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Entries for salary income and timing of same

Pranav (owner) (226 Points)

22 December 2015

Can anyone urgently tell me what accounting entries"(Especially JV)" should be done for salary received and "Time of recording" the same? Its urgent

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3 Replies

CMA Poornima Madhava (CMA) (13112 Points)
Replied 22 December 2015

I think your question is not clear. Generally salary paid/payable is recorded through journal. Do you mean you want to record transaction for receipt of salary?

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Rohit Garg (Student) (35 Points)
Replied 22 December 2015

Normally no entries are passed for salary income but still if you want to pass the entries you can pass the following entries: When the salary becomes due (i.e. at then end of month or the 1st day of next month): Salary Receivable A/c Dr. To Salary Income A/c (being salary become due) At the time of receipt of salary: Bank A/c Dr. To Salary Receivable A/c (Being salary received) I hope the above reply will resolve your query

Stranger (.) (5531 Points)
Replied 23 December 2015

Dear, the following entries are required to be passed:

In the books of the Organisation (Salary will be an expense)

(At the end of each month or beginning of next month, depending upon when salary become due as per the policy of Organisation. Generally it's the beginning of next month)

Salary A/c Dr.

To Salaries Outstanding A/c

(Being salary due)

(At the time of payment)

Salaries Outstanding A/c Dr.

To TDS Payable

To Cash / Bank A/c

(Being TDS deducted on salary & balance paid off)

In the Personal books of accounts of the assessee*** (Salary will be an income)

(At the end of each month or at the beginning of next month)

Salary Receivable A/c Dr.

To Salary A/c

(Being salary due)

(At the time of receipt of salary)

Cash / Bank A/c Dr.

TDS Receivable A/c Dr.

To Salary Receivable A/c

(Being salary due received after deduction of TDS)

***Instead of Personal books of account, P & L A/c & B/S, its the books of account of the business or profession of the assessee, if maintained voluntarily or mandatorily, which are required to be filled in the ITR at the time of filing income tax return for the relevant A.Y.

Note:

1. The above entries are done only in respect of 'salary due' & 'salary received / paid'. Besides, if applicable to the Organisation, entries for EPF or / & ESI should also be passed along with entries for "Salaries due".

2. In case of Companies, in which accrual basis of accounting is mandatory, though not seen in general practice, but there can be an additional entry for "accrued but not yet due". Example: As per Company's policy, Salary becomes due on next month but it accrues at the end of the month itself. In which, at first at end of month "salary A/c" is debited & "salary accrued but not yet due A/c" is credited & later at the beginning of next month "salary accrued but not yet due" A/c is debited & "Salaries Outstanding" A/c is credited. But due to unnecessary increase of work load, it is generally avoided practically.

3. The concept of "accrued but not due" is not applicable in case of incomes as per "Prudence Concept"of Accounting.

Hope ur doubt is cleared now...