Accounting for advances to employees and officers

2.2. Accounting for occasional advances to employees

When a company occasionally (i.e., not on a regular basis) provides advances to employees, accounting may be different. Assume that Joanne Smith, an employee of Company XYX, is scheduled to attend an industry conference. She receives a $2,000 advance for travel-related expenses. To set up an employee advance, the company makes the following journal entry:

Account Titles

Debit

Credit

Employee Advances Joanne Smith

2,000

 

      Cash

 

2,000

When Joanne returns from the conference, she provides an expense report along with receipts and other supporting documentation for the following expenses: $750 air travel, $60 car rental, $600 hotel accommodations, and $300 meals. These amounts total $1,710. Joanne also returns the remainder of her advance in amount of $290. To record expenses and return of cash the Company makes the following journal entry:

Account Titles

Debit

Credit

Cash

290

 

Air Travel Expenses

750

 

Car Rental Expenses

60

 

Hotel Accommodation Expenses

600

 

Meals Expenses

300

 

      Employee Advances

 

2,000

If the actual expenses were more than the advance, the employer would have to reimburse the employee.

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