Accounting for turnover of travel agents and treatment of reimbursable expenses

How to calculate turnover of travel agents and recognition of revenue to be made:

Example:-

1. Receipt by travel agents of ₹ 11,090. The fare of train is ₹ 10,000 and GST on train fare @ 5% ₹ 500. Service Charge of the travel agent is ₹ 500 and GST @ 18% ₹ 90.

Accounting:
1. ₹ 11,090 is to treated as advance from customer under current liabilities.
2. Payment of train fare of ₹ 10,500 to be shown as advance recoverable for cash or kind under current assets.(Note :1)
3. Adjustment of the above current assets and current liabilities should be squarred off by journal.
4. Service Charges of ₹ 500  to be shown as revenue.
5. GST of ₹ 90 is to kept under current liabilities as Output.

Note:
1. GST Number of the person in whose name train ticket is booked, may be provided at booking time for the benefit of ITC of such person.

Conclusion:

To be eligible to treat the above payment of train fare not to be included in the turnover of the travel agent the following conditions must have to be satisfied:

1.  The payment of train fare made by the travel agent should be as pure agent basis.

2.  Important thing to be noted that the pure agent does not use the service so procured for his own interest.

3. There should be agreement between the travel agent and the principal (mere a standard email sent by the travel agent to the principal may act as agreement here, all relevant points of such reimbursement should be mentioned in the email and reply via email mentioning acceptance of such conditions should be made by the principal. Copy of such email should be kept by travel agent as record).

4. Invoice by the travel agent shall be raised mentioning separately the reimbursement of such expenses.