Advances to Employees
What are Advances to Employees?
An advance to an employee is when a business pays an employee in advance.
![ate 1](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-1.jpg)
How it Works
Sometimes, an employee will ask for an advance on their wage or salary.
![ate 2](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-2.jpg)
To record the advance, you credit the cash account.
![ate 3.5](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-3.5.jpg)
This shows the money came from the bank.
![ate 4.5](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-4.5-1.jpg)
After this, you debit the advances to employees account.
![ate 5](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-5.jpg)
This shows the money went to an employee.
![ate 6](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-6.jpg)
The advances to employees account is an asset account.
![ate 7](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-7.jpg)
Asset accounts show what the business owns or what is owed to the business.
![ate 8](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-8.jpg)
The employee is yet to perform the work for which they have been paid.
![ate 9](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-9.jpg)
So, for the time being, the account shows they owe this value to the business.
![ate 10](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-10.jpg)
At this stage, your accounts will show that money came from the bank and went to employee advances.
![ate 11](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-11.jpg)
Come pay day, you will need to update the accounts again.
![ate 12](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-12.jpg)
By now, the employee has performed the work.
![ate 13](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-13.jpg)
So you need to record the expense.
![ate 14](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-14.jpg)
To do this, you transfer the value shown in the employee advances account to the wages expense
![ate 15](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-15.jpg)
Here, you credit the advances to employees account.
![ate 16](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-16.jpg)
This shows you are taking value from the account.
![ate 17](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-17.jpg)
After this, you debit the wages expense account.
![ate 18](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-18.jpg)
This shows that the value has been used as wages expense.
![ate 19](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-19.jpg)
By doing this, you offset the credit entry shown in the employee advances account.
![ate 20](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-20.jpg)
With the offset, your accounts now show that money came from the bank and went to wages.
![ate 21](https://seeaccountingnow.online/wp-content/uploads/2021/08/ate-21.jpg)