Journal entry for payroll processing

Tally.erp 9 offers free payroll processing software with its erp series release. However If you are not using tally’s payroll processing, then you might interested how to pass journal entry for payroll processing.

Though tally.erp 9′s payroll processing  feature is  working excellent and serves a complete payroll processing software for totally free. All you need is to be familiar with the entire system.but even in case you are not familiar with this, then you should understand journal entry for payroll processing.

I have posted some articles about payroll processing in tally for employee creation and attendance creation and creating Payhead

However there are many users who do not use the tally’s automated payroll module also users of earlier version i.e. tally 7.2, 6.3 etc have no access to this facility. So, today, I am writing for them how to process payroll manually and how to pass necessary journal entry with practical example

Suppose total gross salary payable for the month of January 2010 is Rs. 3,00,000

Out of above, basic salary which is eligible for Provident Fund contribution is Rs. 2,00,000

Hence, the Employee Provident Fund contribution will be calculated @12% of basic salary i.e. Rs. 24,000.00

Net salary payable to Employee is Rs. 3,00,000 – Rs.24,000 = Rs. 2,76,000.00

The entry for above transaction will be made accordingly

31.1.2010  Dr. Staff salary Expenses  Rs. 3,00,000 (This is the cost which the company has to bear )

Cr. Staff Salary payable Account     Rs. 2,76,000.00

Cr. Provident Fund payable account  Rs. 24,000.00 (it is your liability to pay to govt.)

Now, make one another entry for employer’s contributions for the above salary

An employer is also required to pay a sum @12% from the basic salary before the same is disbursed to employee. Apart of this, Employer is also require to pay @1.61% (of basic pay )additional amount as per below

@1.10%  towards PF administration fees

@0.50% towards Employees Deposit linked insurance scheme

@0.1% towards EDLI administration charges

Dr. Employer PF Contribution Rs.24,000

Dr. PF administration Fees Rs. 2200

Dr. Employee EDLI Rs. 1,000

Cr. PF payable Rs. 27,200

Now total PF payable will be Rs. 24,000+ Rs. 27,200 =Rs, 51,200 which you should pay to PF department through its challan

I will throw more light regarding allocation of this amount to different account and base of calculation so, don’t forget to come back

Meanwhile, Do browse my other site to know more about provident fund and other Indian Commercial laws

Please post your queries on support Forum only

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