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- As business grows, it is difficult to manage things from one location and hence the need for decentralization. This is the concept behind setting up branches to facilitate the easy running of business. When the business is split geographically, it is called branch, but is the business is split, yet if it is under the same roof it is called department.
Branches can be divided in to
- Dependent Branches
- Independent Branches
- For Dependent Branches accounting records are kept at head office whereas for Independent Branches accounting records are kept in branch itself.
The account is of two types:
Trading Method: All the transactions are recorded in one account being the Branch account showing profit/loss of that branch.
Stock & Debtors Method: Here the head office maintains the Branch account to ascertain the profit/loss. The branch maintains and at the end of the year remits the copy of petty cash book, inventory statement and the list of all expenses.