Master in Accounts & high court Advocate
9610 Points
Posted on 09 November 2024
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.