where branch accounting applies
branch accounting can also be used for a company s operating divisions which usually have more autonomy than branches as long as the division is not set up legally as a subsidiary company a branch is not a separate legal entity although it can somewhat confusingly be referred to as an independent branch because it keeps its own accounting books however branch accounting is not the same as departmental accounting departments may have their own accounts but they usually operate from the same physical location a branch by its nature is a geographically separate entity 3branch accounting is a common practice for businesses that operate in different geographic locations history of branch accountingthough it seems synonymous with contemporary chain stores and franchise operations branch accounting actually goes back a long way venetian banks maintained a form of it as early as the 14th century the ledgers of a firm of venetian merchants dating from around 1410 also show a form of it to try to account for overseas and home accounts luca pacioli s summa de arithmetica 1494 the first accounting textbook devotes a chapter to it by the 17th century branch accounting was being widely used by german counting houses and other businesses moravian settlements throughout the thirteen original colonies used it for their books in the mid 1700s 45advantages and disadvantages of branch accountingthe primary advantages and often the objectives of branch accounting are better accountability and control since the profitability and efficiency of different locations can be closely tracked on the downside branch accounting may involve added expenses for an organization in terms of manpower working hours and infrastructure a separate account coding structure must be maintained for each operating unit it may be necessary to appoint branch accountants to ensure accurate financial reporting and compliance with head office procedures and processes 6