BRANCH HOUSE ACCOUNTING
Advantages of Branch and Agency System
The branch and agency forms of increasing sales in large enterprises
are an outgrowth of the policy of “service” combined with economy of
management which dominates all present-day capitalistic enterprises.
The tendency of a successful business is to absorb other businesses
in the same line through combinations and amalgamations, and thus
the policies of apparently independent units in a single district
or throughout the entire country may be controlled by the central
management at a head office.
Where a business serves consumers direct by means of retail stores, as
for instance, the chain tea stores, the chain cigar stores, the 5c and
10c stores, the system offers one of the best means of bringing the
business into close personal touch with customers. It gives customers
an opportunity to examine the wares at their convenience, and at the
same time it gives the local branch manager an opportunity to build up
good-will for the distant proprietor.
By these means also, stocks of merchandise can be better selected for
local needs, and the buying power of each territory and the quantities
carried on hand can be better adjusted to secure the greatest possible
turnover of stock during an operating year.
There is no doubt that a campaign of education to introduce new goods
or appliances can be more successfully conducted through local branches
or by personal visits of local agents residing in the territory.
Illustrations of this are the present methods of selling sewing
machines, phonographs, pianos, electric and gas appliances, etc. When
branches are given authority to sell on credit and collect their own
accounts, credits can be more intelligently extended and collections
can be more carefully watched by a local branch manager.
Agency and Branch Differentiated
There is a great deal of difference between the organization and
management of agencies and of branch houses. An agency simply acts
as a local salesman for a certain territory. It secures orders and
forwards them to the head office. The head office passes on the credit
of the purchaser and assumes the risk of refusing or accepting the
order. If it accepts the order it also collects the account when it
is due. Naturally it must keep a memorandum of sales, either to pay a
commission to the agent, or to ascertain whether or not the agency is
a paying venture, or for both reasons. A branch, on the other hand,
has a much higher degree of self-management. It may receive at least
the greater part of its stock of merchandise from the head office, but
it usually makes its own sales. It may pass on its own credits and may
collect its own accounts receivable; and sometimes it pays all its own
expenses.
There are many modifications of the self-management of branches,
especially in the matter of financial control. Some branches deposit
all their receipts to the credit of the head office and have no
authority to withdraw money for any purpose. In such cases the branch
is supplied with a separate petty cash fund kept at a fixed sum on the
imprest cash system. Other branches receive and pay money and simply
make periodic remittances of surplus amounts to the head office as if
they were entirely independent units. Various policies of control have
been formulated to suit the nature of the business and the degree of
self-management granted to the local branches.
Degree of Control Desired
The question of the particular kind of branch or the size of the agency
or branch which it is desired to establish depends entirely on the
peculiar needs of the business under consideration, and the degree of
head office control which is necessary to secure the maximum results
with the minimum of expense. An agency by its very nature is completely
under the control of the central office. The agent has no powers other
than those granted by his principal.
If the business is such that a large stock of merchandise is necessary,
and a high degree of discretion and executive ability must be
exercised, or if it is desirable to establish practically independent
units with only central executive control over the entire purchasing
and financial systems, branch stores may best serve the purpose.
The same system, however, will not meet the needs of every business,
or even of every branch in the same business. Changes must be made for
diversified local conditions which are peculiar to each establishment.
Factors of Successful Management
Certain points must be watched in all systems and under all
conditions. Since the total net profits or losses are determined
largely by the average turnover of circulating capital invested in the
merchandise, the control of the quantity of merchandise, as well as
the price, is a question which must have very careful attention and
intelligent supervision. The stock on hand must be that quantity which
will insure a supply adequate at all times to meet the demands of the
trade, and which at the same time will be the minimum necessary to
accomplish such a result. Each article turns in accordance with certain
fixed principles. Certain goods turn faster than others, but there is a
general relation between the rate of turnover and the profit per turn
which should be carefully watched.
In the last analysis the success of every branch store system depends
upon three things:
1. A fair gross profit on sales, augmented by
2. A proper rate of turnover on the merchandise
carried, and
3. Economical management.
Since expenses are a more or less fixed item, their relation to the
total volume of business transacted must have the constant attention of
the manager. Statistical charts made up from the reports sent in by the
various branches, with summaries of total results, compared either by
territories or by branches or by product will show to the manager the
past history and also the present trend of the business as a whole or
in parts. From these charts he is able to form an intelligent basis for
inaugurating future policies of control.
Main Principles of Branch Accounting
The underlying principles upon which branch store accounting is based
are very simple, but the superstructure will be simple or complex
according to the nature of the business and the information which the
head office requires for its accounts and records.
The main points to be kept in view in installing a system of accounts
are to insure:
1. Control or supervision by the head office.
2. Separate results for the trading of each branch.
3. Facilities for centralizing and comparing such
separate results.
In discussing the question of branch accounting any treatment of
the problems peculiar to it is so dependent on the particular system
employed that only a very general statement of principles can be made
unless the comment is confined to a particular system and this might
not be relevant to all systems. There are, however, certain principles
which apply fundamentally to all systems. The question of the degree of
control desired by the head office and the resulting information which
must be given by the branch to the head office governs largely the
detailed ramifications of general principles which will be necessary.
Also the amount of information as to the results of the business done
at each branch which it is desirable for the branch management to
know has an important bearing on the manner of keeping the accounts.
Sometimes it is not desirable that the branch manager should know the
amount of profit which his branch is earning. While, of course, it is
impossible to keep a shrewd manager in entire ignorance of the results
of his management, yet the exact figure of profit earned by his branch
can be kept from him if the books are handled properly. It is purposed
here to develop by statement and illustration most of the problems
which are peculiar to branch and agency accounting.
Agency Accounts
What has been said with regard to the difficulty of presenting a
widely applicable statement of branch accounts is equally true of
agency accounts. There is no well-marked line of distinction between
agency and branch organization. What may be termed an agency by one
concern will be looked upon as a branch by another concern. For the
purpose of this discussion, however, the distinction stated above
between these two forms of organization will be adhered to. Where,
therefore, the agency is for the most part simply a sales agency,
practically nothing in the way of accounts and accounting control
is necessary other than what must always be used in connection with
traveling salesmen. The agency must be furnished with an expense fund
and must, of course, send in to the head office all its orders and
sales. The expense fund is best operated under the imprest system. To
keep track of the results of the various agencies it will be necessary
on the head office books to keep the records of the activities of each
branch separate from one another and from those of the head office. At
the close of the fiscal period a comparison of agency sales with the
direct costs of making those sales and with the expenses of maintaining
the agency will develop the net result of the agency’s activities. The
problem, therefore, of agency accounting is simply one phase of the
general problem of accounting, viz., furnishing, by means of whatever
analysis may be necessary, the information which will be of greatest
advantage, to the management of the business.
Branch Accounting Records
The accounting records of the branch will be simple or complex
according to the conditions to secure control over which they must
give information. Sometimes a very simple set of records will furnish
all the data needed. In other cases just as elaborate detailed records
as are employed at the head office may be required to secure the
information desired. Sometimes it may appear best for the branch
to keep but few records, and for the head office to keep all the
main accounting records by means of duplicate reports of all branch
transactions. Again, to exercise proper control over the branch, even
where it keeps a full set of records, it may be advisable to require
periodic reports of all branch activities. Sometimes these are required
daily, but more often a weekly or monthly summary of activities serves
the purpose equally well.
Illustration of Simple Branch Accounts
The simplest method of keeping the branch and head office accounts
can be illustrated by a short problem in summarized form. In the
illustration given it is assumed that the head office furnishes the
cash necessary to inaugurate the branch, and that all stock-in-trade
is supplied by the head office. It is further assumed that the branch
keeps a complete set of records which will furnish information as to
profits and losses at the close of the fiscal period. On the branch
books it will be necessary to open accounts with Merchandise (here, for
the sake of brevity, carried under one title rather than as usually
shown), with Cash, with Expenses (again, for the sake of brevity,
carried under one head), with the Head Office, and with Profit and
Loss. These accounts present no peculiarities excepting the Head
Office account which stands on the branch books as the net worth or
proprietorship account. It is credited with all values received from
the head office and charged with all values returned to the head office
or expended on head office account. The net profit for the period is
closed from the Profit and Loss account into the Head Office account in
order to show the present net worth or proprietorship with which the
branch enters the new fiscal period.
On the head office books there need be carried only an account with
each branch by name or number. The charges and credits in this account
are the exact reverse of those in the Head Office account carried on
the branch books. At the close of the fiscal period it is necessary
to receive the report of the branch profit or loss before that can
be incorporated in the branch account on the head office books. The
following problem will show the manner in which these accounts are kept.
_Problem._ The head office sends to the
branch during the year $5,000 cash and $50,000
worth of merchandise. The branch makes sales to
customers on account amounting to $45,000 and cash
sales of $10,000. It incurs expenses of $7,500. Its
collections from customers on account amount to
$25,000. It remits $37,000 to the head office. The
inventory of merchandise at the close of the year is
found to be $12,500.
_Solution_
_Branch Books_
Cash $ 5,000.00
Head Office $ 5,000.00
Merchandise 50,000.00
Head Office 50,000.00
Customers 45,000.00
Merchandise 45,000.00
Cash 10,000.00
Merchandise 10,000.00
Expense 7,500.00
Cash 7,500.00
Cash 25,000.00
Customers 25,000.00
Head Office 37,000.00
Cash 37,000.00
Merchandise (Inventory) 12,500.00
Merchandise 12,500.00
Merchandise 17,500.00
Profit and Loss 17,500.00
Profit and Loss 7,500.00
Expense 7,500.00
Profit and Loss 10,000.00
Head Office 10,000.00
_Head Office Books_
Branch $55,000.00
Cash $ 5,000.00
Merchandise 50,000.00
Branch 10,000.00
Branch Profit and Loss 10,000.00
In making up the head office balance sheet, the Branch account as
carried on the head office books will be an asset representing the
property of the head office invested in the branch. Instead of carrying
this property under the title “Branch,” it is sometimes desirable to
include all branch values with similar values at the head office. This
results in a balance sheet which is similar to the consolidated balance
sheet explained in Chapter XXXIV.
Illustration of More Complex Branch Accounts
As an illustration of a somewhat more complex method of keeping the
books, a problem is appended illustrating the sending of goods to the
branch at a nominal figure or at sales price. Here it is not desired
that the branch management be able to determine the profit and loss
of its activities; consequently the goods from the head office are
not charged to the branch at cost but at some fictitious value. Where
this is done it is best to open two accounts, the one to record the
merchandising transactions between the branch and the head office, and
the other to record all other interactivities.
_Problem._ The head office sends to the branch during the year $10,000
cash and $77,000 worth of merchandise as billed at a conventional
price. The branch makes sales to customers on account, of $60,000, and
for cash $25,000. The expenses of the branch are $10,000. Collections
from customers amount to $45,000 and remittances to head office amount
to $66,000. The inventory of the stock-in-trade at the close of the
year is $14,000, this valuation being on the same basis as the original
charge, i.e., at the conventional figure.
_Solution_
_Branch Books_
On the branch books two accounts are opened with the head office,
one entitled “Head Office General,” and the other “Head Office
Merchandise.” Neither one of these accounts represents the full
proprietorship of the head office in the branch, nor do both of them
together represent the true proprietorship because of the fact that the
merchandise is priced to the branch at a fictitious figure. The branch
books cannot show the true status of relations with the head office so
long as the policy, of billing goods in this way is maintained. That
is the chief reason why it is best to set up the two accounts, in one
of which appear the merchandise transactions at the fictitious figure,
while in the other appear all other transactions correctly valued. This
Head Office Merchandise account is more in the nature of a memorandum
or consignment account and is offset by an account called “Purchases
from Head Office.” On the branch books appear also accounts with
Customers, Branch Sales, and Expenses—as in the other case. There is no
Profit and Loss account because it is impossible to determine on the
branch books the correct profit and loss for the period. All expense
and income accounts are closed directly into Head Office General. The
entries necessary to book properly the activities as set forth in the
illustrative problem are as follows:
Cash $10,000.00
Head Office General $10,000.00
Purchases from Head Office 77,000.00
Head Office Merchandise 77,000.00
Customers 60,000.00
Cash 25,000.00
Sales 85,000.00
Expense 10,000.00
Cash 10,000.00
Cash 45,000.00
Customers 45,000.00
Head Office General 66,000.00
Cash 66,000.00
In closing the branch books the inventory is brought into the
Purchases from Head Office account which by its balance shows at billed
price the goods disposed of by sale. The latter figure is taken into
the Head Office Merchandise account so that its balance will also be
the amount of goods still on hand as shown by the inventory. Purchases
from Head Office and Head Office Merchandise are memorandum accounts
calling attention to the fact that the merchandise on hand at the
branch is not carried at its correct valuation but must be adjusted
before incorporation with the head office accounts. The entries to
effect this adjustment on account of the inventory and to close the
branch books are as follows:
Purchases from Head Office (Inventory) $14,000.00
Purchases from Head Office $14,000.00
Head Office Merchandise 63,000.00
Purchases from Head Office 63,000.00
Sales 85,000.00
Head Office General 85,000.00
Head Office General 10,000.00
Expense 10,000.00
These entries close the books of the branch so far as is possible in
view of the fact that accurate results as to profit and loss cannot
be shown from the way in which merchandise is billed to the branch.
There is perhaps no objection to using a Profit and Loss account
as a summary account for income and expense items rather than the
Head Office General account as shown here; though a Profit and Loss
account is somewhat of a misnomer since profits and losses cannot be
determined. In the problem given all expenses are grouped under one
Expense account. This is done for the sake of brevity, and it is to be
understood that as detailed an expense record will be kept on the books
of the branch as may be necessary to give the information desired.
_Head Office Books_
Where the head office bills merchandise to the branch at any other
figure than cost, the record of such shipments is best made in much
the same way as with consignments. Memorandum accounts are set up
to indicate that goods have been shipped to the branches. This is
necessary because of the fact that shipments should not be entered
in the regular merchandise accounts of the head office at any other
figure than cost. Periodically, from memoranda carried in these special
accounts, the true values of the merchandise shown as handled through
them must be brought into the regular merchandising accounts. The
manner of making these adjustments is taken up on page 535. Here will
be shown all the accounts affected on the head office books by the
current transactions with the branch. The entries necessary to record
the data of the problem are as follows:
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
From the standpoint of the head office, the problem of sales to the
branches is, as mentioned above, largely a problem of policy as to
whether goods shall be invoiced at absolute cost; at cost plus a
small percentage for overhead expenses; at sales price, i.e., at the
price at which the branch is expected to sell the commodity; or at
some arbitrary figure which is designed for the purpose of keeping
the branch in ignorance of the actual cost of the goods dealt in and
therefore of the profit and loss upon the branch’s activities. If goods
are billed to the branch at sales price and disposed of at the same
price, a comparison of the branch records covering their purchases
and their sales should indicate by the difference between the two the
amount of stock on hand at any time; i.e., billing the goods to the
branch at sales price makes the merchandise records of the branch
virtually a perpetual inventory of the goods on hand. This method
effects a closer check on losses and waste, for which, of course, a
small allowance must always be made. One of the most serious wastes
to be checked up is occasioned by too liberal weights and measures
to customers. On the other hand, invoicing the goods at sales price
gives the branch manager less discretion in adjusting differences with
customers inasmuch as defective goods must usually be returned to the
head office to secure for the branch full credit. Further, billing the
goods at sales price with the purpose of securing accurate control over
the branch merchandise necessitates the pursuit of an inflexible policy
of sales at the billed price. Daily or weekly adjustments on account of
fluctuations in the market cannot be made without losing the control
over stock which the policy of billing at sales price secures. In some
lines of business this is an insuperable defect.
Where merchandise is invoiced at cost the branch manager has
a rather more secure hold on his customers in that he can give
immediate satisfaction by making allowances and adjustments to settle
difficulties as they come up. Particularly where the manager has an
interest in the profits, a much greater incentive is offered him to
conduct the affairs of the branch in an efficient and economical
manner. This responsibility and power to make adjustments may be
abused, however, and a greater degree of control can usually be secured
by the head office where merchandise is billed at sales price.
As mentioned above, sometimes goods are billed to the branch at an
arbitrary figure. Inasmuch as the question of control by means of a
perpetual inventory does not enter into this policy, large discretion
can be given the branch manager without unsatisfactory results in
checking up the merchandise. He may be allowed to make whatever
adjustments with customers seem advisable. Changes in selling price can
be made as often as conditions demand, either at the instance of the
head office or at the discretion of the manager. A policy of this sort
requires a much more thorough system of report from the branch to the
head office in order to give the head office a means of checking up
periodically the activities of the branch.
It is well to point out that on the books of the head office sales
to branches are in no sense income items and must never be recorded
with regular sales to outside parties. Similarly, sales or transfers
among branches are in no sense earnings. It should be noted that, to
keep the head office records correct and up to date, any transfers of
goods among branches should be reported immediately to the head office;
better still, the authorization of the head office, except in cases of
emergency, should be given before such transfers can be made.
Adjustments on Branch and Head Office Books
Head Office and Branch accounts are essentially accounts current
between the head office and the various branches. At the close of the
fiscal period when the results of the period’s business are being
summarized, the four classes of adjustments which are sometimes
necessary in the case of accounts current may have to be made. The
head office may show a charge to the branch for items which the branch
has not yet received at the close of the fiscal period. Similarly, the
branch may have charges and credits to the Head Office account which
the head office records do not show. If this condition exists, the
two accounts must be reconciled in accordance with the method shown
in Volume I, page 497. Almost invariably, unless a system of complete
daily reports is in effect between the branch and the head office, the
head office will have to wait for certain reports from the branch at
the close of the fiscal period. The nature of the entries to effect
these reports is given in the problem illustrated on page 532.
The chief adjustment which is needed on the head office books
is brought about through the policy of charging the branch with
merchandise at some other figure than cost. Where this is done, the
profit and loss on the branch activities cannot be determined until
true costs are taken into the accounts in place of the fictitious
figures used during the current period. The basis for converting the
fictitious figure into a true cost figure is, of course, a secret
known only to the head office. The memorandum accounts covering the
merchandising transactions with the branch furnish the basis for
determining the cost of goods sold by the branch. Thus, if goods are
billed at, say, 30% above cost the billed price becomes 130% of the
cost. It is therefore possible to determine the cost of all goods
disposed of by the branch and of those still on hand. If it is desired
to merge all the branch activities with the similar activities of the
head office, the only adjustment necessary at the close of the fiscal
period is to convert the sum total of the inventories on hand at the
various branches to a cost valuation basis and include them with the
head office inventory. This gives the data needed to determine the
cost of goods sold and gross profit on the combined activities of the
various branches and head office.
It is usually essential that the results of trading at each branch be
determined, whether or not such results be incorporated separately on
the head office books. Under the assumption that they are to be set
up on the records of the head office, the billed cost of the goods
disposed of at each branch must be converted to a cost basis and shown
transferred from the Head Office Purchases account to the Profit
and Loss account with each branch. This separates the total cost of
goods sold as among the various branches and the head office. When
the various branch Profit and Loss accounts are credited with their
respective earnings from sales, the gross profit or loss on the trading
activities at the various branches will thus be shown. Similarly, the
regular merchandise accounts in which have been recorded the head
office merchandising activities will show the gross profit on sales
made at the head office. These adjustments are made without interfering
in any way with the memorandum accounts carried on the branch books and
on the head office books—accounts which have no place in the balance
sheet of the head office. In their stead will appear the combined
inventory of goods on hand at the branch and the head office converted
to a cost basis.
Example of Adjusting Entries
The character of the entry needed to effect these adjustments will
now be shown, using the data of the illustrative problem shown above.
Comparison of the report of inventory from the branch, $14,000, with
the record of goods shipped to the branch, $77,000, shows that goods to
the billed value of $63,000 were disposed of at the branch. The records
in the head office show that the goods were billed to the branch at
140% of cost. Converting this figure of $63,000 on the basis of 140%
of cost develops a true cost of goods sold of $45,000. This is brought
onto the head office books by the following entry:
Branch A Profit and Loss $45,000.00
Purchases $45,000.00
Reference to the solution above shows that Branch A Profit and Loss has
been charged with $10,000 expenses and credited with $85,000 earnings
from sales. The gross profit, therefore, on the period’s activities at
Branch A is the balance of the Branch A Profit and Loss account, i.e.,
$30,000. The only other adjustment necessary is the conversion of the
Branch A inventory of $14,000 to a cost basis. The true cost here is,
of course, $10,000 since the goods were billed at 140% of cost. The
$10,000 will be included with the inventory of goods on hand at the
head office before the determination of the head office cost of goods
sold and gross profit can be made.
To secure a better understanding of the interrelations of these various
accounts it is suggested that the student set up all the accounts and
follow through them the transactions given in the illustrative problem
above, both on the books of the branch and on the books of the head
office.
A final problem of adjustment as between the head office and branch
books concerns the treatment of fixed assets carried on the books of
the branch. It may happen that the branch makes purchases of various
pieces of property which are charged up to fixed asset accounts on the
branch books. To secure uniform treatment, particularly as regards
depreciation, it is customary at the close of the fiscal period to
transfer the record of all fixed assets to the head office books. This
is accomplished by entry on the branch books of a charge to Head Office
General account, and credits to the various fixed asset accounts.
On the books of the head office the record will be a charge to the
various fixed asset accounts and a credit to the various Branch General
accounts. Usually, therefore, on the branch books appear only current
asset items, current liability items, expense and income items.
Reports from the Branch
The reports which the branch makes to the head office depend entirely
on the degree of control to be exercised by the head office over
its various branches. Accordingly, no general methods of universal
applicability can be described. A statement of some of the different
kinds of reports and the use made of them will be given. In some cases
the branch books are kept in duplicate, the duplicates of all books of
original entry being sent to the head office at the close of each month
or oftener if desired. From these duplicate records the head office can
keep a ledger record with every branch for comparison with the ledgers
as kept by the branches. In other cases the head office requires that
the branch send in daily duplicate copies of all business papers
covering the transactions of the branch. Thus sales tickets are made in
manifold, one copy of every sale, whether cash or credit, being sent
to the head office. This furnishes the head office with a control over
the selling activities of the branch. If the branch has charge of its
cash a duplicate ticket of all deposits made should be forwarded to the
head office. The canceled checks drawn by the branch must be forwarded
by the banker to the head office. This procedure keeps the head office
informed as to the cash transactions of the branch, giving both a
control over the cash and a fairly complete knowledge of disbursements
on account of expenses and of receipts from collections. If, now, all
purchases of stock-in-trade are made from the head office, the latter
has a close control over all the activities of the branch. It may thus
keep a duplicate set of records, although that is scarcely necessary
inasmuch as summaries can be made by which to check up the books of the
branch at the close of the fiscal period.
Sometimes, instead of daily reports periodic summaries of the branch
activities are made to the head office and these provide the basis for
checking up on the branch at the close of the fiscal period. Where the
head office maintains traveling auditors, such frequent reports are not
necessary.
Examples of Reports
Below are given two examples of different kinds of reports from the
branch to the head office. The first is a periodic summary of cash
transactions followed by a statement of collections from customers. The
second form is a type of ledger account carried with each branch on the
books of the head office in accordance with detailed reports made by
the branch or by traveling auditors from the head office. It will be
noted that provision is made in the account by means of special rulings
to show the total expenses of each branch, which total will enter into
the trial balance; and also for an analysis of the expenses of each
branch under suitable heads, these latter being treated simply as
memoranda. Any credits or adjustments are entered in red ink, and are
to be deducted before showing totals.
PERIODIC CASH SUMMARY
=====================================+==============================
_Receipts_ | _Payments_
Cash Sales (by days) $...... | Wages $......
------ | Expenses ......
Total for period $...... | Sent to Head Office ......
Customers Accts. (as below) ...... | Payments into Bank
| (dates & amts.)
Other Receipts ...... | Balance on Hand, carried
------ | to next statement ......
Total $...... | ------
====== | $......
Balance, per last statement $...... | ======
|
[Illustration: CUSTOMER’S ACCOUNTS COLLECTED
_Branch Report to Head Office_]
[Illustration: BRANCH A EXPENSES[69]
_Head Office Ledger Account—Summary of Branch Expenses_]
[69] Credits in red ink.