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Journal Entries of Paying Expenses on the behalf of Others

If you are accountant in any company or any other organisation, you will surely face this problem. You or your company pays the expenses but it is on the behalf of other person. You are just representative for other. For example, you can pay the expenses of your boss, your friend employee, your customer or your supplier. What will its journal entry?

Some will do the mistake by making it expense of business and debit the expense in journal entry which is totally wrong. Sometime, there may be lack of money in the pocket of your boss. He will say to you to pay his electricity bill or any other bill. It is the personal expense of that party not your business expense. So, expense account never debit.

So, how can you pass the journal entries, we will learn with two following examples.

Example of Transaction  No. 1

Generally we used to pay various taxes on behalf of our client through online and after that collect the cheque of that same amount so in this regard please advise the best journal entry for these type of payment of expenses. Ex Suppose we paid Rs. 100 of Mr. Ram as Income Tax Payment and subsequently takes a cheque of Rs. 100 from Mr. Ram so what type of entry has to passed. Please guide

Example of Transaction No. 2

Suppose I am an Accountant in a firm and our firm is dealing in Cars, (Sale Purchase) our creditor has told to me, you are publish my add in news paper for advertising the cars, i have done this job, then we want to received the funds from the Creditors, so what will be the entry pass, for both the entries.

Journal entries will be same of both type of examples

 In both examples, we are seeing that accountant is paying on the behalf of customer or creditor. It means, both expenses is not the business of accountant. So, income tax or advertising  expense is not the  business expense. So, we will never debit these expense account. We will pass the journal entry with following way

1. When you have paid Income Tax or advertisement on the behalf of your Client or creditor

Name of Your Client Creditor ( In this transaction, he is actually your borrower) Account Debit

Cash / Bank Account Credit

Logic : Now amount which you have to take from your client or creditor, will be your asset or increase in your total asset. Every increase in your business asset must be debited. Cash/ Bank is decrease of your asset, so we have credited it. If your client or creditor do not pay you this payment. You can help court to get this amount because this entry is the proof which you can show.

2. When You will get your payment back from your Client or creditor

Cash/ Bank account Debit

Name of Your Client or  Creditor ( In this transaction, he is actually your borrower) Account Credit

Logic : Because your cash or bank asset has increased, so it will debit. Other side your asset of investment in loan ( you have also right to take interest on this amount)  has decrease, so it will be credited.

Single Solution of All Your Journal Entries Problems

I got lots queries relating to journal entries on day basis. For providing you single solution of your all journal entries problems, I have written eBook and Printed Book whose name is Journal Entries Made Easy  whose cost is Rs. 1000 each. I recommend you to buy it from me. You can buy it from our online shop or you can buy it from me by sending email personally to me at my email vinod@svtuition.org

It will surely strong your basics of accounting and journal entries. With this, you can pass the journal entry of every type of transaction. If you will be interested to buy it please reply on same email. After payment, this E-book (in PDF form), you will get within few minutes and by reading it, you can solve your all queries relating to journal entries.


: 2
  1. What if it is like priya paid to jessica on our behalf ₹1000

  2. Hi, Generally we paid on behalf for our boss driver. So every month we will deduct the payment (driver) to our boss salary. Is it correct that we also have to perform journal entry, which we will debit boss account & credit the driver salary on the date we pay salary?


    20 June 20XX
    Debit Driver's Account 1000
    Credit Bank 1000
    (Pay on behalf Boss)

    27 June 20XX
    Debit Boss' Account (7000-1000) 6000
    Credit Bank 6000
    We deduct the driver's salary with boss salary
    (Transaction on Salary Payment Day)

    27 June 20XX
    Debit Boss' Account 1000
    Credit Driver's Account 1000
    Journal Entry.

    We have to offset the payment on behalf amount to the boss' salary? Is this correct?

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Accounting Education: Journal Entries of Paying Expenses on the behalf of Others
Journal Entries of Paying Expenses on the behalf of Others
Accounting Education
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