Journal entry for provident Fund

Journal entry for provident Fund

In this article we would discuss the journal entry for provident fund contribution. There are two types of contribution in provident fund i.e. employer contribution and employee contribution.

Employer Contribution Journal Entry

Employer contribution is expense for the business. Thus expense is recorded, while provident fund is liability towards the employee, thus a liability is created for employees. For example the journal entry for the provident contribution shall be recorded as under;

Date	Particulars	Dr	Cr
	Provident fund contribution A/c	100,000
	Provident fund payable		100,000

Employee contribution Journal Entry

The provident fund contribution is normally deducted from the salary. Thus the following entry is recorded in the book to create a liability of provident fund. The salary is paid net off provident fund liability.

Date	Particulars	Dr	Cr
	Salary A/c	100,000
	Provident fund payable		10,000
	Cash		90,000

Fund transfer Journal Entry

We can see that there are two liability created (employer contribution and employee contribution). The total amount is transferred from operation account to provident fund account. The provident fund account cannot be used in business.

Date	Particulars	Dr	Cr
	Provident fund Bank A/c	110,000
	Operational Bank		110,000

Interest on provident Fund Account

Interest earned on provident fund is also credited to employees by the following entry.

Date	Particulars	Dr	Cr
	Provident fund Bank A/c	110,000
	Provident Fund Payable		110,000