Introduction

The purpose of this process is to process an Employee advance and properly account for the advance through the payroll system.

General Purpose

Generally speaking, an advance is where an employer writes a check to an employee and deducts tha amount of the check from the employees next paycheck.  The amount deducted is actually deducted from the employees next 'NET' pay.  Therefore, the employee's next paycheck is calculated as it always would be (gross pay less employee taxes and deductions) but the advance is deducted from the net pay.

So, how does the accounting work?  The employee is paid from the A/P module and the invoice authorizing this payment is coded using the G/L account# 'Accounts Receivable', which is a standard, and critical, G/L account#.  It makes sense an employer would advance an employee funds and this financial transaction would be recorded as a receivable from the employee.

After the advance is made to the employee, one should enter a wage record into the P/R module using a paytype of 'ADV'.  By entering an advance paytype, the system will automatically use the G/L account# 'Accounts Receivable'; the account# assigned in the critical accounts table for accounts receivable.

Remember, use the G/L account# for accounts receivable in the A/P module.  This will ensure no G/L imbalances will occur during end-of-month updating.  Secondly, make sure advances are processed through the A/P module!