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Accounting entry

Rudrayani Shedjale (Assistant Accountant) (751 Points)

28 March 2019

If A pays to B on behalf of C what will be the entries in the books of A,B & C?

please advise.

interview question which made me confused

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4 Replies

Sahil Jain (FAFD, DISA, CA) (Practicing Chartered Accountant ) (2476 Points)
Replied 28 March 2019

In books of A :

entry for payment made to B on behalf of C
entry 1 (making payment)
B A/c Dr
to Bank / Cash

entry 2 (interparty)
C A/c Dr
to B A/c

In books of B :
entry 1 (receiving payment)
Bank / Cash A/c Dr
to A A/c

entry 2 (interparty)
A A/c Dr
to C A/c

In books of C
Only interparty entry as he has not paid nor received amount.

B A/c Dr
to A A/c

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Rudrayani Shedjale (Assistant Accountant) (751 Points)
Replied 28 March 2019

thanks a lot. but i am not able to apply golden rules of accounting in inter party transactions

Rudrayani Shedjale (Assistant Accountant) (751 Points)
Replied 29 March 2019

n books of A : entry for payment made to B on behalf of C entry 1 (making payment) B A/c Dr to Bank / Cash entry 2 (interparty) C A/c Dr to B A/c In books of B : entry 1 (receiving payment) Bank / Cash A/c Dr to A A/c entry 2 (interparty) A A/c Dr to C A/c In books of C

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In the books of A

1. B A/C dr. (Dr.the receiver)

To Cash A/C (Cr.what goes out)

2. Interparty transaction

C A/C dr (which rule to apply ??)

To B A/C

In the books of B

1. Cash A/C Dr. (Debit what comes in)

To A A/C (Credit the giver)

2. Interparty transaction

A A/C dr (which rule to apply ??)

To C A/C

In the books of C

B A/C Dr (Debit the receiver/Debit when Liab decreases)

To A A/C (Credit the giver/Credit when Liab increases)

Rudrayani Shedjale (Assistant Accountant) (751 Points)
Replied 29 March 2019

in the books of A B A/C Dr. (asset Dr.when increases) To Cash A/C (asset CR.when decreases) C A/C Dr. (asset Dr.when increases) To B A/C (asset CR when decreases) In the books of B cash A/C Dr.(asset dr. when increases) To A A/C (Liab. cr when increases) A A/C Dr.(Liab Dr.when decreases) To C A/C (asset CR.when decreases) in the books of C B A/C Dr.(Liab Dr.when decreases) To A A/C (liab CR.when increases) I think this is more simple