Salary journal entries

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. 

1)Salary paid - indirect exp.                            2)Salary payable - current liability.                   3)Salary advance - Loans and advances asset.    4)Employee name under which head have to group ?

debit salary account  and credit with concerned bank account. 

Nice complete Salary entry.

Firstly pass 

Salary A/c   ............Dr.

       To Salary Payable a/c

At time of payment

Salary Payable A/c ..........Dr.

       To Bank a/c

Y we are contained in salary entry basic HRA

Y we are contained in salary entry basic HRA

Well explained. Great.

Hey, Can anyone pls tell me how do I pass entry of LOP

As the deductions from the salary will be credited at the time of booking a journal entry of salary payable so LOP will also get credited,

but how can we pass the LOP second entry to net off it?

Journal entries for recording a salary payment :

Debit: Salary

Credit: Loss Of Pay

Credit: PF Payable (or Employee Provident Fund)

Credit: ESI Payable (or Employee State Insurance

Credit: Profession Tax Payable

Credit: Net Salary Payable (or Salary Payable)

In this example, the gross salary of is debited to the salary expense account. The individual deductions (LOP, PF, ESI, and Profession Tax) are credited to their respective payable accounts. The remaining amount, which is the net salary, is credited to the net salary payable account.