The service of handling deposits/withdrawals on behalf is a common accounting task that frequently needs to be processed, with typical cases such as:
Logistics Companies
- Collection on behalf (Cash on Delivery - COD): The shipping provider collects payment for goods from the recipient on behalf of the seller, then transfers the funds to the seller.
- Payment on behalf: Covers transportation fees, storage fees, or other costs related to goods.
Financial Service Companies
- Collection on behalf: Banks collect payments on behalf of businesses from customers, such as service bills, insurance premiums, or installment payments.
- Payment on behalf: Banks process payments on behalf of businesses, including employee salaries, service fees, or other requested expenses.
The Problem
In business operations, collection/payment on behalf transactions must be managed and accounted for separately from the business’s own revenues and expenses.
This ensures transparency, avoids confusion between financial sources, and complies with legal regulations on accounting and finance.
Principles and Management Practices for Collection/Payment on Behalf Transactions:
- Separate Documentation and Account Recording
- Exclude from Business Revenue and Expenses
- Periodic Reconciliation
- Detailed Reporting
Key Features
- Allow record on-behalf partner on the payments.
- Generate on-behalf entries after post payment to transfer receivable/payable from customer/vendor to on-behalf partner automatically.
- Reconcile receivable/payable of Customer/Vendor automatically.
Journal Entries
The accounting entries for this transaction will be as follows
Payment Entries
| Account |
Debit |
Credit |
Partner |
Matching # |
| Bank Account |
200 |
0 |
Customer A |
|
| Receivable Account |
0 |
200 |
Customer A |
A1 |
On-behalf Entries
| Account |
Debit |
Credit |
Partner |
Matching # |
| Receivable Account |
200 |
0 |
Customer A |
A1 |
| Payable Account |
0 |
200 |
Vendor A |
|
Editions Supported
- Community Edition
- Enterprise Edition
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