Accounting responsibilities of Branches

As a company grows and expands into new markets, it may be necessary to establish branches with a certain degree of autonomy in order to provide better service to customers. The degree of autonomy granted to the managers of these branches from the central office and the accounts managed by these branches, differ widely from company to company.

The accounting system used to record transactions of branches can vary greatly from centralized accounting system, in which processing is performed entirely by the central office, to a substantially decentralized accounting system, which runs most of the processing operations of the branch from the same branch. In other cases, the accounting function can be shared, some data may be collected and processed by the branch, while other information is managed from the headquarters. Whatever system is chosen, must be designed to meet the needs of management.

If the branch is large enough can have a complete system of independent accounting than the country. These two extremes are described as situations in which (1) the accounts are held by the headquarters and branch office (2) the branch keeps its books. In practice, accounting for branch offices usually falls somewhere between these two extremes.

The decision whether a branch should make its own accounting is based on the extent of its operations, its distance from headquarters, the degree of control that can or must be exercised, the capacity and independence of the branch staff and considerations safety. The main criterion, however, is always efficiency.

If an organization branches, two types of entities can be distinguished. In the first place, the commitment can be considered as a separate entity. The financial result and position the company as a whole is the combined result and the location of the headquarters and its branches.

It 's important to distinguish between internal accounting transactions, ie transactions between branches and between branches and headquarters and external accounting transactions, ie transactions with third parties. Internal transactions are eliminated combined financial statements of the company as a whole, that is the headquarters and its branches. If not, we will duplicate the results of those operations. Record the internal transactions between branches and between each branch and the central administration, however, is crucial to obtain a complete picture of the accounting operating result of each branch. Therefore, purchases or internal and inter-reciprocal sales are recorded separately from external operations .......