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
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.
