Recognizing an advance payment to employee

An advance payment to your employee is something you can make, however, I would keep them rather rare than a regular thing. You wouldn’t want to pay too much in advance for something you at the end of the day may not receive. 

Under an advance payment what is usually meant is an amount you’re paying off from the next wage, but you’re paying it before the work for it has been carried out. To give an example, say you’ve asked for an advance in mid-March for the salary you’d pay in the beginning of April for the work done for the whole period of March.

How would you recognize such an advance payment? Say that the advance was for 500:

# Debit-Credit Account name Amount
1 Debit Other receivables against employees 500
  Credit Bank account 500

Effectively you’re recognizing an asset, a receivable against your employee which you’ll be setting off the payable with once you’re recognizing your payable for the salary for the period. As you’re subsequently accounting for the wage for the month for this employee, your payable is actually less this 500. What you’re doing then is a following entry:

# Debit-Credit Account name Amount
1 Debit Payable to employees 500
  Credit Other receivables against employees 500

With this you’ve decreased what you ought to pay to your employee by what you already paid as an advance payment earlier.