000
Loading in Branch 9,400* Purchase 21,000
Branch Profit 9,400 Freight In 250
Advertising Expense 2,500
Home Office 55,250

* = 10,000 – (3,000 – 3,000/125%)


= 10,000 – (3,000 – 2,400)
= 10,000 – 600
= 9,400

Ending Inventory from HO (After Mark Up of 25%) = 3,000 (125% from cost)
Ending Inventory from HO (Cost Basis) = 2,400 (100% cost)
Loading in Branch for 3,000 Ending Inventory = 600
Realize Loading Inventory = 9,400 (10,000 – 600)
(i)

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