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Query on basis of accounting

shwetha (CMA) (67 Points)

07 September 2020

Dear all

how a Pvt Ltd company needs to book Employer contribution towards esi and pf, either on payment basis or on accrual basis as and when it book salary?

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5 Replies

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 07 September 2020

On Accrual basis......

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shwetha (CMA) (67 Points)
Replied 07 September 2020

Even though its an exp do v need to book on accrual?

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 07 September 2020

For Private Limited Company, Accrual basis of Accounting is mandatory.

Yes, It's our expenses, but before that first it's our liability to contribute to PF, ESIC ect.

All expenses we have to books on accrual basis E.g telephone bill, it's booked on bill date or on receipt of bill date as Expenses Dr... to BSNL Cr.
when afterwards we paid Than BSNL Dr ..to bank Cr.

E.g. #For PF/ESIC contribution :on accrual
(1).. Salary A/ C Dr..
To Employees A/C.
To PF/ESIC (Liability) A/c (Employees contribution)
To TDS ect....if any

(2)..PF/ ESIC( Expenses) A/c Dr. ( Employer contribution)
To PF/ ESIC (Liability) A/c

#When PF/ESIC payment Done :
PF/ESIC (Liability) A/c Dr. (both Employee plus Employer contribution)
To bank Account