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Level 1

Can Employee Loan repayments be set up as a Payroll Liabilty ?

I have amounts sitting in Current Assets (Employee Loans) which have been repaid but the repayment amounts are sitting in Payroll Assets. Shouldn't it be a payroll liabilty and how do I go about repaying the owner for the cash advancements he made out of his pocket. What jounal entries will be required to correct the current status?

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Best answer December 10, 2018

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Level 15

Can Employee Loan repayments be set up as a Payroll Liabilty ?

Make a new Net Pay Deduction set not for tax tracking; link it Not to liability, but to the Other Current Asset account where you tracked the loan payouts.

If you use New Payroll Item > EZ setup, it shows you as Employee Advance Repayment. Otherwise, this is the Same as a wage garnishment, such as Child Support, but not payable to anyone.

You never use JE for payroll activities or Banking.

"how do I go about repaying the owner for the cash advancements he made out of his pocket."

If you are not tracking this as Other Current Asset (paid out of the firm), then set up the payroll item linked to Payroll Liability for the owner as the vendor payee name.

And the deduction item is set as NONE for tax tracking.

It is better to Not Deduct through payroll, when this is a loan between two Friends = the owner loaned personally. Or, start running this through the Business when paid out as Other Current Asset and collect as other current asset. Stop Mixing up these activities across business vs personal lines of activities.

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Highlighted
Level 15

Can Employee Loan repayments be set up as a Payroll Liabilty ?

Make a new Net Pay Deduction set not for tax tracking; link it Not to liability, but to the Other Current Asset account where you tracked the loan payouts.

If you use New Payroll Item > EZ setup, it shows you as Employee Advance Repayment. Otherwise, this is the Same as a wage garnishment, such as Child Support, but not payable to anyone.

You never use JE for payroll activities or Banking.

"how do I go about repaying the owner for the cash advancements he made out of his pocket."

If you are not tracking this as Other Current Asset (paid out of the firm), then set up the payroll item linked to Payroll Liability for the owner as the vendor payee name.

And the deduction item is set as NONE for tax tracking.

It is better to Not Deduct through payroll, when this is a loan between two Friends = the owner loaned personally. Or, start running this through the Business when paid out as Other Current Asset and collect as other current asset. Stop Mixing up these activities across business vs personal lines of activities.

View solution in original post

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