Accounting entry for a pay advance / employee loan?
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My boss gave an employee a $1500 advance to help buy a car. The employee earns a salary + commission. They agreed that the employee's weekly commission will be applied toward the $1500 "loan" until it is paid off. Using MYOB accounting software, what kind of accounting entry should I make every week toward the loan? Please be as specific as possible, as I am not a CPA, just a freelance business mgr / teacher who keeps the books part-time for this small company. Thanks!
Accounting entry for a pay advance / employee loan?I'm not familiar with the internal workings of MYOB, but in general accounting terms you would charge (debit) the check to an account called Employee Advances or something similar. If it's not already in your chart of accounts set it up as a Current Asset.
You said that the employee earns a salary + commission and the weekly commission amount will be applied against the advance. I'm just guessing, but you probably pay the salary and the commission on the same paycheck and withhold income tax and FICA/MC from the gross amounts.
That part would stay the same and you would subtract one more item withheld from the check - the gross amount of the weekly commission would be subtracted off and credited to the Employee Advances account.
An alternative - since the employee will have income tax and FICA/MC withheld from his commission the boss could agree to have his net commission instead of his gross commission applied against the advance so that the employee, who must have had a cash problem to begin with, doesn't get in deeper with the payback. If gross commission is applied to the advance then the withholding items against the gross commission will reduce the take home from his salary. The boss/company owner can decide on that one.
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