ANSWER ID:9144This support note explains how to cater for employees who are paid wages in advance, which is then withheld AccountEdge Pro and Network Edition, Australia only Need to pay some wages in advance? We'll show you how to pay the advance and how to withhold the amount from a future pay . Here's what's involved: Create a payroll advances asset account Create a wage category for payroll advances Create to "repay" the advance. This is done by setting up a wage category to pay the advance, and a deduction category to process repay the repayment of the advance Pay the advance Process the repayment of the advance Report on advances and repayments What if I use Pay Liabilities? Create a payroll advances asset account- Go to the Accounts command centre and click Account List.
- Click the Asset tab then click New.
- Select Bank in the Account Type drop-down menu.
- Give the account a unique number that suits your account list.
- Name the account Payroll Advances. See our example below.
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Create a wage category for payroll advances- Go to the Payroll command centre and click Payroll Categories.
- Click the Wages tab then click New.
- Name the new wage category Advance in Pay (or similar).
- Select Salary as the Type of Wages.
- Select the Override Employee's Expense Account option and make the Payroll Advances asset account (as created above) the Override Account. See our example below. A warning will be displayed regarding the type of account selected - disregard this warning.
 Image Removed - Click Exempt and select the PAYG Withholdings category, then click OK. This will ensure that the advance is made tax-free. The advance will eventually be repaid from net pay.
- Click Employee and select the employee to whom this applies, then click OK.
- Click OK to close the Wages Information window.
Create a deduction category to process the repayment of the advanceGo to the Payroll command centre and click Payroll Categories.Click the Deductions tab then click New.Name the new category Advance Repayment.Set the Linked Payable Account to be the Payroll Advances asset account (as created earlier in this support note). A warning will be displayed regarding the type of account selected - disregard this warningadvance. Both these payroll categories are linked to an asset account which tracks all amounts advanced, repaid, and outstanding. Let's take you through the details. | UI Expand |
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| title | 1. Set up the wage advance |
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| To track wage advances, set up the following: - an asset account
- a payroll wages category
- a payroll deductions category
- Create an asset account with the Account Type set to Bank. This account will be used to keep track of how much you have advanced, and how much is repaid.
 Image Added - Create a wages category. This category will allow you to include the advance on the employee's pay.
- Select Salary for the Type of Wages.
- Select Optional Account and choose the asset account created above. A warning will be displayed about the account you've chosen - click OK to this.
- Click Employee and select the employee who is being paid the advance.
- In our example we'll click Exempt and select the PAYG Withholdings category so the advance is tax-free. Check with your accounting advisor or the ATO for clarification on your tax obligations.
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- Create a deductions category. This category will allow you to withhold the advance from the employee's future pay.
- Select the asset account created above for the Linked Payable Account. A warning will be displayed about the account you've chosen - click OK to this.
- Set the Calculation Basis to User-Entered Amount
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Per Set the Limit to No Limit. See our example below.
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to whom this applies, then click OK.Click OK to close the Deduction Information window.Pay the advanceLet's use the example of Alan Long who has requested an advance of $125 which will be deducted from his next pay. When processing the paycheque for Alan Long, in the Pay Employee window enter $125 in the Amount column for Advance in Pay. The addition of the $125 advance will not affect the amount of PAYG Withholdings deducted as shown in the example below.  Image Removed
Process the repayment of the advanceOnce in the Pay Employee window for Alan Long, enter negative $125 (-125.00) in the Amount column for Advance Repayment. The $125 will be deducted from after tax earnings.  Image Removed
Report on advances and repaymentsTo determine the status of wage advances and repayments: Run the Accounts List Detail report to see the balance of the Payroll Advances asset account (created earlier in this support note). If the balance of the account is negative, an advance is still outstanding (hasn't yet been paid back). If the balance is zero, no advanced payments are outstanding. If the balance is a positive value, too much has been paid back.- who is being paid the advance.
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| When you process payroll, enter the amount being advanced against the Advance in Pay wages category.  Image Added
If you exempted the wages category from PAYG Withholding, the addition of the advance won't affect the amount of tax withheld. |
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| title | 3. Process the advance repayment |
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| When you process payroll, enter the amount being repaid against the Advance Repayment deductions category as a negative value.  Image Added
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<h2><i class="fa fa-comments"></i> FAQs</h2><br> |
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| title | How can I tell how much has been advanced and repaid? |
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| Run the Payroll Activity Detail report for employees who have been paid wage advances |
. Compare the value (Reports > Index to Reports > Payroll > Employees > Activity Summary). - The value of the Advanced in
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pay (created earlier) with the value of the Advance Repayment deduction category (created earlier). This - will show how much has been paid in advance
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, and how - .
- The value of the Advance Repayment deduction category shows how much has been
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paid back| UI Expand |
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| title | What if I use Pay Liabilities? |
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If this feature is used, notice that the Advance Repayment deduction is considered a liability and shows in Because the advance repayment is set up as a deduction, it'll show on the Pay Liabilities window |
awaiting payment. In order to remove it from this list, complete a normal pay liability transaction, but rather than paying from your regular bank account, you will pay from the Payroll Advances Asset account linked in both your Wage and Deduction payroll categories created above. You can remove it by processing a normal Pay Liabilities transaction, but in the Pay from Account field, select the Payroll Advances asset account. This will remove the amount from the Pay Liabilities window without affecting your account balances. |
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