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Treatment of PF & ESI

ABHINANDAN JAIN (CA Student) (886 Points)

29 September 2011

I want to know the accounting treatment of Provident Fund and ESI deducted by Employer and contributed by both Employer and Employee.

I mean pls give entries seperately for employee and for employer & also for both payment of PF and ESI

Also show the extract Balance sheet and P/L A/c

pls explain those entries with the help of a suitable example

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13 Replies

Sumit Grover (Chartered Accountant ) (3652 Points)
Replied 29 September 2011

suppose

basic salary(mean to say payable in hand) :10000

employee PF contribution:500

Employer's contribution: 500

Entry will be

Salary A/c Dr. (10,000+500)-----P&L

Employer's contribution A/c 500------P&L

To Pf payable 1,000---------B/S

To salary payable 10,000---------B/S

and due date of PF payment is 20th ( including days of grace) of the nxt mnth....

And for ESIC its 21st( including days of grace) of nxt mnth

The entry for ESIC is same as of PF

Plz correct me if m wrng

3 Like

ashish gupta ( student) (1922 Points)
Replied 29 September 2011

Consider the following entries

1. At the time of deduction from salary

Salary A/c Dr

To EPF

To ESI

To Salary Payable

(Employee Share is deducted here)

2. Now for deposit of EPF- Employee share as well as employer share

EPF A/c Dr.(employee+employer share)

ESI A/c Dr

To Bank A/c

1 Like

SANYAM ARORA (“It's hard to beat a person who never gives up.”) (20168 Points)
Replied 29 September 2011

Originally posted by : CA Sumit Grover
	suppose basic salary :10000 employee PF contribution:500 Employer's contribution: 500 Entry will be Salary A/c Dr. (10,000+500)-----P&L Employer's contribution A/c 500------P&L To Pf payable 1,000---------B/S To salary payable 10,000---------B/S and due date of PF payment is 20th ( including days of grace) of the nxt mnth.... Plz correct me if m wrng

Agreed.......!!!!!!!

1 Like

ankur bansal (CA Final) (student) (124 Points)
Replied 29 September 2011

suppose basic salary is 10000,

employer share for esi 100, epf 500 , employee share for esi 100. epf 500 then.

at the last day of every month.

salary a/c dr. 10000

to salary payable. 10000

(being salary payable for the month ......)

epf a/c dr. 1000

esi a/c dr 200

to esi payable 200

to epf payable 1000

(being epf and esi payable for the month ..)

on the date of payment of salary to employees.

salary payable a/c dr. 10000

to epf 500

to esi 100

to cash/ bank 9400

(being salary paid to employee after deduct his sahre of esi and epf.)

on the day of payment of esi and epf

esi payable a/c dr 200

epf payable a/c dr 1000

to bank a/c 1200 (being esi and epf paid)

2 Like

(Guest)

Originally posted by : CA Sumit Grover
	suppose basic salary :10000 employee PF contribution:500 Employer's contribution: 500 Entry will be Salary A/c Dr. (10,000+500)-----P&L Employer's contribution A/c 500------P&L To Pf payable 1,000---------B/S To salary payable 10,000---------B/S and due date of PF payment is 20th ( including days of grace) of the nxt mnth.... And for ESIC its 21st( including days of grace) of nxt mnth The entry for ESIC is same as of PF Plz correct me if m wrng

Completely concur with this reply

CA PRAVEEN SINGH (MANAGER ACCOUNTS) (2277 Points)
Replied 30 September 2011

uppose

basic salary :10000

employee PF contribution:500

Employer's contribution: 500

Entry will be

Salary A/c Dr. (10,000+500)-----P&L

Employer's contribution A/c 500------P&L

To Pf payable 1,000---------B/S

To salary payable 10,000---------B/S

and due date of PF payment is 20th ( including days of grace) of the nxt mnth....

And for ESIC its 21st( including days of grace) of nxt mnth

The entry for ESIC is same as of PF

Plz correct me if m wrng

Maneesh Kumar (B.Com M.Com STUDENT CWA IPCC) (507 Points)
Replied 30 September 2011

Suppose

basic salary :10000

employee PF contribution:500

Employer's contribution: 500

Entry will be

Salary A/c Dr. (10,000+500)-----P&L

Employer's contribution A/c 500------P&L

To Pf payable 1,000---------B/S

To salary payable 10,000---------B/S

and due date of PF payment is 20th ( including days of grace) of the nxt mnth....

And for ESIC its 21st( including days of grace) of nxt mnth

The entry for ESIC is same as of PF

Plz correct me if m wrng

Agree With Ca PArveen Sir

Atul Kumar (working employee) (153 Points)
Replied 30 September 2011

suppose

basic salary(mean to say payable in hand) :10000

employee PF contribution:500

Employer's contribution: 500

Entry will be

Salary A/c Dr. (10,000+500)-----P&L

Employer's contribution A/c 500------P&L

To Pf payable 1,000---------B/S

To salary payable 10,000---------B/S

and due date of PF payment is 20th ( including days of grace) of the nxt mnth....

And for ESIC its 21st( including days of grace) of nxt mnth

The entry for ESIC is same as of PF

i need to correct. here in place of PF payable we may show Employee PF payable and Employer PF Payable because once you see the challan of PF there are seprate amount shown for employer and employee contribution and it is also better for MIS.

I am doing in this way correct if i am wrong

Rishabh Ahuja (.) (491 Points)
Replied 02 October 2011

can u ppl jus stop pasting the previous answers plz

cm with smthng new plz ...

Arti Sehgal (MBA) (27 Points)
Replied 07 April 2014

CPFC Notification - Employer PF contribution under section 6 is payable only on basic wages (which excludes HRA, Overtime Allowance, Bonus, Commission etc.), dearness allowance (which includes cash value of any food concession) and retaining allowance, if any. https://www.payrollinsights.com/blogs/pf-contribution-is-not-payable-on-ctc/

Regards,

Arti

BHUPESH (Accountant) (22 Points)
Replied 22 January 2017

Originally posted by : ankur bansal (CA Final)
	suppose basic salary is 10000, employer share for esi 100, epf 500 , employee share for esi 100. epf 500 then. at the last day of every month. salary a/c dr. 10000 to salary payable. 10000 (being salary payable for the month ......) epf a/c dr. 1000 esi a/c dr 200 to esi payable 200 to epf payable 1000 (being epf and esi payable for the month ..) on the date of payment of salary to employees. salary payable a/c dr. 10000 to epf 500 to esi 100 to cash/ bank 9400 (being salary paid to employee after deduct his sahre of esi and epf.) on the day of payment of esi and epf esi payable a/c dr 200 epf payable a/c dr 1000 to bank a/c 1200 (being esi and epf paid)

These entries are okay, but I have a question, in which head of Balance Sheet of Salary Person (If maintain by salary person), Contribution in ESI (Both Employee as well as Employer) will be shown? as we can show the contribution in PF under investment in Balance Sheet (Please correct if I am wrong), but i dont know where i should show the contribution in ESI in Balance sheet.

surendar (articeled student) (22 Points)
Replied 10 January 2022

Hope solution can be proposed from SAP or any ERP point of view where compound journal entry is not recommended.

Eg: Salary payable is related to employee (Seperate entry) & Employer contribution is to be arrived seperately. Both employee and employer combined to make payment. So total three entries.