Steps for preparing final accounts-branches, Financial Accounting

Assignment Help:

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.


Related Discussions:- Steps for preparing final accounts-branches

Financial accounting theory, This assessment item may be completed either i...

This assessment item may be completed either individually or in groups of two (2) students.  The group mark on both assessment items will be given to both students.  Please ensure

Straight-line depreciation, Straight-Line Depreciation - ACCOUNTING method ...

Straight-Line Depreciation - ACCOUNTING method which reflects an equal amount of wear and tear during every period of an ASSET'S useful life. For example annual STRAIGHT-LINE DEPRE

Bankrupt person-bankruptcy and liquidation, Bankrupt person A bankrupt ...

Bankrupt person A bankrupt is a person against whom an adjudication order has been made by the court primarily on the grounds of his insolvency. Any person (other than a body c

A valid will-executorship laws and accounts, A Valid Will A will may be...

A Valid Will A will may be made: Orally; it will not be valid unless: 1. It is made before two or more competent witnesses (i.e. persons of sound mind and full age); and 2.

Departmental accounts, please help me on the current lay out of the departm...

please help me on the current lay out of the departmental accounts

Examine the financial statements, Your firm has been hired to examine the f...

Your firm has been hired to examine the financial statements of Bonanza Development Corp. for possible irregularities.  As part of this task, you reviewed certain land transactions

The objective of accounting standards, A sound foundation is necessary for ...

A sound foundation is necessary for success in any task from building a house to putting on make up. In terms of U.S Accounting standards it is necessary to have a sound foundation

Types of interest given under a will-executorship laws, Types of interest g...

Types of interest given under a will The interest given in a legacy, devise or gift of residue may be of the following kinds:- 1. Vested: A vested interest gives an immedi

Capital gain/loss of bond investment, Problem 1 Seven years ago a semi-ann...

Problem 1 Seven years ago a semi-annual coupon bond with a 10% coupon rate, $1,000 face value and 15 years to maturity was issued by Corn Inc.. Teddy bought this bond two years ag

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd