Entries of PF

PF calculate on basic salary.It is 12% of basic.when we deduct the pf from salary a/c then entry:

salart a/c                         Dr.

To pf payble a/c

To salry payable a/c

and when we paid the pf then entry

PF payable a/c                  Dr.

To bank a/c

and we paid the salary then entry

salary payable a/c                  Dr.

To bank a/c

Ok Thanx. How to add employer share in PF payable a/c

Employer also Contributr Equal amount as of Employees..

Entry will be

Employer's Cont. to PF  DR   

To PF payable

Employer's Cont will be an expense head.

On Exp. Side there will be 2 heads regarding PF. i.e. Employees contr. to PF & Employers Contr. to PF. is it correct?

NO......Employee's Cont to PF is not an Expense of an Employer.

It is deducted from Employees Salary.

OK but vipul sir, at P & L how the exp. of PFwill come together (contr. of both). please tell

For PF account you have to open two ledger account one under Current liabilities and other one under indirect Expenses. When you credit to salary acount of Employee then make credit to the A/c of current liabilities and for employer contribution & other charges paid to PF dept debit the account of Expenses.

Employee contribution amount are the liability of company and if it is not deposited in Govt account the same will be appear in B/S  Liabilities side. after paid the account must be equal.

Employer contribution is an expendinturte for company so it is shows in P/L account.

>> Rajesh

I hope you have got your answer.....

Entries will be

Employer Share - PF Exp. A/c. - Dr., Payable A/c.-Cr

Employee Share - ? The effect of employee share come to Exp. head. please explain. sorry for trouble

ACCOUNTING ENTRIES WILL BE

At the time of credit/payment of the salary

       Salary A/c   Dr

          To PF Payable A/c

           To Salary Payable or Bank A/c

       Provident fund A/c (Employer's Contribution)  Dr. (effected to P/L A/c)

        Admn Charges/ EDLI Charges (PF)                 Dr. (effected to P/L A/c)

                          To PF Payable A/c

At the time of payment of PF to Govt A/c

             PF Payable A/c          Dr.  (Effected to B/s)

                     To Bank

>> Rajesh

Thanks Rajesh sir

this mean only employers contri. will be shown at P&L. & employees share will be in salary a/c. thanx.