i pay to broker behalf on sale. than how to entry ?

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lalit jain (Querist)
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08 January 2017 i pay to broker behalf on sale. than hkw to entry ? and where can i entry in accounting software ? payment or journal ? thanks in advance. ..

CA Suresh Jain

CA Suresh Jain (Expert)
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09 January 2017 It is better to first pass journal entry against the bill of brokerage received and then to pass a payment voucher for payment.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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28 July 2024 When you make a payment to a broker on behalf of a sale, you need to record it properly in your accounting system to ensure accurate financial reporting. Here's a step-by-step guide on how to handle this transaction:

### **Accounting Entries**

1. **Understanding the Nature of the Payment**:
- **Broker Fees**: The payment made to the broker is typically considered a professional fee or commission. This should be treated as an expense.
- **On Behalf of Sale**: If the payment is related to a specific sale, it might be linked to the sale transaction.

2. **Accounting Treatment**:
- **Broker Payment as an Expense**: Record the broker's fee as an expense in your accounting books. This is usually categorized under "Brokerage Fees," "Commission Expenses," or a similar expense account.

3. **Journal Entry**:
- **Debit**: Expense account (e.g., Brokerage Fees or Commission Expenses) - This reflects the cost incurred for the brokerage services.
- **Credit**: Bank Account or Cash - This reflects the payment made from your bank or cash.

**Example Journal Entry**:
```
Date Account Debit Credit
----------------------------------------------------
YYYY-MM-DD Brokerage Fees X,XXX
Bank/Cash X,XXX
```

4. **Accounting Software Entry**:
- **Payment Entry**: If you are using accounting software, you should enter the payment as a “Payment” if you are directly paying the broker from your bank account. In this case, the software will usually allow you to specify the expense category (Brokerage Fees) and then reconcile it with your bank account.
- **Journal Entry**: Alternatively, if the payment does not immediately involve bank reconciliation, you may choose to enter it as a “Journal Entry.” Ensure to categorize it under the appropriate expense account and adjust your bank account accordingly.

### **Steps in Accounting Software**:

1. **Create Expense Account (if not already available)**:
- Navigate to the chart of accounts and create an expense account named "Brokerage Fees" or "Commission Expenses" if it doesn’t exist.

2. **Record the Payment**:
- **Go to the Payment Section**:
- Choose the appropriate bank account or cash account from which the payment was made.
- Enter the payment details (amount, date).
- Select the expense account (Brokerage Fees) to which the amount should be debited.
- **Save and Post the Payment**.

3. **Alternatively, Use the Journal Entry**:
- **Go to the Journal Entry Section**:
- Create a new journal entry with the date of the transaction.
- Debit the Brokerage Fees account with the amount paid.
- Credit the Bank or Cash account with the same amount.
- **Save and Post the Journal Entry**.

### **Additional Considerations**:
- **Supporting Documents**: Keep copies of any invoices or documentation related to the broker’s fee for record-keeping and auditing purposes.
- **GST/VAT**: If applicable, ensure that you also account for any GST/VAT on the broker’s fee as per local regulations.

By following these steps, you ensure that the broker's fee is accurately recorded and categorized in your financial records.

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