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Accounting entry for loans & advances to staff

mjdf13 (junior accountant) (59 Points)

21 August 2013

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

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7 Replies

Praveen Kumar Agarwal (Accountant) (180 Points)
Replied 21 August 2013

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)
Replied 21 August 2013

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 (Deputy Manager) (140 Points)
Replied 21 August 2013

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

2 Like

Krunal Jani (Article Assistant) (63 Points)
Replied 07 September 2013

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)
Replied 26 September 2019

2 entry salary a/c 7000

advance emp. a/c 3000

bank a/c 4000

Indira Priyadarsini Kota (Practice) (590 Points)
Replied 19 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)
Replied 23 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?