Employee Advance Journal Entry

An employee advance is a payment made to an employee ahead of their expected expenses or salary. This advance is typically settled by deducting the amount from the employee's future salary or by the employee providing receipts for the expenses incurred.

Scenario 1: Providing an Advance to an Employee

A company provides an advance of ₹30,000 to an employee for travel expenses.

Journal Entry to Record the Advance:

Particulars	Debit (₹)	Credit (₹)
Employee Advance A/c	30,000
To Cash/Bank A/c		30,000
(Being advance given to employee for travel expenses)

Explanation:

1. Employee Advance A/c is debited to record the advance given to the employee.
2. Cash/Bank A/c is credited to reflect the cash outflow.

Scenario 2: Settlement of the Advance by the Employee

The employee submits receipts totaling ₹28,000 for travel expenses, and the remaining ₹2,000 is to be deducted from their salary.

Journal Entry to Record the Settlement of the Advance:

Particulars	Debit (₹)	Credit (₹)
Travel Expense A/c	28,000
To Employee Advance A/c		28,000
(Being settlement of travel expenses against the advance)

Explanation:

1. Travel Expense A/c is debited to record the actual travel expenses incurred by the employee.
2. Employee Advance A/c is credited to reduce the advance given to the employee.

Journal Entry to Deduct the Remaining Advance from Salary:

Particulars	Debit (₹)	Credit (₹)
Employee Salary A/c	2,000
To Employee Advance A/c		2,000
(Being remaining advance deducted from employee's salary)

Explanation:

1. Employee Salary A/c is debited to reflect the reduction in the employee's salary.
2. Employee Advance A/c is credited to clear the remaining advance.

Summary

1. Providing an Advance: The company records the advance given to the employee.
2. Settlement of the Advance: The employee submits receipts, and the company records the actual expenses against the advance.
3. Deducting Remaining Advance from Salary: Any remaining advance is deducted from the employee's future salary.