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Post Info TOPIC: Is the accounting treatment correct for this transaction?


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Is the accounting treatment correct for this transaction?
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An employee works in an accounting firm. The firm sends the employee to a client.
As a travelling expenses, employee incurs £100.
Employee asks the firm to repay him the travelling expenses of £100.
Whereas the firm asks the client to pay the travelling expenses of £(100 + V.A.T), i.e., £117.50.


JOURNAL ENTRIES:

When company makes payment to the employee:
DR Employee Expenses A/C £100
CR Cash A/C £100

When company raises an invoice to the client for the payment:
DR Debtors/Accounts Receivables £117.50
CR Sales A/C £100
CR VAT A/C £17.50

are these entries correct?

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Hi Aita

Your journal entries look fine. The only thing to note is that the employee expenses of £100 would normally be debited to the relevant expense account e.g. Travelling & Subsistence.

Summer

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thanks summer

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