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.
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...
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Applicability of TDS on CFS, CHA fees, and shipping line charges
- Notice from IT DEPTT IF FD AMOUNT EXCEEDS 10 LACS
- Limited Liability Partnership Firm
- Unable to generate and save json file for updated return
- GST payable under RCM
- Applicablity on tds
- Section 194I not showing in TDS RPU for Compnay Assessee for TDS on rent
- LTCG offset against property buy
- PRODUCT AND SERVICE CATEGORY CODE
- Tax audit & Switching from Presumptive taxation
- Regarding TDS not deducted on rent
- REGARDING CLAIM OF LAST YEAR TDS
- Regarding income tax return of company and LLP
- Import purchase entry
- Under which tax head RCM on Commission on Sale is to be paid.
- Rule 54(1A) for Distributing ITC
- EXCESS CREDIT REALTED GST REVERSAL
- Export invoice not reported
- CA Articleship Extension Matter
- GST OFFICER WRONG NOTICE
Trending Online Classes
-
LIVE Course on GSTR-9 & GSTR-9C (Technical | Practical | Concept - Based)
Sachin Jain03 November 2025
CAclubindia
