How does one account for the return of an advance payment? -

We gave a new hire a monetary advance (via company check and not payroll) but at the last minute he decided to turn down the job. Eventually he returned the advance. How do I account for this? What are the tax implications (in NY)?

There are no tax implications as far as I can see. He never actually worked for you.The entries I would have made are:(For the advance)Debit Employee Advances $XXX [asset account]Credit Cash $XXX(For the return of the advance)Debit Cash $XXXCredit Employee Advances $XXX-------------I know it sounds weird that I m using an account called Employee Advances for this, even though the person never was an employee. But that s just the way I would do it. I m not going to create a whole new account just to record two transactions in. If this happens all the time, you may just need to create a new account to keep track of these non-employee advances.

Thank-you! Report Abuse