Is correct way to do journal entry of salary

This query is : Resolved

Daya (Querist)
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15 May 2025 Salary A/c Dr. ( Cost of the Company)
To Employees Contribution to EPF Payable
To Employer Contribution to EPF Payable
To Employee Contribution to ESI Payable
To Employer Contribution to ESI Payable
To Gratuity Payable
To Professional Tax Payable
To TDS Payable
To Advance Adjustment against Salary
To Salary Payable
is mandatory to separately show Employees and Employers contribution of EPF and ESI Payable in books of Accounts.

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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12 August 2025 Your approach to the salary journal entry is mostly correct but can be clarified and structured better. Here's how it’s generally done and some points on showing employee & employer contributions separately:

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### Typical Salary Journal Entry (monthly):

**When salary is accrued (before payment):**

```
Salary Expense A/c Dr. (Gross Salary + Employer’s contribution)
To Employee's Contribution to EPF Payable (Deduction from employee salary)
To Employee's Contribution to ESI Payable (Deduction from employee salary)
To Professional Tax Payable (Deduction from employee salary)
To TDS Payable (Deduction from employee salary)
To Salary Payable (Net salary payable to employees)
To Employer’s Contribution to EPF Payable (Employer's share)
To Employer’s Contribution to ESI Payable (Employer's share)
To Gratuity Provision/Payable (If applicable)
```

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### Key points:

1. **Separate Disclosure:**

* Yes, **Employee and Employer contributions for EPF and ESI** should be shown separately in the books of accounts because:

* Employee contribution is deducted from salary (liability payable to government).
* Employer contribution is an expense for the company and also a liability.

2. **Treatment in Profit & Loss:**

* Salary expense = Gross salary + Employer’s contribution to EPF & ESI + Gratuity provision (if any).
* Employee contributions and other deductions (TDS, PT) reduce the payable salary amount but do not reduce salary expense.

3. **Advance Adjustment:**

* If any advance salary or other advance adjustment exists, it can be credited under “Advance against Salary” or “Employees’ Advances”.

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### Sample entry with amounts for clarity:

| Particulars | Dr (₹) | Cr (₹) |
| --------------------------- | -------- | ------ |
| Salary Expense | 1,00,000 | |
| Employee EPF Contribution | | 10,000 |
| Employer EPF Contribution | | 12,000 |
| Employee ESI Contribution | | 2,500 |
| Employer ESI Contribution | | 3,000 |
| Professional Tax Payable | | 2,000 |
| TDS Payable | | 5,000 |
| Salary Payable (Net Salary) | | 65,500 |

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### Summary:

* Show **employee and employer contributions separately**.
* Salary Expense includes employer contributions but excludes employee contributions.
* Employee contributions & other deductions go to respective liabilities.
* Salary Payable = Gross salary – all employee deductions.

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If you want, I can draft a more detailed example or suggest entries for salary payment and subsequent payments to government authorities. Would you like that?

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