BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Profit & Loss Account. The credit balance in the Goods sent to Branch Account is afterwards transferred to the Head Office Purchase Account or Trading Account (in case of manufacturing concerns), it being the value of goods transferred to the Branch.

Detailed explanation-2: -All types of purchases i.e. cash purchases and credit purchases are shown as purchases in the trading account. That’s why the Closing balance in goods sent to the branch account is transferred to Purchases A/c or Trading A/c.

Detailed explanation-3: -Trading account is closed by arriving at a figure called gross profit. Gross profit is calculated deducting cost of goods sold from sales. Gross profit is then transferred to the profit and loss account from which all the non operating expenses are deducted and non operating incomes are added to arrive at net profit.

Detailed explanation-4: -For accounting of branch three methods or system are followed. (i) Synthetic Method, (ii) Analytical Method or Stock and Debtors Method, (iii) Final Account Method or Trading and Profit or Loss Account Method.