Travel Advances Definition - Meaning- Journal Entry - Refund - Reimbursement

Travel Advances are those Expenses which are paid in advance to employees, who traveled or visited for business purposes, to meet travel related expenses such as Travel Expenses, Meals Expenses, etc.

Travel Advance is paid to employees for meeting their travel expenses such as travelling expenses, meal expenses, etc., Employees visits to different events for promoting company marketing and other business matters.

Travel Advances are examples of Prepaid Expenses and treated as Current Assets to be shown on Balance Sheet as the company paid advances to employees against which the company will received the benefits i.e., a sales manager visit to university event in order to make marketing campaign to promote the company’s products and brand name in the mind of students.

According to the Rules of Debit And Credit, the normal or usual balance of Travel Advance is debit, however, when it is incurred we debit it and when it is transferred to balance sheet, we credit it.

Travel Advance Journal Entry

There are three stages of recording Travel Advances. These mentioned below:

1. At the Time of Dispatch of Travel Advance

The Journal Entry would be as follows:

                                     Travel Advances a/c  20000

                                                                      Cash a/c / Bank a/c  20000

                                                     (Paid Travel Advances To Employees)

2. When the employees actually incurred the travel expenses such as Travel expenses, Meals Expenses, etc.

                                  Travel Expenses a/c  10000

                                  Meals Expenses a/c    5000

                                                                  Cash a/c / Bank a/c  15000

                                      (Actual Expenses Paid From Travel Advance Given)    

3. (a) If the Employees utilized Actual Expenses less than Travel Advance given, in that case, there is a Refund

As Rs. 5000 of Travel Advances is left, so these are refunded to company by employees and the company enters the following journal entry as shown below:

                                    Cash a/c / Bank a/c  50000

                                                                 Travel Advances a/c  5000

                              (Rs. 5000 Travel Advanced Returned To Company by Employees)

3. (b) If the employees paid excess actual expenses than the Travel Advances given to them, then it is the case of reimbursement, then in addition to above entries additional entries are also passed in the Journal of Company.

Suppose the employees incurred Rs. 23000 that is more than of Rs. 20000 Travel Advance given, then Rs. 3000 is a Current Liability for the company to pay to the employees. In that case, the company records the following Journal Entries:

                                      Travel Expenses a/c  3000

                                                                     Accounts Payable a/c  3000

                                               (Travel Expenses Paid On Account)

                                  Accounts Payable a/c  3000

                                                                     Employees Reimbursements a/c  3000

                                  (Transfer to Employee Reimbursement Account To Create Liability)

When the company actually paid to employees for the excess amount spent, then the following entry is passed as shown below:

                           Employees Reimbursement a/c  3000

                                                                              Cash a/c / Bank a/c  3000

                                                  (Paid To Employees For Reimbursement)


Travel expenses paid in advance is also known as Prepaid Travel Expenses.