Creating Loan to Employee Pay Heads

To create a Deduction Pay Head, Loan to Employee under Loans & Advances (Asset)

Go to Gateway of Tally> Payroll Info.> Pay Heads> Create

1. Enter the Name of the Deduction Pay Head.

2. Select Loan & Advances as the Pay Head Type from the List of Pay Head
Types.
3. Select the respective List of Groups for the field Under.
4. Select Yes from the list if you want the Pay head to affect the net
salary.
5. Specify the Pay Head name to appear on the
Payslip.
6. Select Flat Rate from the List of Calculation Types.
7. Select Calculation period form the list of Calculation
Period
8. Select Per Day from the list Calculation Basis.
9. Set the Rounding Methods to Not Applicable
10.Accept to save the Pay Head.

Payment of Loans / Advances

 In order to account the Loan payment to an employee, enter the Payment voucher as shown below.

Payment of Loan
Go to Gateway of Tally > Accounting Voucher > F5: Payment
1. Select Not applicable in the Class.
2. Change voucher date to 31-May-2006 using F2: Date
button.
3. Debit Festival Loan with an amount of 10000.00, Tally displays a sub-form to allocate this debit to a
cost centre.

5. Select Employee A and accept the sub-form.

6. Credit Cash account and accept the
voucher.
 If you are using the Single entry mode of Payment voucher, then select Cash
account in the voucher header and select Festival Loan from the List of
Ledgers.

Loan Instalment in Pay Structure

Go to Gateway of Tally > Payroll Info > Salary Details > Alter
1. Select Employee A from the list.
2. Navigate through the existing pay structure till the
end.
3. Add new Pay head Festival Loan with Calculation type Flat
Rate.
4. Select End of List to exit from the current Pay Structure.
5. Pay Heads of previous pay structure are copied.
6. At end of the new structure, add new Pay Head, Festival Loan with Calculation type Flat Rate, and
enter Loan Installment amount, 1000.00 in the Rate field.
7. Accept and save the
Changes
 When a Loan is to be recovered in Multiple Fixed Installments, it is added to an
Employee’s Pay Structure with Calculation Type Flat Rate.

When all Installments for an Employee loan has been recovered/deducted, you
need to alter the Pay Structure from next effective payroll date and either remove
the Pay Head or set the Value basis to Zero.

Payroll Voucher for Loan

Go to Gateway of Tally > Payroll Vouchers

1. Change the voucher date to 31-7-2006.
2. Select voucher class Salary Process, and Auto-fill for period 1-5-2006 to 31-5-2006 and select the
group as Employee A.
 Observe that Festival Loan appears as new Pay Head for Employee A.

Track Loans and Advance balances

Go to Gateway of Tally > Display > Payroll Reports >Statement of Payroll> Employee
Ledger Breakup
1. Select Festival Loan
 As per your requirements you can configure the appearance of this report and also combine multiple
loans/advances ledgers into same report.

Stopping Loan Instalment deductions

When the entire loan is recovered through deduction of Installment, you can modify the employee
master, either by setting the value basis of the loan Pay Head to Zero or by creating a new pay
structure effective from subsequent payroll period and removing the loan Pay Head.