John (Accountant) 26 October 2010
My salary statement has the following heads
Gross salary, LOP, PF, ESI, Profession tax, net salary
When I want to book a salary in tally, how should I do it? should I book in gross salary or in net salary? If in gross salary what is the entry to be passed?
Manzil Arora (Others) 06 August 2020
Salary is the basic expense in every company and thus must be precise and also have better presentation for better understanding. I hope following entry might help you in recording compensation.
1. For recording accrual of compensation the following entry can be passed in the P&L Statement:
By Salary Expenses a/c* Dr.
By HRA Expenses a/c Dr.
By Spl. Allowances a/c Dr.
To Employee contribution EPF Payable a/c Cr.
To Employee contribution ESI Payable a/c Cr.
To Professional Tax Payable a/c Cr.
To TDS Payable a/c Cr.
To Salary Payable** a/c Cr.
(Being Salary expenses recorded)
* Salary expense a/c will be recording the Basic/Gross salary to be paid to employee exclusive/inclusive of all allowances given to him respectively.
** Salary payavle a/c will record the net amount of salary whiich shall be paid to the employee(s).
2. Record accrual of Employer's contribution in EPS / EPF / ESIC:
By Company Contribution to EPF expense a/c Dr.
By Administration Charges to EPF expense a/c Dr.
To Company's contribution EPF Payable a/c Cr
(Being EPF/EPS/ESIC expenses recorded)
3. Payment of Salary, EPS, EPF, ESIC:
By Salary Payable a/c Dr.
By TDS Payable a/c Dr.
By Employee contribution EPF Payable a/c Dr.
By Employee contribution ESI Payable a/c Dr.
By Professional Tax Payable a/c Dr.
By Company's contribution EPF Payable a/c Dr
To Bank a/c Cr.
(Being compensation liability paid)
Further, one of the golden rule of accounting is: Dr. the receiver; Cr. the giver. For ease, remember, liability (payable) is recorded on credit side of Journal Entry. Thus, parts of compensation payable like PT, EPF, etc. are bifurcated on credit side for recording liability.
Yogesh Shah (Managing Corporate Finance) 26 October 2010
You have to pass a entry for GROSS SALARY.
All the deductions show as a 'LIABILITIES'. When your company will pay these amounts to respective bodies, then deduct liability created by that payment.
But I didn't get the logic why you wanna credit net salary to 'Provision for Salary'. Net salary directly go to Cash / Bank account. If you want to show 'Salary Payable' then simply pass journal entry as -
Salary Account DR
to Salary Payable A/c.
Rajesh (Service ) 27 October 2010
Entry for Salary Transaction should be done as per following:
At the time of Credit of Salary:
Basic Salary A/c Dr.
HRA A/c Dr.
Trpotation Allowance Dr.
Spl All Dr.
To PF A/c
To ESIC A/c
To Professional Tax A/c
To TDS A/c
To Salary Payable A/c
At the time of Payment:
Salary Payable A/c Dr
To Cash/ Bank
RAMESH POLINENI (DEVOTEE OF SAIBABA) 27 October 2010
At the time of credit of gross salary the entry is
salaries and wages a/c Dr
To BAsic pay
salaries and wages figure will directly goes to the prifit andv loss account to reduce pofit
at the time of payment debit all credit items to cash or bank account
We sdould show the gross salary transations in the tally books