Amount Given to Employees for Expenses| What Are Prepaid Expenses? | How to reimbursed employees

Prepaid expenses are future expenses that are paid in advance. On the balance sheet, prepaid expenses are first recorded as an asset. After the benefits of the assets are realized over time, the amount is then recorded as an expense.

In other words when a company gives an employee money in advance to pay for a known cost. Instead of asking that employee to pay out of their own pocket,
you give them the money before they need it. That is Known as prepaid expenses

Implementing prepaid expenses in Bookkeeper:

1. You can create an account under Current Assets as Prepaid expenses on the respective employee’s name and transfer the funds to it via journal voucher:
 

    Employee's prepaid Expense a/c     Dr.
To Cash A/c or Bank A/c

2. Adjusting Journal entry of prepaid expense:
 

    Electricity/Stationary expense etc.   Dr.
To Employee's prepaid Expense a/c

During the course of their employment, employees often incur expenses on behalf of a business and need to be reimbursed at a later date. In order to process the reimbursed employee expenses transaction two bookkeeping journal entries, need to be posted.

• The expense is posted and liability is established to the employee:

Expenses A/c    Dr.
To Employee’s Reimbursement A/c (Under current Liabilities)

• At a later date, the employee will be reimbursed for the expenses and the following journal is recorded

Employee Reimbursement A/c    Dr.
To Cash A/c