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Accounting entry for loans & advances to staff


mjdf13 (junior accountant)     21 August 2013

mjdf13
junior accountant 
 1 likes  59 points

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Hello Everyone,

Sir, I am a junior Accountant, my question is  My Company given Loan to one Employee 18000 SAR

And It is Deducting 3000 SAR (Saudi Riyals) PM.  From Salary.  Salary of Employee is 7000 SAR

When Loan  Given to Employee

1)  Advances To Employee  A/c  (Current Assets)  Dr. 18000

          To Bank A/c    CR  18000

2) Salaries  A/c  Dr.4000

      Advances To Employee  A/c Cr                       3000

     To Bank A/c                          Cr                            4000

#  But  These Transaction should reflect in Employee Personal A/c    Also.  Please guide me correct procedure of accounts &  Accounting jounral entries.  In Balancesheet How it shows and in P&L HOw it shows.

 

I am not good in English so please understand  as per your knowledge. and give me correct answers

 

 

 

Praveen Kumar Agarwal

Praveen Kumar Agarwal (Accountant)     21 August 2013

Praveen Kumar Agarwal
Accountant 
 13 likes  180 points

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journal entries r correct.. only one mistake is der where slary is debited by 4000 in stead of 7000.. In blnc sheet adv to employee shd be shown on the assets side. And in p&l a/c salary shud be debited wid 7000..
Mihir

Mihir (Wealth Manager)     21 August 2013

Mihir
Wealth Manager 
 622 likes  5288 points

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You will have to create a personal ledger for the entry to reflect in employee's personal account. You can write proper narration in the voucher and if need be, you can prepare a promissory note and ask the employee to sign.

The above journal entries are correct except the mistake pointed by praveen.

1 Like
Rajiv Limbachiya

Rajiv Limbachiya (Deputy Manager)     21 August 2013

Rajiv Limbachiya
Deputy Manager 
 5 likes  130 points

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Your entries is correct, but you have to use particular Employee's account instead under current account of Advance to Employee account like....

1) ABC (Employee) A/c. Dr  18000 (B/S A/c)

    To Bank A/c. Cr. 18000

2) Salary A/c. Dr. 7000 (P/L A/c)

          To ABC (Employee) A/c. Cr 3000

          To Bank A/c. Cr 4000

 

1 Like
Krunal Jani

Krunal Jani (Article Assistant)     07 September 2013

Krunal Jani
Article Assistant 
 3 likes  63 points

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do only 1 thing..... create that employee's personal account and show it under the same head/group in which it is already shown i.e. Advance to Employee A/c (Current Assets)...

Rupa Ramdas

Rupa Ramdas   26 September 2019

Rupa Ramdas

 2 points

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2 entry salary a/c 7000

advance emp. a/c 3000

bank a/c 4000

Indira Priyadarsini Kota

Indira Priyadarsini Kota (Student)     19 January 2021

Indira Priyadarsini Kota
Student 
 5 likes  585 points

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Instead of advance to the employee account, you can create personal account to the employee. It becomes a current asset and debit it with the advance paid. While recovering from the salary, credit to the same account.

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