Distribution of Salary and Its Deductions

Subject: Accountancy

Find Your Query

Overview

Salary is distributed to the employees of government offices against the service rendered by them. The salary is distributed after making a deduction of provident fund, income tax, provident fund loan and citizen investment trust. This note has information about the distribution of salary in government offices and deductions made on it.
Distribution of Salary and Its Deductions

Salary is distributed to the employees of government offices against the service rendered by them. The government determines the amount of salary of each level of employee. The salary is distributed after making a deduction of provident fund, income tax, provident fund loan and citizen investment trust.

  1. Employees' Provident Fund

    Logo of Employees' provident Fund

    Employees’ Provident Fund is the amount collected by deducting from the salary of a permanent employee of government offices, company and corporations. The government deducts 10% amount from their salary, contributes equal amount from their salary, and contributes an equal amount which creates the bigger funds. Such fund is collected and mobilized by an office which is called employee provident fund office. This office invests the collected fund in various productive sectors and provides a loan to the concerned employees at a reasonable rate of interest.

    The following journal voucher is passed while distributing salary by deducting the employees’ provident fund:
    Dr. BE Salary
    Cr. Employee Provident Fund
    Cr. Nepal Rastra Bank
    (Being salary distributed after deducting employees’ provident fund)

    The following journal voucher is passed while deducting the amount of provident fund:
    Dr. Employee Provident Fund
    Cr. Nepal Rastra Bank
    (Being the amount of income tax deposited in the account of concerned office)

  2. Income Tax

    sdf

    Each employee of government offices should contribute some amount as income tax from their taxable income. The Income Tax Act has given certain exemption limit of income for tax purpose. An employee has to pay income tax on the income over the exemption limit.

    The following journal voucher is passed while deducting income tax from the amount of salary:
    Dr. BE Salary
    Cr. Income tax
    Cr. Nepal Rastra Bank
    (Being salary distributed after deducting income tax)

    The following journal voucher is passed while deducting the amount of income tax:
    Dr. Income tax
    Cr. Nepal Rastra Bank
    (Being the amount of income tax deposited in the account of concerned office)

  3. Provident Fund Loan

    sdf

    The employees of government offices deposit their provident fund in the account of provident fund office. They are given a facility to take a loan out of their provident fund deposit. Such a loan can be repaid on an installment basis by making a deduction from their monthly salary.

    The following journal voucher is passed while deducting provident fund loan from the amount of salary:
    Dr. BE Salary
    Cr. Provident Fund Loan
    Cr. Nepal Rastra Bank
    (Being salary distributed after deducting provident fund loan)

    The following journal voucher is passed while deducting the amount of provident fund loan:
    Dr. Provident Fund Loan
    Cr. Nepal Rastra Bank
    (Being the amount of provident fund loan deposited in the account of concerned office)

  4. Citizen Investment Fund

    Example of Citizen Investment Fund

    Citizen Investment Fund is a voluntary deduction which can be made at a certain rate. The amount collected by way of voluntary deduction is invested in productive sectors. While distributing salary, such deduction is deposited in the office of citizen investment fund.

    The following journal voucher is passed while deducting citizen investment fund from the amount of salary:
    Dr. BE Salary
    Cr. Citizen Investment Fund
    Cr. Nepal Rastra Bank
    (Being salary distributed after deducting citizen investment fund)

    The following journal voucher is passed while deducting the amount of citizen investment fund:
    Dr. Citizen Investment Fund
    Cr. Nepal Rastra Bank
    (Being the amount of citizen investment fund deposited in the account of concerned office)

Abroad Studies Opportunities

Karkhana Edukit

The District Police Office, Chitwan, distributed the total salary for the month of Marga, amounting to Rs. 4,00,000 on 12th Poush after deduction of provident fund of Rs. 90,000, income tax of Rs. 20,000, provident fund loan of Rs. 15,000 and citizen investment fund of Rs. 15,000. The deductions were deposited in the concerned offices on the same day.

Required: Journal Voucher

Code No.

Particulars

LF

BH No.

Debit Rs.

Credit Rs.

Dr. B.E. Salary

21111

4,00,000

Cr. Provident fund

90,000

Cr. Income tax

20,000

Cr. Provident fund loan

15,000

Cr. Citizen investment fund

15,000

Cr. Nepal Rastra Bank

15,000

(Being salary distributed after deducting provident fund, income tax, provident fund loan and citizen investment fund)

Code No.

Particulars

LF

BH No.

Debit Rs.

Credit Rs.

Dr. Provident fund

90,000

Cr. Nepal Rastra Bank

90,000

(Being provident fund deposited in the concerned office

Code No.

Particulars

LF

BH No.

Debit Rs.

Credit Rs.

Dr. Income tax

20,000

Cr. Nepal Rastra Bank

20,000

(Being income tax deposited in the concerned office.)

Code No.

Particulars

LF

BH No.

Debit Rs.

Credit Rs.

Dr. Provident fund loan

15,000

Cr. Nepal Rastra Bank

15,000

(Being provident fund loan deposited in the concerned office

Code No.

Particulars

LF

BH No.

Debit Rs.

Credit Rs.

Dr. Citizen investment fund

15,000

Cr. Nepal Rastra Bank

15,000

(Being citizen investment fund deposited in the concerned office

Things to remember
  • Salary is distributed to the employees of government offices against the service rendered by them.
  • The government determines the amount of salary of each level of employee.
  • The salary is distributed after making a deduction of provident fund, income tax, provident fund loan and citizen investment trust.
  • Each employee of government offices should contribute some amount as income tax from their taxable income.
  • The Income Tax Act has given certain exemption limit of income for tax purpose. 
  • The employees of government offices deposit their provident fund in the account of provident fund office. 
  • Employees’ Provident Fund is the amount collected by deducting from the salary of a permanent employee of government offices, company and corporations. 
  • It includes every relationship which established among the people.
  • There can be more than one community in a society. Community smaller than society.
  • It is a network of social relationships which cannot see or touched.
  • common interests and common objectives are not necessary for society.
Questions and Answers

Employees’ Provident Fund is the amount collected by deducting from the salary of a permanent employee of government offices, company and corporations.

Citizen Investment Fund is a voluntary deduction which can be made at a certain rate. The amount collected by way of voluntary deduction is invested in productive sectors.

Employees’ Provident Fund is the amount collected by deducting from the salary of a permanent employee of government offices, company and corporations. The government deducts 10% amount from their salary, contributes equal amount from their salary, and contributes an equal amount which creates the bigger funds. Such fund is collected and mobilized by an office which is called employee provident fund office. This office invests the collected fund in various productive sectors and provides a loan to the concerned employees at a reasonable rate of interest.

Each employee of government offices should contribute some amount as income tax from their taxable income. The Income Tax Act has given certain exemption limit of income for tax purpose. An employee has to pay income tax on the income over the exemption limit.

The following journal voucher is passed while deducting income tax from the amount of salary:
Dr. BE Salary
Cr. Income tax
Cr. Nepal Rastra Bank
(Being salary distributed after deducting income tax)

The following journal voucher is passed while deducting the amount of income tax:
Dr. Income tax
Cr. Nepal Rastra Bank
(Being the amount of income tax deposited in the account of concerned office)

The employees of government offices deposit their provident fund in the account of provident fund office. They are given a facility to take a loan out of their provident fund deposit. Such a loan can be repaid on an installment basis by making a deduction from their monthly salary.

The following journal voucher is passed while deducting provident fund loan from the amount of salary:
Dr. BE Salary
Cr. Provident Fund Loan
Cr. Nepal Rastra Bank
(Being salary distributed after deducting provident fund loan)

The following journal voucher is passed while deducting the amount of provident fund loan:
Dr. Provident Fund Loan
Cr. Nepal Rastra Bank
(Being the amount of provident fund loan deposited in the account of concerned office)

Citizen Investment Fund is a voluntary deduction which can be made at a certain rate. The amount collected by way of voluntary deduction is invested in productive sectors. While distributing salary, such deduction is deposited in the office of citizen investment fund.

The following journal voucher is passed while deducting citizen investment fund from the amount of salary:
Dr. BE Salary
Cr. Citizen Investment Fund
Cr. Nepal Rastra Bank
(Being salary distributed after deducting citizen investment fund)

The following journal voucher is passed while deducting the amount of citizen investment fund:
Dr. Citizen Investment Fund
Cr. Nepal Rastra Bank
(Being the amount of citizen investment fund deposited in the account of concerned office)

Code No.

Particulars

LF

BH No.

Debit Rs.

Credit Rs.

Dr. BE Salary

21111

1,50,000

Cr. Provident fund

25,000

Cr. Nepal Rastra Bank

1,25,000

(Being salary distributed after deducting provident fund.)



Code No.

Particulars

LF

BH No.

Debit Rs.

Credit Rs.

Dr. BE Salary

21111

2,50,000

Cr Provident fund

25,000

Cr. Nepal Rastra Bank

2,25,000

(Being salary distributed after deducting provident fund.)

Code No.

Particulars

LF

BH No.

Debit Rs.

Credit Rs.

Dr. BE Salary

21111

1,98,000

Cr. Provident fund

36,000

Cr. Income tax

4,000

Cr. Nepal Rastra Bank

1,58,000

(Being salary paid distributed after deducting provident fund and income tax.)

Code No.

Particulars

LF

BH No.

Debit Rs.

Credit Rs.

Dr. BE Salary

21111

1,50,000

Cr. Provident fund

15,000

Cr. Citizen investment fund

2,000

Cr. Income tax

3,000

Cr. Nepal Rastra Bank

1,30,000

(Being salary distributed after deducting provident fund, citizen investment fund and income tax.)

Quiz

© 2019-20 Kullabs. All Rights Reserved.