Query on basis of accounting

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?
Replies (5)
Quick Summary
This discussion clarifies how private limited companies should account for employer contributions to ESI and PF. The consensus is that accrual basis accounting is mandatory. This means these contributions, like other expenses, should be recognised as liabilities when incurred, not just when paid. The example provided illustrates booking salary expenses, then recognising both employee and employer contributions as liabilities, and finally debiting these liabilities upon actual payment.

On Accrual basis......
Even though its an exp do v need to book on accrual?
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
Accrual basis
Always accrual basis...

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