The advance report after a business trip: what journal entries are made if the money ran short, was left over or was not returned?
Giving money for a trip, getting a report after return, paying the employee extra or recovering the balance: three different situations of three employees on accounts 4220 and 6970, with journal entries tied to the lines of the NAS No. 21 tables.
In one week "Bunyodkor Loyiha" LLC sent three employees on business trips. Engineer Jasur inspected a site in Namangan and ran short of money. Estimator Malika brought part of the money back from Bukhara. Supply officer Ravshan put off handing in the balance "until later". For accountant Feruza these are three separate calculations, but all of them start with one account.
Which account is used when money is given for a trip?
Money issued for a business trip sits on account 4220 "Business travel advances" (NAS No. 21, paragraph 182). This money is not yet an expense: until the employee submits a report, it is the company's receivable from the employee.
The advance amount is not a rough guess but is worked out by calculation: under paragraph 182, the calculation shows the trip order, the ticket price, daily living expenses and other trip-related expenses. The rate at which daily expenses are taken is not the subject of this article; in the examples below it is a hypothetical amount from the company's internal order.
All three employees were given money from the cash desk:
| Employee | Trip | Advance issued, soum | Journal entry | Basis (NAS No. 21) |
|---|---|---|---|---|
| Jasur | Namangan, 4 days | 3 000 000 | Dt 4220 – Ct 5010 | Paragraph 185, line 4 |
| Malika | Bukhara, 3 days | 2 500 000 | Dt 4220 – Ct 5010 | Paragraph 185, line 4 |
| Ravshan | Karshi, 2 days | 1 800 000 | Dt 4220 – Ct 5010 | Paragraph 185, line 4 |
What happens if the employee overspends?
Jasur's advance report:
| Expense | Amount, soum |
|---|---|
| Return tickets | 1 200 000 |
| Hotel, 3 nights | 1 400 000 |
| Daily expenses, 4 days (hypothetical) | 600 000 |
| Total spent | 3 200 000 |
| Advance issued | 3 000 000 |
| Added by the employee from own money | 200 000 |
The manager approved the report. Now two things are recorded: the 3 million soum issued becomes an expense, and the excess 200 thousand soum becomes the company's debt to Jasur. Under paragraph 306, if the amount spent exceeds the amount issued, this debt is shown on the credit of 6970 "Payables to accountable persons". Jasur heads the design department, i.e. he is a management employee, so the expense goes to 9420:
| Transaction | Debit | Credit | Amount, soum | Basis (NAS No. 21) |
|---|---|---|---|---|
| Trip expense within the advance | 9420 | 4220 | 3 000 000 | Paragraph 412, line 10 |
| Debt to Jasur for the overspending | 9420 | 6970 | 200 000 | Paragraph 309, line 15 |
After that, the balance for Jasur on 4220 is zero, and on 6970 there is a credit balance of 200 000 soum. Once the debt is paid from the cash desk, this balance is closed. No separate line is given for the payment itself in the NAS No. 21 tables, so we do not show it here as a journal entry.
If Jasur had been an employee of a production workshop, the expense would have been recorded not to 9420 but to workshop costs: line 12 of paragraph 185 shows Dt 2010, 2310, 2510, 2710 – Ct 4220-4290.
What if money is left over or not returned?
Malika spent 2 100 000 soum and returned 400 000 soum to the cash desk. Paragraph 180 states that trip advances not fully used must be returned to the cash desk.
| Transaction | Debit | Credit | Amount, soum | Basis (NAS No. 21) |
|---|---|---|---|---|
| Approved trip expense | 9420 | 4220 | 2 100 000 | Paragraph 412, line 10 |
| Balance returned to the cash desk | 5010 | 4220 | 400 000 | Paragraph 185, line 6 |
Ravshan spent 1 650 000 soum and did not return the 150 000 soum balance. The expense part is recorded as for Malika (Dt 9420 – Ct 4220 = 1 650 000). If the balance is withheld from his wages:
| Transaction | Debit | Credit | Amount, soum | Basis (NAS No. 21) |
|---|---|---|---|---|
| Unreturned advance withheld from wages | 6710 | 4220 | 150 000 | Paragraph 290, line 13 |
The procedure for withholding from wages and its limits are set by labour legislation. The accounting entry is made only after the withholding has been carried out on a lawful basis.
Summary for the three employees:
| Employee | Issued | Spent | Result | Where the balance was closed |
|---|---|---|---|---|
| Jasur | 3 000 000 | 3 200 000 | Company owes 200 000 | 6970 (until paid) |
| Malika | 2 500 000 | 2 100 000 | 400 000 returned | 5010 |
| Ravshan | 1 800 000 | 1 650 000 | 150 000 not returned | Withheld via 6710 |
If the trip is in foreign currency, which rate is used?
If foreign currency is issued for a trip abroad, under paragraph 182 it is accounted for separately and translated into soum at the Central Bank rate on the day the advance is issued. The appendix to NAS No. 22, however, gives the date the advance report is approved as the date for recording employees' foreign-currency debts on accountable amounts. Because the two documents mention two different dates, both the issue date and the report approval date are recorded separately; set out in your accounting policy how to apply them. On trips abroad it is especially important to record the report approval date precisely.
Test yourself
5 questions on this topic: pick an option or reveal the answer.
A procurement officer of "Qiziltepa tekstil" LLC received an advance of 4,200,000 soums for a business trip. The expense report confirmed spending of 3,650,000 soums; the remainder was not returned to the cash desk, and it was decided to withhold it from wages. How is the deduction recorded?
An employee returned from a business trip and handed the unused balance of the advance in to the cash desk. What journal entry is made?
In which account is an advance issued to an employee for a business trip recorded?
"Arnasoy baliq" LLC, which works seasonally, accrued wages in winter to workers who did preparatory work for the next season. Under its accounting policy this cost is included in deferred expenses. Which journal entry is made?
Three months ago the company lent money to another organisation as a short-term investment (5830). The loan has now been repaid to the settlement account. Which journal entry is made?
Answered: 0 / 50 of 5 correct
All tests →See also
Sources
- NAS No. 21 "Chart of Accounts for Accounting of Business Entities and Instructions for Its Application", paragraphs 179, 180 and 182 · accounts 4200; unused advances are returned to the cash desk; a business trip advance is calculated on the basis of the order, ticket cost and daily living expenses; a foreign-currency trip advance is accounted for separately and translated into soum at the rate on the day the advance is issued
- NAS No. 21 "Chart of Accounts for Accounting of Business Entities and Instructions for Its Application", paragraph 185 (lines 4, 6 and 12) · Dt 4220-4290 – Ct 5010, 5020; Dt 5010, 5020 – Ct 4220-4290; Dt 2010, 2310, 2510, 2710 – Ct 4220-4290
- NAS No. 21 "Chart of Accounts for Accounting of Business Entities and Instructions for Its Application", paragraph 412 (line 10) · business trip and entertainment expenses: Dt 9420 – Ct 4220, 4230
- NAS No. 21 "Chart of Accounts for Accounting of Business Entities and Instructions for Its Application", paragraphs 305, 306 and paragraph 309 (line 15) · account 6970; if the amount spent exceeds the amount issued, the debt to the accountable person is on the credit of 6970; Dt 2010, 2310, 2510, 2710, 9420 – Ct 6970
- NAS No. 21 "Chart of Accounts for Accounting of Business Entities and Instructions for Its Application", paragraph 290 (line 13) · withholding of advance amounts not returned by accountable persons: Dt 6710 – Ct 4220-4290
- NAS No. 22 "Accounting for Assets and Liabilities Denominated in Foreign Currency", appendix · date for recording employees' foreign-currency debts on accountable amounts: the date the advance report is approved
- Example, employee and company names, amounts · compiled by the author, hypothetical