Steps for preparing final accounts-branches, Financial Accounting

Steps for preparing Final Accounts

The following steps should be followed in preparing the final accounts where we have a foreign branch.

1. Update the trial balance of the branch that is given in the foreign currency with the following items:

a) closing  inventory  DR   Balance sheet
                                              CR  profit and loss.

b) Accrued or prepaid expenses.     Accrual       :  DR.  profit and loss (expense)
                                                                                     CR    balance sheet (liability)

                                                          Prepayment :  DR.  Balance sheet (Asset)
                                                                                      CR   Profit and loss (expense, income)


c) Depreciation:    DR.  Profit and loss (expense)
                                         CR  Balance sheet (provision)


2. Translate the updated trial balance of the branch using the exchange rates given and depending on the method of translation.

Once the trial balance has been translated into the local currency, the debit side may not be the same as a credit side and balancing figure is the exchange gain or loss. If the debit side is more than the credit side, then difference is an exchange gain and if the credit side is more than the debit side then the difference is an exchange loss.

3. Prepare the final accounts of the branch in the normal way using the trial balance of the head. And the translated trial balance of the branch.

Care should be taken on the treatment of the exchange gain or loss. The following points should be applicable.

a) If the functional currency method is being used, then any exchange gain or loss will appear in the column  of the branch and the combined business in the profit and loss accounts. An exchange gain will appear as other incomes under gross profit and exchange loss and expense in the profit and loss account.

b) If the presentation method is being used, then the exchange gain or loss will be taken to a foreign  exchange reserve  which will appear as part of capital and reserves in the balance sheet of the branch and the combined business or added to the head office current account.

Posted Date: 12/12/2012 2:06:15 AM | Location : United States







Related Discussions:- Steps for preparing final accounts-branches, Assignment Help, Ask Question on Steps for preparing final accounts-branches, Get Answer, Expert's Help, Steps for preparing final accounts-branches Discussions

Write discussion on Steps for preparing final accounts-branches
Your posts are moderated
Related Questions
A parent has had a controlling interest of 60% in its subsidiary for a number of years. Below are financial statement extracts of the two companies for the year ended 30 June 20

Investment of accumulated income The income accumulations must be invested from time to time and the investments earmarked as being on Accumulations Account. The income aris

DISSOLUTIONS A partnership may be dissolved due to various reasons which include: Poor trading that has led to losses A partner dying or leaving the firm The time


Calculate the value of each of the following bond Issuer Face Value Coupon Rate Maturity Bid Yield Bid Price

what managers should know about internal rate of return( IRR) and why

Your task in this assignment is to design an asset allocation for the superannuation fund of an individual who is investing to fund his retirement. The asset classes under consider

Business start up accounting transactions: Jane Whitfield, a sole proprietor, established the JW Flower Shop on January 2, 2010. The following transactions have occurred during

Short-term Creditors:   Bankers and another short-term creditor have an interest same to those of the debenture holders and equity shareholders who are interested in the profitabil

Various types of accounting changes can affect the financial statements of a business enterprise differently. Assume that the following list describes changes that have a material