Accounting entry for loans & advances to staff

A/c entries 33846 views 7 replies

mjdf13

junior accountant

59 Points Joined April 2011

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

Replies (7)

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

Wealth Manager

5293 Points Joined December 2008

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.

Rajiv Limbachiya

Deputy Manager

140 Points Joined February 2012

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

Krunal Jani

Article Assistant

63 Points Joined October 2012

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

2 Points Joined March 2018

2 entry salary a/c 7000

advance emp. a/c 3000

bank a/c 4000

Indira Priyadarsini Kota

Practice

590 Points Joined January 2021

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.

farooq ali

4 Points Joined March 2023

Sir, please clarify in that case two personal account of an employee will be opened ? One will be salary account and one will be advance or loan account?