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Interbranch Transactions Interbranch Transactions: John Paul G. Dantes John Paul G. Dantes

Interbranch transactions occur when one branch of an organization transacts with another branch of the same organization. These transactions are recorded as if the branches transacted with the home office rather than each other. The document provides examples of interbranch cash transfers and merchandise transfers. It explains how freight costs should be allocated for interbranch transfers of inventory. Excess freight costs above the normal freight of shipping directly from the home office to the receiving branch are recorded as an expense by the home office.

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Ella Mae Turato
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451 views13 pages

Interbranch Transactions Interbranch Transactions: John Paul G. Dantes John Paul G. Dantes

Interbranch transactions occur when one branch of an organization transacts with another branch of the same organization. These transactions are recorded as if the branches transacted with the home office rather than each other. The document provides examples of interbranch cash transfers and merchandise transfers. It explains how freight costs should be allocated for interbranch transfers of inventory. Excess freight costs above the normal freight of shipping directly from the home office to the receiving branch are recorded as an expense by the home office.

Uploaded by

Ella Mae Turato
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Interbranch Transactions

John Paul G. Dantes


Inter-branch Transactions

It occurs when one branch of an organization is involved in a


transaction with another branch of the same organization.
Inter-branch Transactions

As if, The asset transferred went through the Home office

As if, the branches were transacting with the home office rather than
with each other.
Inter-branch Transaction
01 02

TRANSFER OF CASH TRANSFER OF


MERCHANDISE
Inter-branch transfer of cash
Illustration:

The home office instructs branch #1 to transfer 100,000 cash to branch #2

Branch #1 Branch #2 Home Office

Home Office...……….100,000 Cash……....…………100,000 Investment in Br#2……100,000

Cash……....…………100,000 Home Office………...……100,000 Investment in Br#1……100,000


Inter-branch transfer of cash
Illustration:

Branch #2 subsequently repays 80,000 to branch #1

Branch #1 Branch #2 Home Office

Cash……....…………80,000 Home Office...……….80,000 Investment in Br#1……80,000

Home Office………...……80,000 Cash……....…………80,000 Investment in Br#2……80,000


Inter-branch transfer of merchandise

Branch should be charged only normal freight and not excess


freight

Excess freight charged as an expense in the home office books


Inter-branch transfer of merchandise
Illustration:

The home office transfers inventory worth 150,000 to branch#1. Freight paid
by home office is 10,000. Later on, the Home Office instruct Branch#1 to transfer
the merchandise to Branch#2. Branch#1 pays freight of 3,000. If the merchandise
had been shipped directly from Home office to Branch#2, the freight cost would
have been 11,000.
Inter-branch Transaction
01 Home Office 02 Branch #1

Investment in Branch#1………160,000 Shipments from HO………150,000


Freight-in……………………..…10,000
Shipments to Branch#1………150,000

Cash………………………………..…10,000 Home Office………………….160,000


Inter-branch transfer of merchandise
Computation of excess freight
Freight from home office to Branch#1…..……………….10,000
Freight from Branch#1 to
Branch#2………………………..3,000
Total freight on indirect routing……………………….……
13,000
Normal freight from Home Office to Branch#2……..(11,000)
Excess
freight………………………………………………………….20
00
Inter-branch transfer of cash

Branch #1 Branch #2 Home Office


Shipment to Br#1……150,000
Home Office……....………… Shipment from HO….150,000
163,000 Shipment to Br#2……150,000
Freight-in……………….….11,000
Shipment from HO……….150,000
Freight- Home Office...……….161,000 Investment in Br#2……161,000
in……………………….10,000 Loss on excessive Freight.........2,000
Cash……………………………...3,00
0 Investment in Br#1……163,000
Computation of Savings freight:

Assuming if merchandise shipped directly from HO to Branch#2 the freight cost would be 14,000

Freight from home office


Branch#1……………………….10,000
Freight from Branch#1 to
Branch#2………………………..3,000
Total freight on indirect routing……………………….……
13,000
Normal freight from Home Office to Branch#2……..(14,000)
Savings on
freight…………………………………………………….1000
Computation of Savings freight:

Branch #1 Branch #2 Home Office


Shipment to Br#1……150,000
Home Office……....………… Shipment from HO….150,000
163,000 Shipment to Br#2……150,000
Freight-in……………….….13,000
Shipment from HO……….150,000
Freight- Home Office...……….163,000 Investment in Br#2……163,000
in……………………….10,000
Cash……………………………...3,00 Investment in Br#1……163,000
0

NOTE: Savings on freight is not recognize as Gain.

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