GST Course

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

TAMAL KHAN (Articled trainee)     14 September 2012

Accounting entry for deduction from salary

If a Company suffers losses for nonreceipt of some order due to the fault of an employee, and later it wants to deduct some amount as penalty from the salary of that  employee, what entry should the Co. pass at the time of deducting the same??

 14 Replies

Bhaskar Unnikrishnan CPA CMA

Bhaskar Unnikrishnan CPA CMA (Accounts / Administration)     15 September 2012

Debit Salary Debit Penalty Credit Salary Payable

When Paid:

Debit Payable Credit Cash

Praveen Kumar Agarwal

Praveen Kumar Agarwal (Accountant)     15 September 2012

salary a/c....dr. penalty a/c.... dr. To Employee's a/c

Arif Ali

Arif Ali (Apt Co Advisory)     17 September 2012

When penalty is paid:

Penalty A/c ... Dr

   To  cash/bank


and when penalty is charged from employee as deduction:

Employee' salary payable a/c.... Dr.

   To Penalty A/c

Praveen Kumar Agarwal

Praveen Kumar Agarwal (Accountant)     20 September 2012

actually there is no actual loss of money.. Company cud nt get order and due to that it losts some opportunities to earn some money.. That will be considered as opportunity cost

prit (accountant)     14 August 2013

i want to know about deduction in salary a/c 
i m paying 23500pm salary to one of my staff as per her monthly salry come around rs. 282000/- for that i want to know which deduction is applicable to her & at what %...
kindly reply me in details asap.


Leena (Faculty)     17 August 2013

Dear Prit

You should deduct TDS @ 10% on the income above Rs 2lakh.

Also deduct professional tax @ Rs 200 pm.


Shivani (Learner)     11 September 2013

Agree with Praveen the company has not suffered any loss as such.

But it is penalising the employee at fault so deducting some amount from his or her salary.

In my view entries should be

Salary 1000

To Penalty 1000 (assume)

To Salary Payable 9000


Salary Payable 9000

To Bank 9000


My question is What is this penalty of Rs. 1000 for the company.

Unless other deductions like EPF, ESI or TDS it is not the Current Liability of the company which it needs to deposit with the suitable department within a particular time frame.

It is not an expense for the company either as it has not suffered any loss as such.

Under what head shall we put it while passing its entry in Tally?




Kolade Oloro

Kolade Oloro   24 April 2017

You need to first establish the accounting method your organization adopted. But i trust is accural method of accounting. kindly follow the postings bellow. The ugly truth is that the company made money from the staff, and usually classified as income(Fine and Penalty). See it this way, Assumed that you paid the employee full salary and ask him/her to pay for the fine without you deducting from salary.  That it the exact and true senario.

First Step: Accounting Entry      
Salary Account
Date Descriptttion Amount Date Descriptttion Amount
    Dr     Cr
xxxx Salary 50,000   Bal c/d 50000
  Total 50,000     50,000
  Bal b/d 50000      



Salary Payable Account
Date Descriptttion Amount Date Descriptttion Amount
    Dr     Cr
xxxx Penalty/Fine      5,000.00 xxxx Salary 50,000
xxxx Salary Paid    45,000.00      
  Total    50,000.00        50,000.00




Second  Step: Accounting Entry      
Penalty/Fines Account
Date Descriptttion Amount Date Descriptttion Amount
    Dr     Cr
      5,000.00 xxxx Penalty/Fine      5,000.00
  Total      5,000.00          5,000.00
        bal b/d        5,000.00
Bank/Cash Account
Date Descriptttion Amount Date Descriptttion Amount
    Dr     Cr
  Bal c/d 45,000.00 xxxxx Salary Paid    45,000.00
  Total    45,000.00        45,000.00
        Bal b/d    45,000.00
Kanchan Nagdev Nagdev

Kanchan Nagdev Nagdev (Accounts Assistant)     30 January 2020

If we are deducting penalty from salary then penalty comes in which head in tally
Kumar Sushank

Kumar Sushank (Asst. Manager - Accounts & Taxation)     30 January 2020

In this case, Penalty will be treated as under Indirect Incomes of company.


Bharath (Accountent)     20 February 2020

Dear sir... Under which Accounting Head penalty Account will Come...?

Kumar Sushank

Kumar Sushank (Asst. Manager - Accounts & Taxation)     20 February 2020

It will be under Indirect Incomes (Accounting Head).

1 Like
Rama chary Rachakonda

Rama chary Rachakonda (Master in Accounts & Lawyer email voice no:9989324294)     23 February 2020

penalty charges account comes udner General expenes a/c head

Kumar Sushank

Kumar Sushank (Asst. Manager - Accounts & Taxation)     24 February 2020

@ Mr. Rama Chary: In given case, company is not paying that amount, only charging that amount to his employee. It will be only addition for a company. So, in company books it would be other income.

Leave a reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Related Threads

Start a New Discussion

Popular Discussion

view more »

Subscribe to the latest topics :
Search Forum:

Trending Tags