Employee loan - shouldn't Principal deducted be automatically credited to Employee Loan Ac

I have created an employee loan at 0% interest with salary deduction option (fixed amount per period) and disbursed it.

When I run the payroll entry/salary slip, the deduction for principal shows correctly. When I make a bank entry the reduced pay amount shows in the bank entry, which is correct.

However, I don’t see the deducted principal amount posted to the employee loan account as a credit. Hence I still see the originally disbursed loan amount.

Is this incorrect behavior or am I missing a step?


@KanchanChauhan @ArundhatiS
Hi, I hope you don’t mind my tagging your ids.
Is the loan repayment journal entry to the employee loan ac supposed to be done manually for each pay period?

I did not manage to get that information from the video or the blog.

Thank you.

Any one?

One more bump


I have checked on local account and it’s working properly, have created payroll entry and on submission of salary slip from payroll entry system credits the principal amount into the employee loan account. This scenario didn’t work if you’re not making salary slip from the payroll entry and making manually.

Hi, I am doing a salary slip, but it does not work.
Did you use 0% interest?

I will pull step by step screenshots if you are not able to reproduce.


Yes I have tried with 0%, kindly make salary slips using payroll entry and check.

Thanks @rohit_w
Let me put down the steps and screenshots for your reference (based on the video on emp loans)

  1. Created Employee Loan A/c under current assets
  2. Created loan type with 0% interest
  3. Confirmed loan type is created
  4. & 5) Set up Employee loan (directly without Employee Loan Application)
  5. Disbursed loan
  6. Created Salary slip (correctly deducts the loan installment amount)
  7. Created Salary bank entry (to payroll ac)
  8. Bank GL A/c correctly shows payroll entry amount (from salary slips of all employees)
  9. Employee loan a/c shows no change to the balance

Please review.

Please let me know if this gives any clues or if you need more information. Thanks.

Hi @Chandra

Can you confirm that you created the Salary Slip using the Payroll Entry feature and not manually as mentioned by @rohit_w earlier?

Kind regards,

Hi @wale,

Yes, it is payroll entry and salary slip (not manual).
Please take a look at the screenshots - I have tried to put down the steps
including this one (#7)

@rohit_w @wale
Hello, any ideas how this may be resolved please?

I figured the issue.
When the first payroll entry was made, the default account for the salary component was not in place. Even though I updated the account and then cancelled & amended the payroll entry/salary slip, it would not take the updated salary account.

Completely cancelled the original payroll entry and created afresh - this works correctly with the posting to salary, to employee loan and bank.

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Hy Chandra

I hope this finds You as well,

I face The same issue in the same case with an interest of 0%, please let me know how Exactly You had solved

It has been a while and I don’t use this functionality now. Please try updating the default account for salary first and then create the payroll entry (than update the existing entry).

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I am facing the same issue, I tried following your method, even created a new test environment so that I could test from scratch, still the loan amount is not deducted from bank account while making bank entry. Could you please assist what other changes you might have made.