Branch Accounting – Understanding the Basics

Branching Out

When an organization, whether for profit or non-profit, grows or strategizes expansion, it usually clears additional locations. Banks, caffeine shops, supermarkets, department stores, restaurants, cosmetic salons, airline carriers, and even government office buildings may operate much more than one location, national or foreign, to appeal to the needs of their customers or clientele. expertiza contabila Iasi

Many of these additional locations may either take the form of an agency or a branch.

Branch or Firm? 

Depending on its aims, the enterprise may undertake the form of either a branch or an agency. Both are part of a central firm and even though they conduct functions from their home office, they are not just an independent legal entity from the latter.

The key big difference between two lies in their level of autonomy or independence. As an example, a sales agency typically does not stock inventory, but only displays merchandise, takes instructions and arranges for delivery of the merchandise. Quite simply, the agency merely serves on behalf of the home office (H. Um. ), with these managing the other areas of businesses such as getting products, advertising, and granting of credit.

The branch, however, has a greater amount of autonomy and so operates more independently of the home office than the organization, mostly in the pursuing aspects:

Provision of the larger range of services to customers or clientele
Work out of greater management decision-making
Handling of more areas of business operations, such as stocking of inventory, gas of customers’ orders, credit and collection
Maintenance of another accounting system
Individual Branch Accounting System

Exhibiting this greater degree of autonomy, the branch typically maintains its separate accounting system, as the agency does indeed not. In fact, is it doesn’t home office which information all agency transactions in the former’s accounting system.

Such maintenance of independent accounting records by the branch and the home office facilitates far better control over functions and permits top management to better determine branch performance and make strategic business decisions for the company.

Accounting for Branch Operations

The accounting transactions recorded by the branch are generally of the following types:

External transactions or deals with parties external to the company as a legal entity (e. g. customers, suppliers, creditors, electricity companies)
Internal transactions
within the department
with other branches of the organization
with home office

The documenting by the branch of its external transactions and those which naturally impact only the branch (i. e. internal transactions within the branch) is done using the regular credit accounts and journal entries. On the other hand, in recording the branch’s transactions with the They would. O., certain intra-company unsecured debts will have to be created and used. Also, inter-branch transactions or ventures of the branch with another branch are usually coursed or cleared through the H. O. using intra-company accounts.

This entry was posted in Uncategorized. Bookmark the permalink.

Comments are closed.