Salary Accounting and Audit Notes: Can Anyone Share Detailed Insights?

Hi all,

Does anyone have the details regarding salary accounting and audit notes? Please share.

Regards, Amar🌟

Salary accounting is the part of financial entries for the salary payable recognition and salary payment made to the employees. The financial entries can be as follows:

1. Salary payment made simply and directly

Salaries & Wages A/c Dr
To Bank/Cash A/c Cr

2. Salary accounting where liability is recognized at the end of the salary due period and payment is done on a different date.

I. Salary accounting
Salaries & Wages (a) A/c Dr
To Salaries Payable (b) A/c Cr

II. Salary payment
Salaries Payable A/c Dr
To Bank/Cash A/c Cr

(a) Salaries & Wages is the aggregate of salary components to be paid to the employees.
(b) Salary payable is the accounting entry recognizing the salary payable liability.

3. Salary accounting and payment entries in cases where there is PF payable and others like Sodexo, etc., which are to be paid to third parties but the expense has to be recognized at the time of salary accounting consolidatedly.

Salary accounting - expense and liability recognition
Salaries & Wages A/c Dr (including PF and Sodexo part)
To Salaries Payable A/c Cr
To PF Employees Cont. A/c Cr
To PF Payable A/c Cr
To Sodexo Payable A/c Cr

Salary and other payments
Salary payable A/c Dr
To Bank/Cash A/c Cr
(When actually paying salaries to employees)

PF payable A/c Dr
PF Employees Cont. A/c Dr
To Bank/Cash A/c Cr
(When actually paying to the PF authorities)

Sodexo payable A/c Dr
To Bank/Cash A/c Cr
(When actually paying the Sodexo/contractors)

4. Salary accounting and payment entries in cases where there is PF payable and others like Sodexo, etc., which are to be paid to third parties but the expense has to be recognized at the time of salary accounting separately.

Salary accounting - expense and liability recognition
Salaries & Wages A/c Dr (excluding PF and Sodexo part)
PF Employer's contrib. A/c Dr
Sodexo (Meal Voucher) A/c Dr
PF EDLI & Charges A/c Dr
To Salaries Payable A/c Cr
To PF Employees Cont. A/c Cr
To PF Payable A/c Cr
To Sodexo Payable A/c Cr

Salary and other payments
Salary payable A/c Dr
To Bank/Cash A/c Cr
(When actually paying salaries to employees)

PF Employees Cont. A/c Dr
PF payable A/c Dr
To Bank/Cash A/c Cr
(When actually paying to the PF authorities which include Employees' contribution, Employers' contribution, and EDLI and other charges)

Sodexo payable A/c Dr
To Bank/Cash A/c Cr
(When actually paying the Sodexo/contractors)

The information is given from simple to complex cases. The complexity increases as the number increases. It is possible that the first case itself suits some people. So there is no need to understand everything.

There are more complexities involved in the process of salary accounting when it comes to high-level accounting practices like providing for retirement benefits to employees based on actuarial valuation, etc.