a. List three accounts prepared by the head office for the branch
b. Explain two methods of accounting for goods sent to branch
c. State four reasons for preparing departmental accounts
Explanation
a. - Branch stock account
- Branch debtors account
- Profit and loss account
b. - Cost price: Goods may be issued to the branches at cost because of the difficulties involved in pre-determining the selling price. Under this method, it is very easy to extract the profit and loss for the branch.
- Cost plus percentage: Where goods are issued to the branch at cost plus a certain percentage, a certain profit elements, to the extent of the added percentage, is already included. Charging goods at cost plus percentage is normally adopted where it is possible to charge goods to the branch at selling price because of its nature.
c. - To provides information for remunerating departmental manager on the basis of result.
- It helps to know the profitability of each department
- Evaluate performance, planning and control
- Calculate commission of managers department wise