Branch Accounting Objectives and Advantages

The main object of keeping branch accounts is dependent on the nature of the business and specific need of a particular branch. The objectives of keeping the branch accounts acceptable to all business are:

Objectives

• To know the profit or loss of each branch separately.
• To ascertain the financial position of each branch on a particular date.
• To know the cash and goods requirements of the various branches.
• To evaluated the progress and performance of each branch.
• To calculate commission for payment to the managers, if based on profits of branch.
• To know the profitability of each branch and type of business for expansion of the business.
• To give concrete suggestions for the improvement in the working of the various branches
• To meet the requirements of specific enactments as all branches of a company must keep the accounts for audit purposes.
• To know the cash flow generated by the branches and the cash position of the branches.
• To know the profit & loss generated by branches and to know the financial position of the individual branches.
• To know and evaluate the performance of individual branches and comparing them with other branches to find out the optimal practices for the required growth.

Advantages

• Branch accounting helps in identifying the profitability of different branches and finding out the requirements of different branches as per their requirements.
• Branch Accounting enables to maintain the separate books of accounts and financials of different branches separately.
• Branch accountings enables the head office to find out the progress reports of different branches and finding out the most optimal method for making the required profitability for the business.

Disadvantages of Branch Accounting:

The cost also gets increased due to duplication of responsibility and staffs at different branches.

Branch accounting requires different branches to maintain their books of accounts and for the same staff, workforces are need to be hired which may cost the business significantly.

The Branch accounting results into decentralized decision making and not solely dependence upon the Head office that may results into a longer period of time for taking any decision and the decision may create conflicts as the same decision may not be made by the Head office and the Branch office.