Query regarding salary accounting

Others 1023 views 5 replies

Ajay Singh Bhati

Manager (Accounts)

215 Points Posted on 04 September 2012

Dear members,

We are running a textile industry in Africa. My query is regarding Salary & Wages. I have to separate Direct and Indirect Salary for Costing purpose. In the payroll slip we have following payheads:

Earning side: Basic Pay, Housing Allowance, Transport Allowance, Food Allowance, Bonus, Overtime, Night Shift Allowance, Arrears (if any),

Deduction side: Pension Fund, Income Tax, Loans & Advances, Union Fees

My query is, if I have to separate Direct Labour for costing purpose, then from the earning side, which pay head should I take, i.e. just the Basic Pay or all the allowances also. Allowances are same for factory workers and admin staff.

And please also let me know that if I have to take allowances also, in the accounting software (tally) should I open two separate ledger accounts for all pay heads? e.g. Basic Pay (Direct) and Basic Pay (Admin), Housing Allowance (Direct), Housing Allowance (Admin), Transport Allowance (Direct) & Transport Allowance (Indirect).....and so on..

An early response shall be highly appreciated.

Thanks in Advance.

Ajay Singh

Replies (5)

Bhaskar Unnikrishnan CPA CMA

Accounts / Administration

414 Points Posted on 04 September 2012

To my limited knowledge, you have to consider basic salary only. Costing define "Direct Expenses that changes with volume of production". Those allowance, do not fluctuate with changes in production volume, not to consider for direct expenses.

Ajay Singh Bhati

Manager (Accounts)

215 Points Posted on 04 September 2012

Originally posted by : CMA Bhaskar Unnikrishnan
	To my limited knowledge, you have to consider basic salary only. Costing define "Direct Expenses that changes with volume of production". Those allowance, do not fluctuate with changes in production volume, not to consider for direct expenses.

Thank you Mr. Bhaskar,

But the allowances are also calculated on total working hours of the employee just like basic pay. I am still confused whether to consider these for costing or not because it's part of direct labour we pay for production.

Thanks again.

Regards

Bhaskar Unnikrishnan CPA CMA

Accounts / Administration

414 Points Posted on 04 September 2012

It is apparant that Allowance cost fluctuate with your production volume, so it need to take as direct expense for costing purpose. Sincere apology that I cant advise you on Tally issue.

Ajay Singh Bhati

Manager (Accounts)

215 Points Posted on 04 September 2012

Thank you Mr. Bhaskar once again for your kind reply and sir please no need to apologize. I appreciate your advise. Thanks :)

Bhaskar Unnikrishnan CPA CMA

Accounts / Administration

414 Points Posted on 04 September 2012

You are welcome... A Clarification, Even the alloance for Direct Labor is fixed, you should included for costing purpose as direct cost. Go though below link and you can get a good idea!... https://www.ehow.com/how_2364529_calculate-direct-labor-cost.html