When a company lends cash to one of its employees, the entry will include a credit to Cash and a debit to an asset account such as Notes Receivable from Employees (if a promissory note is involved) or Other Receivables-Advances to Employees (if a note is not involved).

When the company earns interest on the loan, the interest should be credited to Interest Revenue or Interest Income and should be debited to Interest Receivable or Cash.

About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

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