How to manage GST across branches using online GST accounting software?

When you have a trading company that is expanded to other locations and established as a separate office but is under the head office’s control is known as the branch of the company.

Reach is an online GST accounting software that is one of the best accounting software which is built for managing multi branch business. It allows you to create separate account for all the branches and helps the branch managers to manage it individually keeping a neat account for every office.

Reach ERP is a collection of all the modules that is required for managing a business and it generates functions that helps in taking care of more business processes in a smarter way.

Why does Reach ERP works best for multi branch entities?

Two methods of Branch accounting

  • Branches and Head office can keep separate record
  • Head office keeps records of branches

Scenario-1

Account kept by branch

  • Head office and branch will open a full set of books to record their own transactions
  • Create branches from settings
  • The head office current account is opened to record transactions between them
  • Create Head office as a separate Branch in Reach ERP and not as an admin branch
  • Branch current account is opened to record transactions between the head office and the branch

 

Transactions

 

Transactions Head office (HO) books Branch books
1 Opening Stock Dr HO Trading

Cr Stock (opening stock)[at cost]

Dr Branch Trading

Cr Stock (Opening stock)[at Cost or Cost+profit]

2 Goods purchased directly from HO suppliers[at cost] Dr Purchase(Trading)

Cr Creditors

No entry
3 Goods purchased directly from Branch suppliers [at cost] NO entry Dr Purchase(trading)

Cr Creditors

 

Transactions

 

Transactions Head office (HO) books Branch books
4 Goods sent from HO to Branch [cost+profit] Dr Branch Current

Cr Goods sent to Branch

Dr Good received from HO

Cr HO Current

5 Goods returned from Branch to HO Dr Goods sent to branch

Cr Branch Current

Dr HO Current

Cr Good received from HO

6 Cash sales/Credit sales Dr HO Cash/Debtors

Cr HO Sales

Dr Branch cash/ debtors

Cr Branch sales

Transactions

 

Transactions Head office (HO) books Branch books
7 Closing stock Dr Stock(Closing)

Cr HO Trading

Dr Stock (Closing)

Cr Branch Trading

good purchased directly from Branch suppliers [at cost] & goods received from HO [cost+profit]

8 Gross profit on trading Dr HO Trading

Cr HO profit and loss

Dr Branch Trading

Cr Branch profit and loss

9 HO expenses paid by HO Dr Expenses (P&L)

Cr Cash/Bank

No entry

Intercompany transactions

  • It would not be transferred to the total column of trading and profit and loss account and the balance sheet
  • For example, goods sent to the branch , goods from head office overheads charged by the head office, service overheads charged by the office to the branch, head office current account, branch current account provision for unrealized profit.

Goods sent to branch for mark-up

  • The head office supplies goods to it’s branches with an invoice price at cost plus profit
  • Goods sent to branch a/c and goods received from HO a/c are valued at invoice price
  • If there is unsold stock at the end of the accounting period, the unrealized profit-in-stock must be eliminated from the consolidated final accounts
  • A provision for unrealized profit a/c will be opened to measure unearned profit included in the closing stock of the branch and reflect in the HO’s book

Provision for unrealized profit

Stock at mark-up     Mark up 100% Mark up

  • Stock mark up = closing stock at branch sent from HO+ goods in transit
  • Closing stock of branch include goods directly purchased from suppliers will not be concerned in the calculation of the provision of unrealized profit

Provision for unrealized profit

Increase in provision Dr P/L

Cr provision for unrealized profit

Decrease in provision Dr provision for unrealized profit

Cr p/l

  • The increase or decrease in the provision should be entered in the profit and loss a/c
  • The balance should be appear in the balance sheet under current liabilities
  • The total stock= stock in HO+ stock in branch +stock in transit-provision for unrealized profit

Stock loss

Normal stock loss Abnormal stock loss
  • Related to the ordinary activities of the business
  • e.g. Obsolete stock, damaged stock
  • No entry needed
  • Caused by an exceptional              events
  • e.g. fire loss, burglary loss
  • Accounting recorded needed

Stock loss

 

Events HO’s book Branch’s book Total column
Stock loss in the HO Dr P/L

Cr Trading (cost)

No entry Dr P/L

Cr Trading (Cost)

Stock loss in transit Dr Goods sent to Branch

Cr Branch Current (Mark up)

Dr P/L

Cr Trading (Cost)

No entry Dr P/L

Cr Trading (cost)

Stock loss in Branch NO entry Dr P/L

Cr Trading (cost)

Dr P/L

Cr Trading (cost)

Goods in transit (GIT)

  • Goods were sent by the head office before the end of the financial period, but received by the branch after the end of the financial period
  • GIT=goods sent to branch- goods received from HO

 

Remittances/Cash in transit (CIT)

  • The remittance or cash was remitted by the branch before the end of the financial period, but was received by the head office after the end of the financial period
  • CIT- remittance to head office-remittance from branch

Preparation of the final accounts

  • Separate trading and profit and loss accounts and balance sheets would be prepared for the head office and the branches

 

Scenario-2

Account kept by Head office

  • The branch do not keep their own records, the HO will keep all accounting records for the branch transactions
  • Branches will be created from settings
  • HO will operate as admin branch

 

Goods are invoiced to the branch at the cost plus profit

Transactions

 

Transactions Accounting entries
Opening stock balance Branch stock a/c-opening “debit” balance recorded as “cost plus profit”

Branch Stock Adjustment a/c- Opening “Credit” balance recorded as “Profit” portion only

Goods sent to branch Dr Branch Stock [cost+profit]

Cr Goods sent to Branch [cost]

Cr Branch stock adjustment [profit]

Goods returned by Branch to HO Dr Goods sent to Branch [cost]

Dr Branch stock adjustment [profit]

Cr Branch Stock [cost+profit]

 

Transactions Accounting entries
Credit Sales at the Branch Dr Branch Debtors (selling price)

Cr Branch Stock

Cash Sales at the Branch Dr Branch Cash (selling price)

Cr Branch Stock

Goods returned by customer to Branch Dr Branch Stock (selling price)

Cr Branch Debtors

Bad debts, Discount Allowed to customer Dr Branch Profit and loss

Cr Branch Debtors

Branch expenses Dr Branch Profit and loss

Cr Cash/Bank

Branch income Dr Cash/Bank

Cr Branch Profit and loss

Preparation of the final accounts for the head office

  • After calculating the branch profits or losses, the overall profit and loss for the head office can be computed

Account entries

Transactions Accounting Entries
Balance transferred from goods sent to branch account to the head office purchases account Dr Goods sent to branch

Cr HO purchases/trading

Branch net profit transferred to head office profit and loss account Dr Branch Profit and loss

Cr HO P/L

 

 

For more information click here

For 15 days free trial click on>> Demo

 

0 Comments

Leave a reply

Your email address will not be published. Required fields are marked *

*

Log in with your credentials

Forgot your details?