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Question

Difficulty: EasyDistinction Between Dependent and Independent Branches

Which of the following operational practices distinguishes an independent branch from a dependent branch?

  1. Maintaining a complete set of accounting books and extracting its own trial balance at year endAnswer
  2. B
    Remitting all daily cash receipts directly to the head office bank account without maintaining local ledgers
  3. C
    Relying exclusively on head office bookkeepers to record all sales, purchases, and operating expenses
  4. D
    Selling only merchandise supplied directly by the head office without authority to purchase goods locally

Answer

Maintaining a complete set of accounting books and extracting its own trial balance at year end
An independent branch acts as a distinct accounting entity that maintains a complete set of books using double-entry principles, extracts its own trial balance, and prepares its trading and profit and loss accounts independently before incorporating them into the head office records.

Step-by-Step Solution

1
Identify the key accounting distinction between dependent and independent branches
Dependent branches have their accounting records kept entirely by the head office, whereas independent branches maintain their own complete double-entry books.
Branch classification in accounting depends on the degree of accounting autonomy and record-keeping responsibility assigned to the branch.
2
Evaluate the option choices against independent branch characteristics
Only maintaining a full set of books and preparing an independent trial balance represents the operational and accounting framework of an independent branch.
Independent branches prepare their own trial balance before submitting financial reports to head office for periodic consolidation.

Key Concept

Distinction Between Dependent and Independent Branches
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Distinction Between Dependent and Independent Branches