A staff advance entry in Tally has two parts. When you give the advance, pass a Payment voucher that debits the staff member's advance ledger and credits Cash or Bank. When you take it back, credit the same advance ledger in that month's salary journal, which lowers the net pay you owe. The advance ledger goes under Loans & Advances (Asset), because the money is still yours until it is recovered. Keep one ledger per person, such as "Staff Advance: Sunita", or one "Staff Advances" ledger with a cost centre for each person if your team is large. Booking an advance as Salary or any other expense is the common mistake, since it inflates the month's salary cost and hides who still owes you money. The worked example below gives Sunita ₹6,000 on 5 October 2026, recovers it at ₹2,000 a month, and then shows a ₹25,000 staff loan at 12% with its EMI and interest entries.
Key Highlights
- The advance ledger belongs under Loans & Advances (Asset), so the balance shows what each person still owes you on any day.
- Recovery happens inside the salary journal: a ₹2,000 credit to the advance ledger and ₹2,000 less in Salary Payable, with no separate receipt needed.
- A ₹25,000 staff loan at 12% a year with a ₹2,500 EMI is cleared in 11 months and earns ₹1,474.63 of interest in all.
In This Article
- Which group a staff advance goes under, and why
- Advance salary and a staff loan
- The entries for a ₹6,000 advance
- Recovering the advance in parts from salary
- A staff loan with interest
- How the app keeps advances and loans
- Frequently Asked Questions
Which group a staff advance goes under, and why
An advance is money you have handed over that you expect back, so it is an asset. Tally's predefined group for this is Loans & Advances (Asset), under Current Assets. Create the ledger from Gateway of Tally > Create > Ledger, name it after the person, and choose Loans & Advances (Asset) as the group.
Putting it under Indirect Expenses, Salary or Sundry Debtors causes trouble. Under an expense head the month's salary cost looks higher than it was, and the advance disappears from the balance sheet. Under Sundry Debtors your staff appear in the receivables list next to customers. A separate ledger under Loans & Advances keeps the money visible and out of your customer reports.
Advance salary and a staff loan
| Advance salary | Staff loan | |
|---|---|---|
| Typical size | Part of one month's pay | Several months' pay |
| Paid back | From the next salary, or over 2 to 3 months | Monthly EMI over a year or more |
| Interest | Usually none | Sometimes, at a rate you agree |
| Ledger group | Loans & Advances (Asset) | Loans & Advances (Asset) |
| Recovered through | The salary journal | The salary journal, plus an interest entry if you charge interest |
Both sit in the same group. A separate "Staff Loan: name" ledger helps when someone has both a short advance and a long loan at the same time.
The entries for a ₹6,000 advance
Sunita asks for ₹6,000 on 5 October 2026 for Diwali shopping. You agree to take back ₹2,000 from each of the next three salaries.
| Date | Voucher | Debit | Credit | Amount |
|---|---|---|---|---|
| 5 October | Payment (F5) | Staff Advance: Sunita | Cash | ₹6,000 |
| 31 October | Salary journal (F7) | (salary lines) | Staff Advance: Sunita | ₹2,000 |
| 30 November | Salary journal (F7) | (salary lines) | Staff Advance: Sunita | ₹2,000 |
| 31 December | Salary journal (F7) | (salary lines) | Staff Advance: Sunita | ₹2,000 |
Open the ledger after each month and the balance tells the story: ₹6,000 on 5 October, ₹4,000 after the October salary, ₹2,000 after November, and nil after December.
Recovering the advance in parts from salary
In the October salary journal Sunita's gross salary is ₹14,000. After her PF and ESI, she would get ₹12,215. With the ₹2,000 recovery her net pay is ₹10,215. The journal shows it as:
| Ledger | Debit | Credit |
|---|---|---|
| Salary | ₹14,000 | |
| Salary Payable (Sunita) | ₹10,215 | |
| PF and ESI Payable (her share) | ₹1,785 | |
| Staff Advance: Sunita | ₹2,000 | |
| Total | ₹14,000 | ₹14,000 |
The employer's PF and ESI lines are left out here to keep the focus on the advance. The full journal with three staff is in our salary entry in Tally Prime with PF and ESI example. Write the recovery on the payslip too, so Sunita sees ₹2,000 taken back and the ₹2,000 still left.
A staff loan with interest
Say you lend Ramesh ₹25,000 in October at 12% a year, with an EMI of ₹2,500 taken from salary from November. Each month interest is 1% of the balance left.
| Month | Interest | Principal | Balance left |
|---|---|---|---|
| November 2026 | ₹250.00 | ₹2,250.00 | ₹22,750.00 |
| December 2026 | ₹227.50 | ₹2,272.50 | ₹20,477.50 |
| January 2027 | ₹204.78 | ₹2,295.22 | ₹18,182.28 |
| September 2027 (last) | ₹14.60 | ₹1,460.03 | nil |
The loan is cleared in 11 EMIs, the last one ₹1,474.63, and the interest comes to ₹1,474.63 in all.
The entries:
- Giving the loan: Payment voucher, debit Staff Loan: Ramesh ₹25,000, credit Bank ₹25,000.
- Interest each month: Journal voucher, debit Staff Loan: Ramesh, credit Interest Received (under Indirect Incomes). In November that is ₹250.
- The EMI: in the salary journal, credit Staff Loan: Ramesh ₹2,500 and reduce his Salary Payable by ₹2,500.
After November the loan ledger reads ₹25,000 + ₹250 − ₹2,500 = ₹22,750, which matches the table. Loans at low or no interest above certain amounts can have income-tax effects for the employee, so ask your CA before you set the rate.
How the app keeps advances and loans
Takkada's Staff and Payroll add-on lets you give a salary advance and take it back from the next salary or in monthly parts, and give a staff loan with an EMI, with interest if you want, showing every EMI with interest and balance left. The salary run takes back what is due each month. Giving an advance or loan, and paying back a staff bill, each make their own entry for Tally, alongside one balanced salary entry every month, sent through Takkada's Tally connector, in the Tally ledgers you pick.
Read how the month's salary entry is made for Tally from the phone, see the staff attendance and salary app, or start with what to look for in payroll for a Tally business.
Frequently Asked Questions
Q: Staff advance comes under which group in Tally?
A: Loans & Advances (Asset), a predefined group under Current Assets. The advance is money you expect back, so it is an asset until recovered. Keep one ledger per person, so a ₹6,000 advance shows as ₹6,000 owed by that person until salary takes it back.
Q: Advance salary comes under which head in Tally?
A: The same head, Loans & Advances (Asset). Advance salary is paid before the salary is earned, so it cannot be booked as salary expense yet. When the month's salary journal is passed, the advance ledger is credited and the salary expense is booked in full, for example ₹14,000 of salary with ₹2,000 of it settled against the advance.
Q: How to recover an advance from salary in Tally?
A: In that month's salary journal, credit the staff member's advance ledger with the amount being recovered and reduce their Salary Payable by the same amount. If ₹2,000 is recovered from a net pay of ₹12,215, the person receives ₹10,215 and the advance ledger falls by ₹2,000. No separate receipt voucher is needed.
Q: How to enter a staff loan with interest in Tally?
A: Pay the loan with a Payment voucher to a Staff Loan ledger under Loans & Advances (Asset). Each month, pass a journal debiting the loan ledger and crediting Interest Received for that month's interest, then credit the loan ledger with the EMI in the salary journal. On ₹25,000 at 12%, the first month's interest is ₹250.
Takkada's Staff and Payroll add-on keeps every advance and loan with its EMI table and takes back what is due in the salary run. It is switched on for each company separately; message us on WhatsApp and we will show it on your books.