Hi there,

Could anyone tell me how we record the transaction below?

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.

How do we record this in the books of accounts?

You've asked once

Could you tell us who is incurring the expense?

You can see through scenario that it is the customer who finaly incurred the travelling expenses.
we can use many record to specify each step of the transaction; but as we know all the scenario at the first approch, we can directely go to the final figure that is:

Dr Costumer ---------------------- 117.5
Cr Input VAT --------------------- 17.5
Cr Reimbursement of expenses-- 100 ( this is the reimbursement to the employee; the firm can directely pay it the the employee(Cash account) or can keep it in the emplyee account (employee Account) in order to pay it later)

then when the customer will pay back the expenses to the company, we will record it as follow:

Dr Cash Account------------------ 117.5
Cr Costumer Account------------- 117.5

I hope you are satisfied. If you need further precision, just specify it.

Take care

is that the credit side should be account receivable?