Blogger Random - Recent - Specific Label Posts Widget - All in One Post Feed Widget

Journal Entries of Payroll

>> August 29, 2012

Payroll means total salary of an employee. When we pay the net salary to any employee, we make the his or her payroll. Payroll record is necessary because it is the main expense of company. There are many liabilities like TDS, EPF and ESI which are related to payroll. So,  it is made with full of care because we have to adjust total deductions from the salary in this. We also record all these items with following journal entries.

1. Pass the journal entry 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

2. Pass the journal entry of the payment of salary.

Salary Payable  Debit
     Cash/ Bank Credit

Now understand the above journal entry

Basic salary and allowance are the salary expense which go to salary payable and which is paid to employee at the time of payment of salary. EPF, EPS and ESI contribution will be transferred to their payable fund accounts. Because all these contribution is also expense, so we have debited the contribution in these funds. Before transferring to salary payable account, we deduct the TDS and transfer to TDS payable account. So, TDS payable account will be credited.

You should understand the meaning of above payroll items.

1. EPF = Employees provident fund.

 2. EPS = Employees pension scheme

 4. ESIC = Employees State Insurance Corporation

You might like:

Follow Us


Post a Comment

About Accounting Education

An educational site with 2500+ articles, solutions, video-guides and tutorials on all topics related to accounting and finance.

Get Update on Mobile

Type in your mobile phone web browser for free access anytime, from any place.The content is designed specifically for cell phones and mobile devices.

Contact Us

Email :

Phone : +91-8557888436

Send an Email
Phone number and vCard
LinkedIn profile
Follow us on twitter