HandiLedger can prepare reports for both branches and divisions.
We recommend using Branch accounting where:
Each branch uses separate bank accounts; and
A separate balance sheet is required for each branch.
Example: A chain of stores, in different locations, with each store autonomous, would use Branch accounting.
Divisional accounting should be used where:
The business uses the same bank account for its various cost centres (divisions).
Example: You are the proprietor of a Petrol Station, and you need to know the amount of profit generated by the various parts of the business, e.g., driveway, shop, and garage.
Branches and Divisions
You can learn more on how to create branches and divisions in HandiLedger.
In branch accounting, the beneficiaries and distributions need to be set in the main branch as well; otherwise, the main branch will show an undistributed income figure. This amount needs to be for the consolidated amount. If the branches have the comparative year selected, the main branch requires this to be selected as well.
Branches with both profit and Loss:
Exercise care when dealing with an entity that has branches that have both a profit and a loss.
A Trust cannot roll over a loss and place it in undistributed income. In the current year, the consolidation looks at the offset balances; the opening and closing balances from one year to the next will be out of line.
Example: If the Entity has two branches, in 2010 one makes a profit and the other loss. The one beneficiary in this example gets a 100% distribution, to make it easier to work with. The beneficiary loan account statement for both branches and the main branch in 2010 reflects the correct picture. Where it goes wrong is with the rollover into 2011, the way the consolidation works is that it merely looks at the account numbers, adds the figures together and presents them.
The issue now is that the branch with the profit reflects the profit from the last year in the opening balance, but as the loss is correctly not distributed in the 2011 main branch beneficiary loan account report, we get an incorrect opening balance, which does not match the correct closing balance from the prior year due to the way the program operates the consolidation process.
One workaround is to create a loan-type account and move the profit into the loss entity so both end in profit. Or vice versa if the loss is greater. You can create the entries as reversal entries in HandiLedger and will then reverse on 1 July the next year. Once they are both the same e.g., both profit, you will then be able to consolidate and roll over.
Isolate the loss
You can isolate the loss by creating an account 4198 and using that account with any Asset/Liability account, this will ensure the rolled-over opening balance equals the closing balance of the prior year. You must then reverse the entry in the current year. This method can also be used for divisional accounting with both a profit and loss situation.