Late Deduction Account Nature

1. The general entry for the deduction of salary for late arrivals would be:

Debit: Wages/Salaries Expense

Credit: Cash/Bank

2. The journal entry for adjusting short leave hours from overtime hours would be:

Debit: Overtime Wages Expense

Credit: Wages/Salaries Payable

3. The nature of the deduction account would depend on the accounting policy of the firm. However, in most cases, the account is classified as a Contra-Expense account. This is because it is an account that reduces the Wages/Salaries Expense account.

The account would typically be shown as a deduction from gross salary and reflected as a negative value. In terms of the financial statements, the account would be shown in the income statement under the heading 'Employee Compensation and Benefits' as a reduction from the total amount paid as salaries.

Dear Ayush Sir,

Thanks for detailed reply.

I reviewed your 1st entry regarding late deduction where you debit wage exp. and credit cash/bank. my question is that this entry reflects expense paid by cash/bank it doesn't reflect that late deduction happened? please review.

2nd entry is reflecting that overtime expense is accrued because you credited wages salary payable? it doesn't reflect short leave adjustment.

As far as 3rd point is concerned, please share about contra expense definition. further, yes I also believe that deduction account nature depends on accounting policy as someone advised me to take it as an assets in balance sheet as it is reducing our salary expense and giving us benefit. furthermore, to shown in balance sheet will helpful to see every year it's balance which will carried forward each year and it has flaxiblity that if employer wants to release it in any case, he can easily release whereas if it takes in p&l we cant release it because this account balance doesn't carried forward and it's closed in every year. what's your opinion in this regard ?