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R
roxy2book
November 27, 2024
Question

Employee cash advance

  • November 27, 2024
  • 1 reply
  • 0 views

Hello, an employee was given cash advance of $600 

first JE                                      DR                   CR

employee cash advance         600 

Loan                                                              600

second JE

Loan                                        600

Stockholder Dividend                                     600

this was done when paid

balance sheet shows zero balance but on statement of cash flow Loan shows -600

what do I need to do to correct this and make it zero?

 

1 reply

FishingForAnswers
FishingForAnswers
November 28, 2024

@roxy2book  Well, off the top of my head, I'm not clear on what you were doing with your first JE.

 

In this context, both a loan and an employee cash advance would represent money owed to the company by the employee. Normally, you'd see some manner of asset or equity being lowered as a result of the money leaving the company to go to the employee.

 

Can you describe in more detail exactly what you were doing here, and what account type you were using for each account in the JEs?

R
roxy2bookAuthor
November 28, 2024

company gave employee 600 check - this is loan payable. then money was repaid and taken out of employee payroll check. it may not have been recorded properly. money was repaid but did not show as received in bank acct. 

    FishingForAnswers
    FishingForAnswers
    November 28, 2024

    @roxy2book  Mm...

     

    Well, for now, I'll just break down how I would have structured it and why. One of the other board frequenters may come along with a better way.

     

    First, I think it would have been better to create a Check, or whatever the QBO equivalent is, using an Other Current Asset (Employee Advance) as the detail account.

     

    This would simultaneously create the relevant check in QBO, lower the bank account balance by $600.00, and increase the Other Current Asset (Employee Advance) by $600.00 to establish its opening balance.

     

    Second, well. I'm not clear on why a Stockholder Dividend account was involved in this process.

     

    At any rate, to recognize the repayment by way of their paycheck, I would have created a payroll item deduction with its source account coded to the Other Current Asset (Employee Advance). This would have lowered the asset each time the employee's paycheck was garnished to repay the loan.

     

    Assuming the bank account used to pay employees is the same as the bank account the original loan check was written from, this would in effect reimburse said bank account by lowering the amount that otherwise would have been paid out of it in the form of the employee's paycheck.

     

    If it is not the same bank account, then a simple transfer from the payroll bank account to the loan bank account would set things right.

     

    If I'm not mistaken, this should correct your concerns with the statement of cash flows.

     

    If not, there are at least a couple people who frequent this board who have a lot more accounting moxie than I do; I don't know if I'd expect to see them reply until Friday, given the holiday on Thursday.

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