BRANCH ACCOUNTS

Profit is earned when sales are made and not when goods are sent to branch . However for control or other purposes manangement may decide to send goods to branch at invoice price . In this situation , closing stock at branch will be at sales price , on which no profit has been earned . Therefore , an entry in HO is to be passed for creation of stock reserve , for the amount of profit loaded on the closing stock so that the profit and loss account does not reflect the profit on such stock.

stock transfer to branches should be on cost basis. bcz profit is not on branch transfer but if you are doing branch transfer at mrp basis than as on last day of financial year .you should make stock reserve on closing stock on the closing stock held at the end of f.y.