Dependent Branches, Types, Features

Dependent Branches are branches that operate under the direct control of the head office. They have limited autonomy and rely on the head office for critical functions such as inventory procurement, pricing decisions, and financial management. The head office maintains detailed accounts of all transactions related to the branch, including sales, expenses, and stock. Dependent branches typically do not prepare independent financial statements; instead, their data is consolidated with the head office’s accounts. This system ensures centralized control, better monitoring, and streamlined operations, making it suitable for smaller or geographically close branches with limited decision-making authority.

Types of Dependent Branches

• Service Branch:

All the branches which are booking or executing orders on behalf of the head office are called service branches. These are the branches that are busy in executing all the orders for the sake of head office.

• Retail Branch:

Retail branches are also dependent branches, but they are concerned with the head office for selling goods, produced by the head office itself or purchased from outside in a bulky position and are sent to the retail selling branches for selling them out as like.

Features of Dependent Branch:

1. Centralized Control

• Dependent branches function under the strict supervision and control of the head office.
• The head office takes key decisions related to procurement, pricing, marketing, and financial policies.
• The branch manager primarily focuses on operational tasks as per the directives of the head office.

2. No Independent Financial Records

• Dependent branches do not maintain full-fledged financial records.
• Their transactions, such as sales, purchases, and expenses, are recorded by the head office.
• The branch usually keeps a memorandum record for internal purposes but sends all relevant details to the head office.

3. Limited Autonomy

• These branches have minimal decision-making authority.
• Functions like inventory management, pricing strategies, and promotional activities are handled by the head office.
• The branch’s role is limited to implementing policies and directives.

4. Stock Supplied by Head Office

• The head office supplies goods to the branch at either cost price or an invoice price.
• The branch does not procure goods directly from suppliers.
• The head office keeps detailed records of stock movements to and from the branch.

5. Sales and Collection

• Sales, whether on credit or cash, are conducted by the branch but under the pricing policies set by the head office.
• For credit sales, the head office manages customer accounts and debt collections.
• Cash collections are periodically remitted to the head office.

6. Profit and Loss Determined by Head Office

• The head office determines the profitability of the dependent branch.
• A branch’s performance is assessed by comparing revenues and expenses recorded in the head office’s accounts.
• The branch itself does not prepare independent profit and loss statements.

7. Simplified Reporting Structure

• The branch periodically sends sales reports, expense statements, and stock details to the head office.
• These reports ensure transparency and help the head office in consolidating branch operations.