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
Tally & Co. incurred a pretax operating loss of $100,000 in its first year of operations for both financial reporting and income tax purposes. However, it expects to be profitable

As an expense and an asset This approach tries to resolve the differences between the two methods by ensuring that we show an asset that may materialize or crystallize and at t

Five years ago Ramon Millan quit his job as an associate at a large law firm and opened a burger joint in Malibu. His innovative use of aged blue cheeses and specialty sauces resul

Cashflows from financing activities Financing activities are those activities that will lead to either an increase or decrease in shareholders funds and long-term liabilities.

i have project on "cengagebrain" for framework class. its pretty long

PRESUMPTION OF SURVIVORSHIP Where two or more persons have died in circumstances rendering it uncertain which of them survived the other or others, the deaths shall, for all pu


Illustration-statement of Changes in Net Assets-pension fund (a) What meetings of creditors must be held and for what purpose in the course of a creditors’ voluntary winding up

Proposed dividends by subsidiary company If the subsidiary company has proposed some dividends appearing under current liabilities then the dividends are payable to the holding c

It is the month of april for rand company a producer of gold and silver commemorative medallions. Rand company has one job, job A a special minting of 1000 gold medallions which st