Accounts & Finance

"To prepare the combined Trading Account, we need to gather the relevant information for all three branches and the head office. Since the head office invoices goods at fixed sales prices and maintains branch accounts in its ledgers at cost price, we need to calculate the cost of goods sold for each branch separately.

Assuming that the profit on cost is the same for all branches, we can calculate the selling price of goods for each branch as follows:

Selling price = Cost price + (Profit on cost/100 x Cost price)

We can then calculate the cost of goods sold for each branch by subtracting the opening stock and adding the purchases from the selling price of goods.

The combined Trading Account can then be prepared by adding up the sales, cost of goods sold, and gross profit for each branch.

Here is a summary of the relevant information for the year ended 31st March 2014:

Head Office:

Opening stock: Rs. 2,00,000

Purchases: Rs. 8,00,000

Sales to Coimbatore branch: Rs. 12,00,000

Sales to Trivandrum branch: Rs. 10,00,000

Sales to Bangalore branch: Rs. 15,00,000

Coimbatore Branch:

Opening stock: Rs. 1,00,000

Purchases from Head Office: Rs. 12,00,000

Sales: Rs. 15,00,000

Closing stock: Rs. 2,00,000

Trivandrum Branch:

Opening stock: Rs. 1,50,000

Purchases from Head Office: Rs. 10,00,000

Sales: Rs. 12,00,000

Closing stock: Rs. 1,50,000

Bangalore Branch:

Opening stock: Rs. 2,50,000

Purchases from Head Office: Rs. 15,00,000

Sales: Rs. 18,00,000

Closing stock: Rs. 3,00,000

Using the above information, we can calculate the selling price and cost of goods sold for each branch as follows:

Coimbatore Branch:

Selling price = Rs. 12,00,000 + (20/100 x Rs. 12,00,000) = Rs. 14,40,000

Cost of goods sold = Rs. 2,00,000 + Rs. 12,00,000 - Rs. 1,00,000 = Rs. 13,00,000

Trivandrum Branch:

Selling price = Rs. 10,00,000 + (20/100 x Rs. 10,00,000) = Rs. 12,00,000

Cost of goods sold = Rs. 1,50,000 + Rs. 10,00,000 - Rs. 1,50,000 = Rs. 9,00,000

Bangalore Branch:

Selling price = Rs. 15,00,000 + (20/100 x Rs. 15,00,000) = Rs. 18,00,000

Cost of goods sold = Rs. 2,50,000 + Rs. 15,00,000 - Rs. 3,00,000 = Rs. 14,50,000

We can now prepare the Branch Accounts in Madras Head Office books as follows:

Coimbatore Branch Account"