Accounting for employee advances
Do you occasionally give employees an advance on their next paycheck? Here’s an easy way to record and track these advances using the QuickBooks payroll feature.
In the chart of accounts, create a new “other current assets” account called Employee Advances.
In the payroll item list create a new payroll item. In QuickBooks 2007 and above use custom (advanced) setup. During setup you will need to choose these options.
- Item Type - Deduction
- Item Name - Employee Advance Repayment
- Liability - Leave agency and number fields blank. Chose Employee Advances other current asset account for the liability account.
- Tax Tracking Type - None
- Taxes - Select none
- Calculate on quantity - Select neither
- Gross or Net - Select Net Pay
- Default Rate & Limit - Leave blank, no annual limit
- Finish
Your items and accounts are now set up. To record employee advance payments, simply write a check using ‘Employee Advance’ as the account.
To withhold advance repayments from employees paychecks, just add the employee advance repayment item to the additions and deductions section on the paycheck. Be sure to use a negative amount for deductions.
In response to Deb’s question below:
Wondered if there is a way (within QB) of tracking amounts owed by individual employees, in cases where employees pay over more than one payroll?
Create a report like this:
Reports > Custom Transaction Detail Report On the Display Tab select “All Dates” and Total by “Employee” Switch to the Filter tab and select you Employee Advances other current asset account Generate the report by clicking ok. This report will show all advances and repayments you have correctly entered in QuickBooks. As with all things, the report will only be as accurate as the information you’ve entered.
You can also filter by employee to create a report for an individual employee, very useful for including with paystubs or settling disputes.
I recommend memorizing the report, saving you from recreating it from scratch each time.
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Comments
Payroll deduction is a simple, safe and easy means of paying a variety of bills. Payroll deduction is a relatively new option for paying auto insurance premiums and it may be difficult to find an insurer that offers this option. Payroll deduction is not for everyone, especially those whose paychecks vary widely from week to week. If you are able to locate a company that offers payroll deduction and your pay is fairly stable, you may find that the time savings combined with the ease of use make payroll…
Concise and easy to follow instructions, thank you.
Wondered if there is a way (within QB) of tracking amounts owed by individual employees, in cases where employees pay over more than one payroll?
Thx agn!
Hi! Because the companies I do the accounting for are paid by quickbooks in a separate company…payroll…We have a total of three companies including payroll. I am having a difficult time making the journal entries from payroll to each company for employee advance repayments..Can you help me? Thanks for your time.
Susan
Your post was a tremendous help. Thanks so much.
You are a life saver in this ever challenging line of work trying to keep these books straight.