Name of Institution

MBA (M&S)
AFM
Dr. Archana Singh

Accounting for Payroll

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 Name of Institution

Accounting for payroll

• The procedures of computation, disbursement,
preparation of payroll reports and accounting
of payroll cost are referred to as payroll
accounting.

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 Contd… Name of Institution

Payroll accounting system involves proper

designing of forms and records not only to
supply the information required by
employees and various laws but also to
provide management with information
needed in its decision making process.

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 Name of Institution

• Most of the employees are entitled to a

graded system of salary wherein they are
entitled to annual increments at a fixed
rate.

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 Name of Institution

• In a nutshell payroll cost is TCTC on

account of the employees, payable in any
form at present or in future and includes:
 Employee’s pay
 Fringe Benefits
 Post retirement benefits

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 Name of Institution

Employee’s pay: Gross and Net

• Gross pay includes:
• Basic Pay
• HRA
• D.A.
• C.C.A.
• Conveyance Allowance
• Net Pay:
• Balance left after compulsory and voluntary deductions.

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 Illustration Name of Institution

• Basic pay of Mr. Subhash is Rs.17460, who is

entitled to D.A. and HRA of 49% and 30%
respectively of the basic salary. He is also entitled to
C.C.A. and T.A. of Rs. 800 and Rs. 1000
respectively. Employer is entitled to deduct 10% of
the basic pay as contribution to PPF and Advance
Tax of Rs.5000 p.m. Rs. 240 is compulsorily
deductible as group insurance scheme. The employee
has agreed to make voluntary contribution of Rs 2000
towards PPF and Rs.100 towards the tea club.
Compute the Gross pay, deductions and Net Pay?

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 Illustration 2 Name of Institution

• Mr. X is employed in the grade of Rs.12000-240-

18300. His basic salary on april 1st 2007 was
Rs.17880 p.m. Following allowances were payable:
• D.A. 49%, HRA 30%, CCA Rs.800p.m.
He was entitled to increment from July 1st
2007.Following deductions are to be made:
• P.F. 10%, Addl. P.F.Rs.2000, Income Tax Rs.7000,
LIC Rs.1500, Conv. Adv. Rs.300, Employee
association Rs.100.Compute Gross earnings for the
FY. 2007-08