Instant payment on behalf of another person
This query is : Resolved
25 September 2025
Sir
Company A done some construction work through a contractor 'B' for Company C.
ie the construction work is for Company C but due to non-availability of manpower in Company C, on request of Company 'C' ,Company A execute the job .
The Company C requested Company A to make the payment to Contractor 'B' & latter Company C will reimburse the amount to Company "B".
My query is:
What will be journal entry in the books of Company 'A'.
Abhijit
Company A done some construction work through a contractor 'B' for Company C.
ie the construction work is for Company C but due to non-availability of manpower in Company C, on request of Company 'C' ,Company A execute the job .
The Company C requested Company A to make the payment to Contractor 'B' & latter Company C will reimburse the amount to Company "B".
My query is:
What will be journal entry in the books of Company 'A'.
Abhijit
25 September 2025
The journal entries in the books of Company A, when it pays Contractor 'B' on behalf of Company C (expecting reimbursement from Company C), should reflect that the amount paid is recoverable from Company C and does not ultimately impact Company A’s P&L. The correct treatment is to record the payment as a receivable (asset) from Company C, rather than as a direct expense for Company A.
Initial Payment to Contractor 'B' (On Behalf of Company C)
When Company A pays Contractor 'B', the entry should be:
Debit: Receivable from Company C (or "Accounts Receivable – Company C" / "Reimbursable Expenses")
Credit: Bank/Cash
This reflects that Company A has made the payment, but it is not their expense—it is recoverable from Company C.
Initial Payment to Contractor 'B' (On Behalf of Company C)
When Company A pays Contractor 'B', the entry should be:
Debit: Receivable from Company C (or "Accounts Receivable – Company C" / "Reimbursable Expenses")
Credit: Bank/Cash
This reflects that Company A has made the payment, but it is not their expense—it is recoverable from Company C.
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25 September 2025
When Reimbursement is Received from Company C
When Company C reimburses Company A, the entry should be:
Debit: Bank/Cash
Credit: Receivable from Company C (or "Accounts Receivable – Company C" / "Reimbursable Expenses")
This clears the receivable, showing that the reimbursement has been collected.
When Company C reimburses Company A, the entry should be:
Debit: Bank/Cash
Credit: Receivable from Company C (or "Accounts Receivable – Company C" / "Reimbursable Expenses")
This clears the receivable, showing that the reimbursement has been collected.
26 September 2025
Many sincere thanks to Sir Dhirajlal Rambhia for very very clearly analysis the Journal entries. It help immensely to clear the doubt. These types of situation is a very common in State Govt owned Companies. Here both Company A and Company C are the State Govt owned Company.
Abhijit
Abhijit
26 September 2025
You are welcome...
26 September 2025
Good luck...
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