Overpaid Employee Refund: How Should We Record This in Our Accounts?

Hi all, I am working with a manufacturing company and recently joined in October 2012. We overpaid one employee in July 2012, but the employee has since returned the excess amount. Now, my accounts executive is asking how to record this transaction in the accounts. Kindly advise me on the same.

Similar things do happen commonly in all companies. In such cases, it is not advisable to take back the excess salary in any form. The ideal way is to get authorization from the employee to deduct the excessive salary in the immediate next salary. Then, during the next salary disbursement, only the deducted salary should be disbursed. I believe this will solve your purpose.

Regards,
Kishore

Yes, Ashok! You can adjust the extra amount you paid (during last month's salary) in the preceding month's salary of the employee (with prior authorization from the employee).

Regards, Kishore