Question regarding employee rents paid..

[homerironworks]

I have an employee that is issued a check for his landlord weekly to pay his rent. We have an external payroll company that deducts this from his paycheck, and it is credited back to us in the process. Right now the rent is coming out of an expense account, and this just doesn't feel right to me. Does anyone have any idea on how this could be journalized??

 

[kirby]

When you pay employees rent
Dr Rent Exp
CR Cash
Then payroll company deducts from his PR check and pays you
DR Cash
CR (You didn't specify but should be to rent expense)
So you are in essence making a short term loan to him for the period between when you pay his rent and when he pays you back.

 

[homerironworks]

Thank you. My only problem with that is that this all happens on the same day. The payroll company withdraws the total amount of all payroll expense and I cut him a check

 

[kirby]

I am not seeing the problem here. Can you state the problem you have with this?

 

[bklynboy]

We have a similar issue where we pay certain employee costs and then get reimbursed (in my case its not the same day but does not change the issue). We handle this by recording the following for the payment:

Debit: Employee Advance (asset)
Credit: Cash

We use an asset since this is a payment on their behalf that we expect to be repaid - it is not an expense as its not part of teh company's obligation.

When we get repaid from the employee we record:

Debit: Cash
Credit: Employee Advance

Clears the asset that is repaid. Note if you have any concern around repayment then an allowance should be set up for any potential loss (does not sound like this would be teh case on your end).

I also do not see the issue here - can you explain the journals you make for the transaction?