PROFITIZE Case Study: How TechCo Recorded Travel Expense

Introduction:

TechCo, a company that manufactures electronic gadgets, needed to send some of its employees to a conference in another city. To make this happen, they arranged travel and lodging for the employees through a travel agency.

The Situation:

TechCo needed to book travel and lodging for 5 employees. The total cost for the travel and lodging was $4,000. TechCo didn’t pay anything upfront but paid $1,500 upon receiving the service. The remaining $2,500 was arranged to be paid later through trade credit.

Case Facts:

• Total cost of travel and lodging: $4,000

• Amount paid upon receiving the service: $1,500

• Amount financed through trade credit: $2,500

• Total cost: $4,000

• Payment method:

  • Payment upon receiving service: $1,500

  • Amount financed through trade credit: $2,500

    
    

Question for You:

Now, let’s think about how TechCo would record this transaction in their accounting books according to IFRS (International Financial Reporting Standards). TechCo needs to make the following journal entries:

1. When the travel and lodging service is received and partial payment is made:

Debit: Travel & Lodging Expense for the total cost of the service.

Credit: Cash/Bank for the amount paid upon receiving the service.

Credit: Accounts Payable for the amount financed through trade credit.

1. When TechCo pays the remaining balance:

Debit: Accounts Payable for the amount owed.

Credit: Cash/Bank for the amount paid.

Can You Figure Out the IFRS Journal Entries?

Based on the information provided:

1. When TechCo receives the travel and lodging service and makes a partial payment:

Debit: Travel & Lodging Expense for $4,000

Credit: Cash/Bank for $1,500

Credit: Accounts Payable for $2,500

1. When TechCo pays the remaining balance:

Debit: Accounts Payable for $2,500

Credit: Cash/Bank for $2,500

This case study shows how businesses record expenses for services like travel and lodging, paying part upfront and using trade credit to cover the rest, allowing them to manage cash flow effectively while ensuring their employees can travel as needed. ​

Disclaimer: This case study is designed to enhance digital financial literacy and business management skills among students, to help them apply these concepts in real-world scenarios to boost their earnings, employability and entrepreneurial potential. The case was edited by Razi Amin, a Harvard MBA with 30+ years of leadership and advisory experiences at major international banks in New York, London, Hong Kong and Washington, DC. Razi is also a member of Harvard Alumni for Global Women's Empowerment. While AI technology was used for prompt-engineering to generate case content, every case has been rigorously reviewed and edited to ensure accuracy, clarity, and educational effectiveness. Reproduction of this case material is prohibited without permission from ASPEN Capital Solutions LLC.