| Branch A General | $ 10,000.00 | |
| Cash | $10,000.00 | |
| Branch A Merchandise | 77,000.00 | |
| Sales to Branches | 77,000.00 | |
| Cash | 66,000.00 | |
| Branch A General | 66,000.00 |
It is to be noted that separate merchandise accounts are opened with each branch by name but that only one Sales to Branches account need be opened. The Branch Merchandise account with each branch provides all the necessary data for making the adjustment at the close of the period, the offsetting memorandum account for all the different Branch Merchandise accounts being the Sales to Branches account. At the close of the period, upon report of the total activities for the period at the branch, the following entries are made on the head office books:
| Branch A General | $85,000.00 | |
| Sales | $85,000.00 | |
| Expenses | 10,000.00 | |
| Branch A General | 10,000.00 |
An alternative method of summarizing branch activities is sometimes used, as follows:
| Branch A General | $85,000.00 | |
| Branch A Profit and Loss | $85,000.00 | |
| Branch A Profit and Loss | 10,000.00 | |
| Branch A General | 10,000.00 |
Under the first method the effect is to merge the activities of the branch with the similar activities of the head office. A statistical abstract of the different branches is then depended upon by the head office management to show the results of the period’s trading at the various branches. Under the second method the effect is to bring onto the books under the various branch Profit and Loss accounts the results of the trading in each case. Whichever method best gives the information desired by the head office will, of course, be adopted.
A brief discussion will now be given of the chief problems met in branch accounting. No attempt will be made to discuss the problem of branch organization from the standpoint of system or control. Such a discussion belongs more particularly to the field of auditing than to that of accounting.
Purchases
From the head office point of view no special problems are met in the matter of purchasing. From the standpoint of the branch the question of purchases is largely the same as the question of sales from the head office standpoint, and the problem of sales is chiefly one of the price at which goods should be billed to the branch. This is treated in the next section. Attention is called here to the need of a very careful control and checking up on purchasing activities of the branch where the branch is permitted to buy some portion of its goods from outside sources. This may become necessary in cases of emergency, or may be a matter of fixed policy in those cases where commodities are sold at some of the branches which the head office does not care to furnish or cannot handle with economy. Where the branch makes purchases both from outside and from the head office, the result may be to complicate the adjustments necessary at the close of the fiscal period. The underlying principles on which the accounts and their adjustments rest are, however, the same.
Sales