Answer Posted / jayesh eay

A is paying to B , on behalf of C.
Therefore in the books of A

1) B's a/c ....Dr ( Receiver)
To Cash/ Bank..cr ( Cash out )

2) Need to reclass the previous entry , because he is not paying for himself . He is paying on behalf of C. So it is like an advance to C., hence
Reclass journal
2) C's a/c .....Dr
To B's a/c......cr

In the books of B

1) Cash/ Bank .. A/c ........Dr
To A's. a/c.......,.............cr
( Being Cash received from A)

Again similarly B would also need to reclass as the payment is not from A, it is from C, hence

2) A's a/c ..........Dr
To C's a/ ...........Cr


In the books of C.

C's liability has reduced for B, ( As the payment was made ) similarly C's liability has increased towards A( As A paid is as an advance towards C)

Hence by the American Golden rule .
Liability increase .....Cr
Liability decrease Dr

1) B's .....a/c ..........Dr
To A's a/c .........cr

Thanks

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