Accounting for salary advances to employees in account 141

Accounting for salary advances is an important accounting practice in corporate financial management, ensuring transparency and compliance with legal regulations. Accurate accounting for salary advances not only helps businesses manage cash flow effectively but also protects the rights of employees. This article will provide detailed instructions on the process, accounting principles and practical situations in accounting for salary advances. 1C Vietnam will guide you on how to account for salary advances accurately and effectively.

1. Overview of salary advance accounting

1.1. What is salary advance accounting?

Accounting for salary advances is the process of recording, tracking and processing the amounts of money that the business advances to employees before the official salary period. This advance will be deducted from the employee's salary in the next salary period or according to the agreement between the two parties.

Salary advance is different from other types of advances such as:

• Advance for business expenses: Granted to employees to perform specific work and tasks and must be settled based on actual costs incurred.
• Advance purchase: Issued to purchase assets, goods and services for the business and must have valid documents when making settlement.

1.2. Why is salary advance accounting important?

Accounting for salary advances plays an important role in corporate financial management for the following reasons:

• Ensure financial transparency: Record fully and accurately all advances to employees to avoid loss of assets.
• Effective cash flow management: Helps businesses have an overview of the financial situation and plan reasonable spending.
• Minimize accounting risks: Avoid errors in calculating salaries, bonuses and payments to employees.
• Compliance with legal regulations: Meet the requirements of state management agencies on accounting regime and employee benefits.

2. Accounting principles in accounting for salary advances

To accurately account for salary advances, businesses need to master the basic accounting principles related to this transaction.

2.1. Functions of account 141 and account 334 in accounting

In accounting for salary advances, two main accounts are used: Account 141 (Advances) and Account 334 (Payable to Employees). Each account has its own functions and characteristics as follows:

The choice of using account 141 or account 334 depends on the nature of the advance:

• Use account 141 when the advance is considered a receivable, the employee is responsible for repayment.
• Use account 334 when the advance is considered as the advanced salary, which will be deducted from the salary of the next period.

2.2. Basic accounting procedures according to Circular 200/2014/TT-BTC

According to Circular 200/2014/TT-BTC, the process of accounting for salary advances is carried out in the following steps:

Step 1: Record the advance payment

• When advancing salary to employees:
  • Debit account 141 (Advance)
  • Have account 111 (Cash) or account 112 (Bank deposits)

Step 2: Calculate salary and record payables

• When calculating salaries for employees:
  • Debit account 642 (Business management costs) or account 627 (General production costs)
  • Credit account 334 (Payable to employees)

Step 3: Deduct the advance

• When deducting the advance from salary:
  • Debit account 334 (Payable to employees)
  • Credit account 141 (Advance)

Step 4: Pay the remaining salary

• When paying the remaining salary:
  • Debit account 334 (Payable to employees)
  • Have account 111 (Cash) or account 112 (Bank deposits)

3. Legal regulations related to salary advance accounting

Accounting for salary advances must comply with current legal regulations to ensure the legality of accounting operations.

3.1. Accounting regulations under Circular 200 and Circular 133

Circular 200/2014/TT-BTC and Circular 133/2016/TT-BTC both provide specific guidance on recording and handling salary advances.

According to Circular 200/2014/TT-BTC (applicable to large enterprises):

• Account 141 is used to track the company's advances to officers and employees.
• Advance payments must be tracked in detail for each subject.
• Periodically check, reconcile and confirm advances.

According to Circular 133/2016/TT-BTC (applicable to small and medium enterprises):

• Account 141 can be detailed into Account 1411 (Advances) and Account 1412 (Other receivables).
• Small and medium-sized enterprises can apply simpler processes, while still ensuring accounting principles.

The main difference between the two circulars:

• Circular 133 applies a simpler accounting system, suitable for small and medium-sized enterprises.
• Circular 200 requires a more detailed system of documents and books, applicable to large-scale enterprises.

3.2. Employee rights when receiving advances according to labor law

According to the 2019 Labor Code, employees have the right to request salary advances in the following cases:

• When employees have to temporarily take leave from work for special personal reasons such as: illness, accident, funeral, wedding.
• When the business is in difficulty, cannot pay salaries on time and has an agreement to partially advance.
• When employees perform special tasks as required by the business and require funding to do so.

Workers' rights protected:

• The salary advance must not exceed the actual salary that the employee is entitled to.
• Enterprises are not allowed to charge interest on salary advances.
• Deduction of advance payment from salary must be transparent and have the consent of the employee.
• The total amount of deductions cannot exceed 30% of the employee's monthly salary.

4. Common errors when accounting for salary advances

In the process of accounting for salary advances, businesses may encounter some errors that affect the accuracy of financial reports.

4.1. Common errors in the use of accounting accounts

One of the most common mistakes is the misuse of accounting accounts, specifically:

• Confusion between account 141 and account 334: Many accountants often record all salary-related items in account 334 without distinguishing the nature of the transaction.

Example of error and how to fix it:

1. Error: When advancing salary to employees, accountants record:
   
   • Debit account 334 (Payable to employees)
   • Credit account 111 (Cash) This is incorrect because account 334 is a payable account, not suitable for recording advances.
2. Solution: The correct accounting would be:
   
   • Debit account 141 (Advance)
   • Credit account 111 (Cash)

• Incorrect use of detailed accounts: Not clearly classifying advance objects, leading to difficulties in monitoring and settlement.

4.2. Missing documents or incomplete approval process

Lack of valid documents is the second most common error in accounting for salary advances, leading to many serious consequences:

• No advance request: Loss of legality of the transaction, may be refused by tax authorities to recognize reasonable expenses.
• Missing payment voucher/payment authorization: No documents to prove payment, potential risks in asset management.
• Missing signature of authorized person: Reduces the validity of the document.

To build an effective document control process, businesses need to:

• Set up a standard advance request form.
• Clearly define the approval process, from proposer to final authority.
• Store documents fully and systematically for easy reference when needed.
• Perform periodic reconciliation between books and original documents.

5. Internal control process in salary advance management

Internal control is an important factor to help businesses effectively manage salary advances, ensure transparency and compliance with regulations.

5.1. Documents required for internal control operations

To control salary advances well, businesses need to fully prepare the following documents:

Step 1: Prepare the advance request form

• The advance request must have full information: full name of the requester, amount, reason, and repayment time.
• The request must be approved by the immediate supervisor before being forwarded to the accounting department.

Step 2: Create payment voucher/payment authorization

• Payment vouchers/payment orders must be based on approved requests.
• Payment vouchers must have the signatures of the maker, controller, approver and payee.

Step 3: Track and manage advances

• Keep a detailed advance tracking book for each individual.
• Regularly update the status of advances.

Step 4: Prepare refund/deduction voucher

• When paying wages, the payroll should clearly show the advance deduction.
• Prepare an accounting voucher to record the deduction of advance payment from salary.

5.2. Effective internal review and approval process

Internal approval and review processes play an important role in limiting risk and ensuring the accuracy of payroll advance accounting.

Role of chief accountant:

• Check validity of documents before approving payment.
• Ensure that the correct accounting account is entered.
• Check the match between the advance amount and the employee's salary.
• Track repayment deadlines and get reminders when they are due.

Effective monitoring measures:

• Clearly assign responsibilities between the document creator, the reviewer and the approver.
• Perform periodic reconciliation between books and reality.
• Set up advance limits for each subject and each specific case.
• Organize surprise checks on large or long-standing advances.

6. Practical situations in salary advance accounting

In reality, businesses may encounter many complicated situations when accounting for salary advances, requiring appropriate solutions.

6.1. Handling of overpayments or non-repayments

When an employee makes an advance payment exceeding the salary he/she is entitled to or does not repay the advance payment, the enterprise can apply the following handling methods:

Step 1: Identify the cause

• Find out why advances are overdrawn or not repaid.
• Work directly with workers to agree on a treatment plan.

Step 2: Plan your deductions

• If the employee is still working: Plan to gradually deduct from the salary in the following months, ensuring it does not exceed 30% of the monthly salary.
• If you have left your job: Transfer to other receivables and take action to collect.

Step 3: Post to the appropriate account

• In case of non-recoverability: Transfer to account 1388 (Other receivables) or account 3388 (Other payables).
• Accounting:
  • Debit account 1388 (Other receivables)
  • Credit account 141 (Advance)

Step 4: Final processing

• If determined to be irrecoverable: Make provisions or account for them in business management expenses after approval.
• Accounting:
  • Debit account 642 (Business management expenses)
  • Credit account 1388 (Other receivables)

6.2. Accounting for advance leave salary

When an employee advances salary for leave, the accounting process is as follows:

Step 1: Record the leave salary advance

• When paying in advance:
  • Debit account 141 (Advance)
  • Have account 111 (Cash) or account 112 (Bank deposits)

Step 2: Calculate current salary

• When calculating salaries for employees:
  • Debit account 642 (Business management costs) or account 627 (General production costs)
  • Credit account 334 (Payable to employees)

Step 3: Deduct the advance

• When deducting the advance from salary:
  • Debit account 334 (Payable to employees)
  • Credit account 141 (Advance)

Real life example:

• Employee A advanced 5 million VND for July vacation.
• A's July salary is 10 million VND.
• Accounting:
  1. When making an advance:
     • Debit account 141 (Advance): 5,000,000 VND
     • Credit account 111 (Cash): 5,000,000 VND
  2. When calculating salary:
     • Debit account 642 (Management costs): 10,000,000 VND
     • Credit account 334 (Payable to employees): 10,000,000 VND
  3. When deducting advances:
     • Debit account 334 (Payable to employees): 5,000,000 VND
     • Credit account 141 (Advance): 5,000,000 VND
  4. When paying the remaining salary:
     • Debit account 334 (Payable to employees): 5,000,000 VND
     • Credit account 111 (Cash): 5,000,000 VND

Accounting for salary advances is an important accounting practice that requires accuracy and strict adherence to accounting principles. Applying the correct accounting process not only helps businesses effectively manage cash flow but also ensures the rights of employees and complies with legal regulations. From choosing the right accounting account, preparing complete documents to applying technology in management, all contribute to transparency and efficiency in accounting work.