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PF treatment in Balance Sheet

22 December 2020

Hi All,

I have a small query regarding Provident Fund. I wanted to know about the treatment of Provident Fund in Balance Sheet for a Salaried Person.

1. Do we show PF in Balance Sheet ? If yes then where and if no then why ?

2. How do we recognize PF withdrawal in Balance Sheet ?

Please let me know in case you need any further details.

Regards,

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7 Replies

prasad Nilugal ( GST Practitioner & Accounts ) (14803 Points)
Replied 22 December 2020

Yes , Provident fund deducted form employees salary is liability to pay to GOVT account (P.F Dept ) with in due date , therefore you have show under current liability in Balance sheet .

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Sumit Kumar Agarwal (3 Points)
Replied 22 December 2020

Ok can you also confirm on the treatment of Total PF Balance.

For example if PF Account has Rs 1,00,000 Balance, then do we need to show this amount in Balance Sheet ?

Hemanth C L (60 Points)
Replied 22 December 2020

First of all Balance Sheet not required for Salaried Person, only Form 16 is enough

ayusmita (Tax consultant) (5885 Points)
Replied 23 December 2020

As per my knowledge ITR 1 does not ask for balance sheet

provident fund have two elements
one employers contribution
second employees contribution
when employer contributes it becomes expenses for his or her company and recorded in profit and loss Account where's as it becomes liability for employee side
provident fund contribution a/c dr to
provident fund payable a/c

now employee contribution
when it deducted from salary and become liability record under other long term liability in balance sheet

salary a/c dr
to provident fund payable a/c
to cash a/c

now at the stage of fund transfer we have two liability Account one employers contribution another employee contribution
hence

provident fund bank a/c dr
to employee bank account

now the interest treatment it's also liability
provident fund bank a/c dr
to provident fund payable a/c

prasad Nilugal ( GST Practitioner & Accounts ) (14803 Points)
Replied 23 December 2020

He is not asking about filing of ITR1 return , he his asking about treatment of PF ( employees) contributions in Balance sheet .

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bonnieshona (BONNIESHONA) (24 Points)
Replied 23 December 2020

Provident fund or PF is a compulsory retirement savings plan managed by the government where employees contribute a fixed percentage of their monthly pay-out and the same amount is contributed by the employer. Accounting and Journal entry for provident fund is a 3 step process.

When salaries are paid to employees, the employer deducts the employee’s contribution from it and only the net amount is paid. Employer’s own contribution along with the employee’s share is later on deposited with the proper authority.

Ashok Pitroda (Accounting Professionals) (2257 Points)
Replied 14 June 2022

I also have a question: What are the treatment and journal entries of interest from an investment made to a provident fund in the books of accounts of the employer? and

Interest from an investment made to a provident fund is an asset or liability from the employer's point of view? and

Where to show it on the balance sheet?