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Labour Cess entry in books of accounts

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If a govt organisation deducts 1% labour Cess
from vendor payment then
In the books of accounts of vendor how will this entry be done?
Replies (1)

In the books of accounts of the vendor, the entry for labour cess deducted by the government organization would be:

 Debit: Debtors (or Receivables) account = XXX (invoice amount) Credit: Sales account = XXX (invoice amount)

Debit: Labour Cess payable account = 1% of XXX (labour cess amount)

Credit: Debtors (or Receivables) account = 1% of XXX (labour cess amount) When the labour cess is paid to the government:

Debit: Bank account = 1% of XXX (labour cess amount) Credit: Labour Cess payable account = 1% of XXX (labour cess amount) 

Note: - XXX represents the invoice amount. - Labour Cess payable account is a current liability account. - Debtors (or Receivables) account represents the amount owed to the vendor.

 By passing these entries, the vendor accounts for the labour cess deducted by the government organization and pays the cess to the government.


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