SALARIES PAYABLE
This query is : Resolved
24 June 2009
DEAR MY QUERY IS
IF SALARY IS PROCESSED IN PAYROLL SEPERATE CHEQUES ARE ISSUED TO THE EMPLOYEE. THEY ARE NOT DEPOSITED THE CHQUES AFTER SIX MONTHS THEY ARE STALE HENCE REVERSAL ENTRY PASS AS SHOWN AS SALARY PAYABLE.
HOW MUCH TIME THIS AMOUNT SHOULD BE RETAINED. IS IT DEPOSITED IN ANY GOVERNMENT TREASURY. HOW MUCH TIME IS IT REQUIRED. IF EMPLOYEE DIDNT CLAIM THE SAME AMOUNT. DETAILS ON ALL THIS RESPECT REQUIRED
It is carry forward from last 4-5 Years and it is not traceble the employee is it reverse and cosider as revenue of the organisation or treated as liability and paid to any government authority
IF SALARY IS PROCESSED IN PAYROLL SEPERATE CHEQUES ARE ISSUED TO THE EMPLOYEE. THEY ARE NOT DEPOSITED THE CHQUES AFTER SIX MONTHS THEY ARE STALE HENCE REVERSAL ENTRY PASS AS SHOWN AS SALARY PAYABLE.
HOW MUCH TIME THIS AMOUNT SHOULD BE RETAINED. IS IT DEPOSITED IN ANY GOVERNMENT TREASURY. HOW MUCH TIME IS IT REQUIRED. IF EMPLOYEE DIDNT CLAIM THE SAME AMOUNT. DETAILS ON ALL THIS RESPECT REQUIRED
It is carry forward from last 4-5 Years and it is not traceble the employee is it reverse and cosider as revenue of the organisation or treated as liability and paid to any government authority
24 June 2009
cheques are encashable in the period of six months of issue date, after expiry of this date if the cheque was not encashed you can post the reversal entry for salary payble.
24 June 2009
And it is not to be deposited with any government treasury.
25 June 2009
It is carry forward from last 4-5 Years and it is not traceble the employee is it reverse and cosider as revenue of the organisation or treated as liability and paid to any government authority
22 July 2025
Great question! Here’s how to deal with unclaimed salary payments where salary cheques have gone stale and the employees are untraceable:
1. Reversal of Salary Payable:
If salary cheques remain uncashed after 6 months (stale), you can reverse the salary payable entry in your books since the liability technically no longer exists.
The entry would typically be:
css
Copy
Edit
Salary Payable A/c Dr
To Salary Expense A/c (or Other Income A/c)
But whether you reverse to expense or income depends on the facts (see below).
2. Accounting Treatment:
Since the salary was already paid or provided for as an expense, you cannot treat this reversal as income.
Typically, this stale salary remains a liability (salary payable) until either paid to the employee or dealt with under legal provisions.
If the employee cannot be traced, this amount is called "Unclaimed Salary" or "Unpaid Salary".
3. Legal and Compliance Aspect:
Usually, unpaid/unclaimed salaries do not get transferred to government treasury like some other unclaimed amounts (e.g., unclaimed dividends or deposits).
However, companies should make reasonable efforts to locate the employee and pay the dues.
If after reasonable efforts, the employee cannot be traced, company policy or local labour laws should be followed. Sometimes, these amounts may remain as a liability indefinitely or until claimed.
4. Statutory Requirements:
Check local labour laws or Payment of Wages Act applicable in your state/country.
Some states require companies to maintain unclaimed salary in a separate account.
It is not permissible to treat unclaimed salary as income without proper legal steps.
5. Recommended Practice:
Keep the amount in a separate ‘Unpaid Salaries’ liability account.
Make efforts to contact employees (through notices, emails, etc.).
If employees do not claim for a long time (like 3-5 years), consult legal advice for next steps.
Document all attempts to contact employees for audit trail.
Summary:
Issue Treatment
Stale salary cheque (6 months) Reverse cheque issuance, keep amount as salary payable/unclaimed salary
Employee untraceable Maintain as liability, don’t recognize as income
Deposit to govt treasury Generally NOT required for unclaimed salaries
Retention period Indefinite until employee claims or legal decision
1. Reversal of Salary Payable:
If salary cheques remain uncashed after 6 months (stale), you can reverse the salary payable entry in your books since the liability technically no longer exists.
The entry would typically be:
css
Copy
Edit
Salary Payable A/c Dr
To Salary Expense A/c (or Other Income A/c)
But whether you reverse to expense or income depends on the facts (see below).
2. Accounting Treatment:
Since the salary was already paid or provided for as an expense, you cannot treat this reversal as income.
Typically, this stale salary remains a liability (salary payable) until either paid to the employee or dealt with under legal provisions.
If the employee cannot be traced, this amount is called "Unclaimed Salary" or "Unpaid Salary".
3. Legal and Compliance Aspect:
Usually, unpaid/unclaimed salaries do not get transferred to government treasury like some other unclaimed amounts (e.g., unclaimed dividends or deposits).
However, companies should make reasonable efforts to locate the employee and pay the dues.
If after reasonable efforts, the employee cannot be traced, company policy or local labour laws should be followed. Sometimes, these amounts may remain as a liability indefinitely or until claimed.
4. Statutory Requirements:
Check local labour laws or Payment of Wages Act applicable in your state/country.
Some states require companies to maintain unclaimed salary in a separate account.
It is not permissible to treat unclaimed salary as income without proper legal steps.
5. Recommended Practice:
Keep the amount in a separate ‘Unpaid Salaries’ liability account.
Make efforts to contact employees (through notices, emails, etc.).
If employees do not claim for a long time (like 3-5 years), consult legal advice for next steps.
Document all attempts to contact employees for audit trail.
Summary:
Issue Treatment
Stale salary cheque (6 months) Reverse cheque issuance, keep amount as salary payable/unclaimed salary
Employee untraceable Maintain as liability, don’t recognize as income
Deposit to govt treasury Generally NOT required for unclaimed salaries
Retention period Indefinite until employee claims or legal decision
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- TDS on Purchase of Immovable Property by NRI from NRI
- Capital gain from sale of house property
- Current Account Opening for Sole Proprietorship with Udyam Certificate - Zero Turnover
- INTEREST APPLICABLE ON ITC REVERSAL PORTION
- When TDS on GST applied
- Before GSTAT- APL-02 Vs APL-04
- Annual return in Gst
- Value of property in capital gain
- FORM 26A APPLICABILITY
- Copyright software
- GST Treatment of Insurance Commission for Existing GST Holder
- Cash gift by grand mother to her grand daughter
- Tax amount diff in Gstr1 and 3B in tax compare reports
- Tds on GST in connection with sale to public company
- Restoration of certificate of practice
- Regarding change in correspondence address in SSP portal
- No Compliences after incorporation
- USEFUL LIFE OF USED/SECOND HAND COMMERCIAL VEHICLES
- Claiming TDS deducted by builder on Hardship compensation and Corpus
- Address Change to another state of a Registered Trust with 12AB approval
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
CAclubindia
