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Question

Difficulty: MediumDistinction Between Dependent and Independent Branches

Which of the following accounting practices uniquely characterizes an independent branch rather than a dependent branch?

  1. Extracting a complete trial balance and preparing its own financial statementsAnswer
  2. B
    Maintaining only basic cash records and sales memos to submit periodic returns to the head office
  3. C
    Functioning as an entirely separate legal business entity distinct from the head office
  4. D
    Forwarding non-current asset purchase invoices directly to the head office for journalization while ignoring inventory records

Answer

Extracting a complete trial balance and preparing its own financial statements
Extracting a complete trial balance and preparing its own financial statements is the primary feature of an independent branch. Because an independent branch maintains a full set of books using double-entry bookkeeping, it can independently verify the arithmetical accuracy of its ledgers by extracting a trial balance at period-end.

Step-by-Step Solution

1
Identify the accounting autonomy level of an independent branch
An independent branch acts as an autonomous accounting unit keeping full double-entry records.
Independent branches record all transactions, including local purchases, sales, and expenses, in their own ledgers.
2
Determine the financial statement output generated by an independent branch
The branch extracts its own trial balance and prepares its trading and profit and loss accounts.
Extracting a trial balance distinguishes an independent branch from a dependent branch, whose accounts are maintained at the head office.

Key Concept

Accounting distinction between dependent and independent branches
Estimated Time:1m 0s
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Topics

Distinction Between Dependent and Independent Branches