Adding a New Employee Custody
An employee custody is an amount given to the employee to spend on the company’s expenses, then they settle it later with expenses or purchase invoices, or return the remainder in cash. This article explains how to add a new custody for an employee, the accounts used in it, the entry created on saving, and how to record the opening balance of custodies.
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Note: You need the permission to add employee custodies. You can review each role’s permissions from Employee Roles.
Contents
How to Access
- Direct link: Employee Custody, then click Add Custody.
- From the menu: Click Finance, then Employee Custody, then click Add Custody.
Steps
- Open Employee Custody, and click Add Custody.
- Select Employee.
- Set Date of the custody, and Settlement Due Date if you want.
- Enter Amount, and make sure of the Currency.
- Leave Employee Custody Account on Default Account, or choose another account.
- Select Cash / Bank Account from which the amount was paid, and Payment Method if you want.
- Add Description and Attachments if any.
- Click Save. To exit without saving, click Cancel.
Fields and Sections Explained
| Field | Description | Required | Appears When |
|---|---|---|---|
| Employee | The employee to whom the custody is given. | Yes | Always |
| Custody Code | The custody number, generated automatically by the system. | Yes (automatic) | Always |
| Date | The custody payment date, which is the date of the journal entry. | Yes | Always |
| Settlement Due Date | The expected date for settling the custody. | No | Always |
| Amount | The amount given to the employee; it must be greater than zero. | Yes | Always |
| Currency | The custody currency; the default is the account currency. | Yes | Always |
| Employee Custody Account | The account that holds the custody amount until it is settled (the debit side of the entry). When you leave Default Account the system uses the employee’s account under Employee Custody, or creates it if it doesn’t exist. | Yes | Always |
| Cash / Bank Account | The account from which the amount was paid (the credit side of the entry), and you can choose any account from the Chart of Accounts. This account is also used when Return Cash. | Yes | Always |
| Payment Method | The method of paying the custody amount. | No | Always |
| Description | Notes about the custody. | No | Always |
| Attachments | Supporting documents in png, jpeg, pdf, docx, and xls formats, with a maximum of 10 MB. | No | Always |
Rules and Restrictions
- The Amount must be greater than zero.
- The Date of the custody can’t be within a closed financial period.
- After adding any settlement to the custody, you can’t edit the Employee or the Amount or the Currency or the Payment Method or the Employee Custody Account or the Cash / Bank Account; only the Description remains editable.
- The custody amount can’t be reduced when editing it to less than the total settlements recorded on it.
- When using Return Cash, the remaining amount is returned to the same Cash / Bank Account set in the custody, and another account can’t be chosen.
- The custody status is set automatically and doesn’t appear in the add form.
Error Messages and Their Solutions
| Cause | Message | Solution |
|---|---|---|
| The custody date is within a closed financial period. | This date is in a closed financial period | Choose a date outside the closed period, or open the financial period. |
| Editing the custody amount to a value less than the recorded settlements. | The custody amount can’t be less than the settlements already recorded on it. | Enter an amount equal to the total settlements or greater. |
The Effect on the System
- The custody is saved with the status Open, and its remaining amount equals its amount.
- The custody appears in Employee Custody and in the custodies tab in the employee’s profile.
- An automatic journal entry linked to the custody is created, with the custody date and currency.
Example: a custody of 5,000 paid from the main treasury:
| Account | Debit | Credit |
|---|---|---|
| Employee Custody Account (the employee’s account under Employee Custodies) | 5,000.00 | |
| Cash / Bank Account (the main treasury) | 5,000.00 | |
| Total | 5,000.00 | 5,000.00 |
When the custody is edited, the entry itself is edited, and when it is deleted, the entry is deleted.
Recording the Opening Balance of Employee Custodies
If the employee had an existing custody before starting to work on the system, record it as a new custody without paying an amount from the treasury, by choosing the opening balances account instead of the treasury:
- Open Employee Custody, and click Add Custody.
- Select Employee, and make the Date of the custody the start date of your work on the system.
- Enter the amount remaining with the employee in Amount.
- Leave Employee Custody Account on Default Account.
- In Cash / Bank Account Choose the opening balances account you use in Chart of Accounts, instead of the treasury.
- Click Save.
An entry is created debiting the employee custody account and crediting the opening balances account, without any transaction on the treasury. The custody appears in the screen Employee Custody, and it can be settled later with expenses or purchase invoices like any other custody.
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Important: If the employee returned the remaining amount in cash, don’t use the action Return Cash for this custody; because it returns the amount to the opening balances account you chose when adding it, not to the treasury. Instead, click Add Settlements, record the returned amount, and choose in it the treasury account that received the amount.
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Note: You can also record the opening balance with a manual journal entry on the employee’s account under Employee Custody, but in this case it appears in the accounts only, and it doesn’t appear in the employee custodies screen and can’t be settled from it.
Frequently Asked Questions
How do I record the opening balance of employee custodies?
Add a new custody for the employee with the amount remaining with them, and choose in Cash / Bank Account the opening balances account instead of the treasury. If the employee returns the remaining amount later, record it with Add Settlements on the treasury account, not with Return Cash. The details are in Recording the Opening Balance of Employee Custodies.
The employee returned the rest of the custody, so why did the amount go to an account other than the treasury?
Because Return Cash returns the amount to the same Cash / Bank Account set in the custody. So if the custody was recorded as an opening balance on the opening balances account, the amount returns to it. In this case, record the returned amount with Add Settlements and choose the treasury account.
Where do I find the employee custody account in the chart of accounts?
Under Assets → Current Assets → Employee Custody, in an account with the employee’s name. It is created automatically when adding the employee’s first custody while leaving Default Account.
Why can’t I edit the custody amount or the employee?
Because a settlement was added to the custody. After the first settlement, only the Description remains editable.
Must the cash / bank account be a treasury?
No. Any account from the chart of accounts can be chosen, and it is the credit side of the custody entry. But note that Return Cash returns the remaining amount to this same account.