Q21

Where inventory to the branch is invoiced at cost, which of the following are the two accounts to be opened in the accounting records of the head office?

a. Branch inventory adjustment account and inventory to branch account

b. Head office inventory account and inventory to branch account

c. Branch inventory account and inventory to branch account

d. Inventory to branch account and inventory from branch account

Q22

Which of the following statements is incorrect in regard to the accounting for branch inventory?

a. When dealing with a dependent branch and the accounting functions of the branch are performed by the main branch of the entity (head office).

b. Branches can be managed as dependent or independent units, each with its own distinct accounting requirements.

c. The branch inventory account serves the same purpose as the trading account. When balanced at the end of the accounting period, the balance on the account represents the gross profit/loss that the branch made.

d. The gross profit/loss is the result of the difference between the price at which inventory is received (from head office) and the price at which inventory is sold by the branch. This profit/loss is transferred to the branch expense account.

Q23

Which one of the following statements is incorrect?

a. When petty cash is embezzled at the branch, the branch inventory account is credited, and the branch expense account debited.

b. The cost price of inventory that cannot be found is credited to the branch inventory account and debited to the branch expenses account.

c. In certain circumstances, the branch inventory account serves the same purpose as the normal trading account.

d. Where inventory is invoice to branch at cost price, the mark-down on sales does not require any entries in the books.