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Salary journal entries

John (Accountant)     26 October 2010

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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?

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Manzil Arora (Others)     06 August 2020

Manzil Arora
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Hi John

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

Yogesh Shah
Managing Corporate Finance 
 54 likes  1051 points

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Hi John,


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.

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Rajesh (Service )     27 October 2010

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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

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At the time of credit of gross salary the entry is

                       salaries and wages a/c Dr

                                   To BAsic pay

                                   To Pf

                                    To ESi

  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


Dear John,

I am agree with Rajesh

vishal (article)     28 October 2010

 29 points

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I also agreed with Rajesh


shailendra (Accounts Executive )     03 November 2010

Accounts Executive  
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I agree with Rajesh


Tushar Desai (Manager - Finance & Accounts)     14 June 2011

Tushar Desai
Manager - Finance & Accounts 
 34 likes  834 points

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Hi John,

I agree with Mr Rajesh

bhupinder (ACCOUNTANT)     20 June 2011

 21 points

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Hi Jhon,

Along with Mr. Rajesh.


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