In this blog post we try to provide the information about Journal Entries for Payroll. Its represents the total salary of an employee. When we disburse the net salary to an employee, we create their payroll record.

Maintaining a payroll record is essential as it constitutes a significant expense for the company. Various obligations, such as TDS (Tax Deducted at Source), EPF (Employee Provident Fund), and ESI (Employee State Insurance), are associated with payroll.

Consequently, payroll records are meticulously prepared to account for all these deductions through the following journal entries:

JOURNAL ENTRY FOR ACCRUED SALARY (WHEN SALARY IS DUE)

 Basic Salary Debit

 Allowances Debit

 Company Contribution to EPF Debit

 Company Contribution to EPS Debit

 Administration Charges to EPF Debit

 Company Contribution to ESIC Debit

 EPF Payable Credit

 EPS Payable Credit

 ESIC Payable Credit

 Professional Tax Payable Credit

 TDS Payable Credit

 Labour Welfare Fund Payable Credit

 Loan to Employee Credit

 Salary Advance to Employee Credit

 Rent Recovery Credit

 Canteen Expense Credit

 Salary Payable Credit

JOURNAL ENTRY FOR SALARY PAYMENT

 

 Salary Payable Debit

 Cash/Bank Credit

 

Now, let’s break down the above journal entries:

 

Basic salary and allowances constitute the salary expense, which is recorded under salary payable and paid to the employee when the salary is disbursed.

Contributions to EPF, EPS, and ESI are transferred to their respective payable fund accounts because these contributions are also considered expenses. Therefore, we debit these contributions to the respective funds.

 Before transferring to the salary payable account, we deduct TDS and transfer it to the TDS payable account, resulting in a credit to the TDS payable account.

 

Here’s a brief explanation of the payroll items mentioned:

 

1. EPF (Employees Provident Fund)
2. EPS (Employees’ Pension Scheme)
3. ESIC (Employees’ State Insurance Corporation)

These journal entries help in accurately recording and managing the financial aspects of payroll, including deductions and contributions.

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JOURNAL ENTRIES WITH EXAMPLES

JOURNAL ENTRIES FOR PAYROLL CONCLUSION

Dear readers in this above article you got the information about Journal Entries for Payroll. If you have any questions kindly comment below.