Treatment of Certain Branch Transactions
Branch expenses paid by the branch out of petty cash: Such expenses will be deducted from the branch cash and at the close reduced balance of cash will be shown on the credit side of the branch account as such expenses need not be shown in the branch account.

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Depreciation of fixed assets: This is not shown in the branch account. But the closing balance of the fixed assets will be shown on the credit side of the branch account after deduction of the amount of depreciation.

Credit sale, bad debts, sales returns, allowances and discount allowed pertaining to branch as these are not direct transactions between branch and head office:  These items are pertaining to the debtors account and will not be shown in the branch account. However, these items will be taken into consideration while ascertaining the amount of opening or closing balance of debtors or amount received from debtors, which are shown in the branch account.

Goods in transit: Goods in transit is the difference between goods sent by head office and received by the branch. Such goods will be shown either on the both sides of the branch account or will be ignored totally while preparing the branch accounts.

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