[what is journal entry of provident fund , will the salary be involved in the entry or there will be separate entry of provident fund and separate entry of salary?
salary 2500
bank 2500
Providnent fund 251
bank 251
Dear Raza125,
When salaries are paid to the employees, employer deducts the employee's share of provident fund from salary and net salary (after PF) is paid to the employee.
Employer's own contribution as well as deducted amount from employees salary are deposited for a specifid period with the proper authority.
When salary is paid, the following entry is passed,
(Assume salary is Rs. 5000 , deduction from employee's salary Rs. 500, & employer contributes equal amount)
Salary Ac --------------------------------5000Debit
Provident Fund (liablity Ac)-------------- 500Credit (Will be reflected in each individual employee's salary on credit side)
Bank / Cash ------------------------------ 4500Credit
Employer's contribution's entry will be
Salary Ac ---------------------------------500Debit
Provident Fund ( Liablity Ac)--------------500Credit
<b>Alternatively</b> A compound entry may be passed as under,
Salary Ac ------------5000+500---------------5500Debit
Provident Fund (liablity Ac)----500+500------ 1000Credit
Bank / Cash --------------------------------- 4500Credit
<b>Effect</b>
Salary of Rs. 5500 will be shown P&L Ac as an expense.
Provident Fund of 1000 will be shown on the equity side of the balance sheet untill fully paid forthwith interest,if any,
<b>At the time of payment</b>,
Provident Fund (liablity Ac)-------------- 1000Debit
Bank / Cash ------------------------------ 1000Credit
Best Regards,
AOA, welldone faisal bhai
Thanx Faisal bhai.
your knowledge sharing is quite appreciable and v are getting benifits of it. keep it up,sir.