In provident fund employer and employee contribute a specific amount and at the end of employment accumulated amount, sum of employer and employee contribution, is paid to employee.
Suppose total salary (inclusive of all) is Rs.10,500
employee PF contribution:500
Employer’s contribution: 500
Entry will be
Employer’s contribution 500———Dr.
To Provident Fund Payable 1,000———Cr.
To salary payable 10,000 ——————- Cr.
Accumulated balance of Provident Fund will appear in Balance Sheet as liability.
If provident fund made any sort of investment and interest or profit is earned on the said investment then following general entry will be passed :
Interest Receivable on Provident Fund 100———-Dr.
To Provident Fund Payable Account 100————-Cr.