Need For Branch Accounting

A branch is defined as a section of an enterprise which is geographically separated,controlled by a head office and carrying on the same activities as of an enterprise.As a business expands,it may open branches in different towns and cities in order to avail their products and services over a large territory.For example, Bata Shoe Company has branches in various cities all over the country.Simply,branch is a segment of an enterprise.In order to exercise greater control over the branches,it is vital to ascertain profit or loss incurred by the branches separately.Specialized accounting techniques have to be adopted for controlling various branch activities and for their smooth running.Branch is located at some distance from the head office,it carries all its activities under its direction and control.It is necessary that the head office and the branch must obtain information at regular intervals about the functioning of the branch.for this,it requires that the head office and the branch keep proper book of accounts.Why the need for branch accounting arises?The need arises for branch accounting as to ascertain the profitability of each branch separately for a particular accounting period,to ascertain whether the branch should be expanded or closed,to ascertain the requirement of cash and stock for each branch and to ascertain the quantity of stock held by each branch at the end of an accounting period.From the point of view of accounting,the branches are divided into two main classes that is home branches and foreign branches.Home branches is further classified into two categories viz dependent branches and independent branches.In dependent branches,the head office maintains all the accounts whereas in an independent branches the branch maintains its own account.In foreign branches,they trade independently and record their transactions in a foreign currency.

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