Branch accounting (cost method of invoicing)

There are basically three types of inventory pricing to the branch from the head office. 

1.  The cost method
2.  The cost plus method (cost plus mark up)
3.  The fixed selling price method (market price method

        Below we shall see how to post these transactions using the cost method.

The cost method simply means that the goods were being invoiced to the branch by their exact cost value.

for the other two methods you shall click links at the end of this section:

When goods are being invoiced to the branch at cost method:

1. When goods are sent to branch

            Dr. Branch stock account (at cost)

Cr. Goods sent to branch (at cost)

2. Branch returns goods to the head office

Dr. Goods sent to branch (at cost)

Cr. Branch stock account (at cost)

3. When good are sold 

Dr. Cash (at selling price)

Cr. Branch stock (at selling price)

4. If customer returns goods to branch

Dr. Branch stock (at selling price)

Cr. Cash (at selling price)

5. If customer returns goods to head office directly

i.    Assume goods they are returned to branch

Dr. Branch stock (at selling price)

Cr. Cash (at selling price)

ii.   Assume goods are returned to head office

Dr. Goods sent to branch (at cost)

Cr. Branch stock (at cost)

6. Goods sale loss at the branch

Dr. Cash lost / insurance claim (at cost)

Cr. Branch stock (at cost)

7. If stock lost

            Dr. Stock lost (at cost)

Cr. Branch stock (at cost)




that is all see examples in the branch accounts notes here

for the other to methods clink them here

1.  The cost plus method (cost plus mark up)
2.  The fixed selling price method (market price method