(a) What are closing entries?
(b) Distinguish between a branch and a department.
(c) State four reasons for the preparation of branch accounts.
Explanation
(a) Closing entries: Closing entries are journal entries made at the end of an accounting period which are later transferred to the income statement.
OR
Closing entries are journal entries passed to close the accounts relating to income, expenses, gains, and losses at the end of the accounting period.
(b) Distinction between a Branch and a Department:
A Branch is a segment/unit of a business located outside the head office, but a Department is a unit of an organısation under the same roof.
OR
A Branch can replicate all the activities of the head office: but a Department operates only a single line of production or service of the firm which differs from those of the other units.
(c) Reasons for the preparation of branch accounts: Branch accounts are prepared to:
i. be used as a basis to reward hardworking staff:
ii. serve as a basis for management decision-making
iii. compare the results performance of various branches
iv. know the profitable and unprofitable branches
v. determine which of the branches could be closed down
vi. help management controls the organization's activities.