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What is the logic behind posting the balance of goods sent to branch account to purchases account
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Cost Allocation: When goods are sent from the head office to a branch, they are initially recorded in the branch account. At the end of the accounting period, the balance of goods sent to the branch is transferred to the purchases account to ensure that the cost of these goods is included in the overall cost of goods sold for the business. Inventory Management: This transfer helps in maintaining accurate inventory records. By posting the balance to the purchases account, the head office can track the total purchases made, including those sent to branches, and manage inventory levels more effectively.
