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Leave liability computation

Others 35 views 1 replies

Dipjyoti Majumdar

CA in service & CS. dipmaj@

3490 Points Joined June 2011

Dear Forum

An employee is paid basic salary of ₹. 20,000 from April'25 - Dec'25 and ₹. 24,000 from Jan'26 to Mar'26 (after increment in Jan'26). If his privilege leave balance is 30 days as on 31/03/2026, what will be amount of leave encashment liability to be provided in accounts for Fy 2025-26.

Will it be ₹. 24,000 or ₹. 21,000 ?

Pleae share your views.

Regards,

Replies (1)

Aashok F C Advisory

Finance & Compliance Consultant | FP

328 Points Joined January 2026

For an employee with a 30-day leave balance as of March 31, 2026, the leave encashment liability should be provided at their current (last drawn) salary of ₹24,000, not the weighted average for the year, as accounting standards require provisions to reflect the expected future cost of settlement at the reporting date.