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Setup an employee loan outside of Payroll

Lorri Neal

We have paid a supplier bill on behalf of an employee. The employee has chosen to pay the loan back directly to the business bank account rather than from his wages as he will be paying back different amounts each week, depending on the overtime he has worked.

I created a chq to the supplier and used the 'Employee Advances' account as the account. I'm not sure this is correct as the amount comes up ex GST in 'Employee Advances'

Is there another way I should have done this?

Thanks

Accepted answers

Kris_Williams

you don’t enter a tax code, it’s not your expense or GST to claim back, the account you used is ok but yes you could have used a loan account too.
if you want you can call me

0415940843

All comments

Kris_Williams

What you’ve done sounds fine. The figure will not have a tax code, and I would use something like Contra or Clearing account. I think employee advances would be fine too - just no tax code.

When he repays just go to banking and make the deposit to the same account

Lorri Neal

Thanks Kris,

My concern is the amount he pays back will be more than what's in the Employee Advances account as he will be paying back the GST incl amount.

I'm not sure what you mean by use the Clearing Account-where in the transaction do I need to use this?

Kris_Williams

employee advances should have the total that you paid on his behalf, and it would not be entered with a tax code, regardless of whether it has GST he will owe the entire amount. Did you just enter it a cheque to a supplier to the account of employee advances with no tax code?

Lorri Neal

I entered it with a Tax Code as it was paid to a supplier. I thought maybe I should have used the Fees & Charges expense account (as that is what it was for), then created the loan separately?

Kris_Williams

you don’t enter a tax code, it’s not your expense or GST to claim back, the account you used is ok but yes you could have used a loan account too.
if you want you can call me

0415940843

Lorri Neal

I think I've got it now.

Thanks very much for your help

Kris_Williams

You’re very welcome …