Home > Financial Accounting, OpenERP, Payroll, Provident Fund > Provident Fund Calculation and Payroll in Manual System & in OpenERP

Provident Fund Calculation and Payroll in Manual System & in OpenERP

Provident Fund Register of an Employee (say Mohsin) of 6 Months is below;

Mohsin Provident Fund Register
Provident Fund
Month Basic Salary By Employee 12% By Company 1.3% Net Salary Payable Net Provident Fund Payable
July 15000 1800 195 13200 1995
Aug 15000 1800 195 13200 1995
Sep 15000 1800 195 13200 1995
Oct 15000 1800 195 13200 1995
Nov 15000 1800 195 13200 1995
Dec 15000 1800 195 13200 1995
Total 90000 10800 1170 79200 11970

Accounting Aspects of each month as Below:

We will use the following list of accounts with balances.

Nature Of Account Account Balance
Liability
Salary Payable 0 Cr
Provident Fund Payable 0 Cr
Expense
Salary Expense 0 Dr
Provident Fund Expense 0 Dr
Asset
Bank 0 Dr

July Accounting Aspects:

Account Dr Cr
Salary Expense 18000
Salary Payable 13200
Provident Fund 1800
Provident Fund Expense 195
Provident Fund Payable 195
Salary Payable 13200
Bank 13200

August Accounting Aspects:

Account Dr Cr
Salary Expense 18000
Salary Payable 13200
Provident Fund 1800
Provident Fund Expense 195
Provident Fund Payable 195
Salary Payable 13200
Bank 13200

September Accounting Aspects:

Account Dr Cr
Salary Expense 18000
Salary Payable 13200
Provident Fund 1800
Provident Fund Expense 195
Provident Fund Payable 195
Salary Payable 13200
Bank 13200

October Accounting Aspects:

Account Dr Cr
Salary Expense 18000
Salary Payable 13200
Provident Fund 1800
Provident Fund Expense 195
Provident Fund Payable 195
Salary Payable 13200
Bank 13200

November Accounting Aspects:

Account Dr Cr
Salary Expense 18000
Salary Payable 13200
Provident Fund 1800
Provident Fund Expense 195
Provident Fund Payable 195
Salary Payable 13200
Bank 13200

December Accounting Aspects:

Account Dr Cr
Salary Expense 18000
Salary Payable 13200
Provident Fund 1800
Provident Fund Expense 195
Provident Fund Payable 195
Salary Payable 13200
Bank 13200

Account Balances at end of December:

Nature Of Account Account Balance
Liability
Salary Payable 0 Cr
Provident Fund Payable 11970 Cr
Expense
Salary Expense 90000 Dr
Provident Fund Expense 1170 Dr
Asset
Bank 79200 Dr

Provident Fund Calculation and Payroll in OpenERP:

I am assuming that post reader install the hr_payroll module before implementation.

Major Steps:

  1. Accounts creation
  2. Partner Creation
  3. Contribution Register
  4. Allowance & Deductions Heads
  5. Function and Salary Structure
  6. Employee creation
  7. Employee contract
  8. Create Employee Payslip
  9. Check Accounting Aspects and Contribution Register

Accounts Creation:

create the following accounts in openerp from Financial Management → Configuration → Financial Accounting → Financial Accounts → List of Accounts.

Acc Name Code Parent Account Type Internal Type
Chart 0 View View
Bank 1 chart Asset Other
Salary Payable 2 chart Liability Payable
Salary Receivable 3 chart Asset Receivable
Salary Expense 4 chart Expense Other
Provident Fund Payable 5 chart Liability Payable
Provident Fund Expense 6 chart Expense Other

Partner Creation:

Create an employee as partner from Partners → Partners → New Partner providing following data.

Name: Mohsin Yaseen

Code: mohin

Supplier: Checked

Account Receivable: Select salary receivable.

Account Payable: Select salary payable.

Enter some information of contact (address) too.

Contribution Register:

Create a contribution register for provident fund from Human Resources → Configuration → Payroll → Contribution Register (Click new) providing following data.

Name: Provident Fund Register

Account: Select Provident Fund Expense

Provident Fund Deduction Head:

Create deduction head for provident fund from Human Resources → Configuration → Payroll → Allowance/Deduction Heads (Click new) providing following data.

Category Name: Provident Fund

Category Code: PF

Type: Deduction

Based on: basic

Condition: True

Contribute by Company: Selected

Amount Type: Fixed Amount

Contribution: 195

Contribution Register: Provident Fund Register

Function and Salary Structure:

Create a Employee function and salary structure for this function from Human Resources → Configuration → Payroll → Employee Function (Click new) providing following data.

Function Name: Consultant

Code: Con

Salary Structure

Name: Consultant Provident Fund Salary Structure

Code: CPFSS

Category: Provident Fund

Type: Deduction

Amount Type: Percentage (%)

Amount /Percentage: 12

General Account: Provident Fund Payable

Employee Creation:

Create an Employee from Human Resources → Employees → New Employee providing following data.

Employee: Mohsin Yasen

Active: Selected

Related User: Administrator

Home Address: Select the partner having name mohsin

Bank Account: Bank

Salary Account: Salary Expense

Employee Account: Salary Payable

Employee Contract:

Create an employee contract from Human Resources → Employees → Contract providing following information.

Employee: Select Mohsin Yasen

Contract Name: Consultant Contract

Function: Select Consultant

Working Hour / Days: 8

Working Days / Weeks: 5

Start Date: 07/01/2010

Wage Type: Monthly Basic Wages

Wage: 15000

Create Employee Payslip:

Create the employee Payslip for the months of july to dec 2010 from Human Resources → Payroll → Employee Payslip (Create New) providing following data (below data is in the form of monthly payslips).

July Payslip Data:

Employee: Mohsin Yaseen

Expense Journal: x Expenses Journal

Bank Journal: x Bank Journal

Date: 07/31/2010

Press Button: Compute Sheet, Verify Sheet,Complete HR Sheet, Complete Accounting Checking and Pay Salary.

Aug Payslip Data:

Employee: Mohsin Yaseen

Expense Journal: x Expenses Journal

Bank Journal: x Bank Journal

Date: 08/31/2010

Press Button: Compute Sheet, Verify Sheet,Complete HR Sheet, Complete Accounting Checking and Pay Salary.

Sep Payslip Data:

Employee: Mohsin Yaseen

Expense Journal: x Expenses Journal

Bank Journal: x Bank Journal

Date: 07/30/2010

Press Button: Compute Sheet, Verify Sheet,Complete HR Sheet, Complete Accounting Checking and Pay Salary.

Oct Payslip Data:

Employee: Mohsin Yaseen

Expense Journal: x Expenses Journal

Bank Journal: x Bank Journal

Date: 07/31/2010

Press Button: Compute Sheet, Verify Sheet,Complete HR Sheet, Complete Accounting Checking and Pay Salary.

Nov Payslip Data:

Employee: Mohsin Yaseen

Expense Journal: x Expenses Journal

Bank Journal: x Bank Journal

Date: 07/30/2010

Press Button: Compute Sheet, Verify Sheet,Complete HR Sheet, Complete Accounting Checking and Pay Salary.

Dec Payslip Data:

Employee: Mohsin Yaseen

Expense Journal: x Expenses Journal

Bank Journal: x Bank Journal

Date: 07/31/2010

Press Button: Compute Sheet, Verify Sheet,Complete HR Sheet, Complete Accounting Checking and Pay Salary.

Provident Fund Contribution Register:


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  1. coolmanlg
    January 5, 2011 at 1:07 pm | #1

    Happy new year. I would like to register my appreciation over your tutorials to the community. It’s about the single most important site for learning about openerp. It is very functional. Thank you again. Am sure I will donate someday.

    • January 5, 2011 at 4:39 pm | #2

      @coolmanlg thanks buddy happy new year u too.
      ur donation are welcome in from of; help others guys in form of sharing knowledge. if yes than shake hand and join my page.
      welcome any time.

  2. January 7, 2011 at 5:43 am | #3

    in ver 5 payroll includes two functionalities. first simple payroll second the integration of payroll with accounts.
    in ver 6 they are separate modules
    simple payroll=hr_pyroll
    payroll integration with accounts = hr_payroll_account.
    remember hr_payroll_account (ver 6) depends on hr_payroll (ver 6)

    • Edi
      January 7, 2011 at 6:47 pm | #4

      thanks for the tutorial. Is it possible to use function value to calculate income tax based on salary range? For example from 0 to 1000 taxed at 10% and from 1000.01 to 2000 at 20%.

      • January 8, 2011 at 5:54 am | #5

        @Edi yes brother its possible.
        When you define a salary structure under employee function.
        Select Category type: Income Tax
        Amount Type: Function:
        after this, Function tab in same window will enable for you.
        define the list of start value, end value and amount.
        that it.

  3. Edi
    January 8, 2011 at 7:09 pm | #6

    Mohsin, excuse my ignorance, but care to be a bit more elaborate? I have tried countless times and I just can’t seem to understand how the function value works. I would greatly appreciate it if you can provide a simple example.

    Thanks a lot for the great blog.

    Cheers

    • Edi
      January 8, 2011 at 7:10 pm | #7

      By the way I’m testing with version 6.0 RC2.

    • January 9, 2011 at 7:19 am | #8

      @Edi ok let me write an example and with steps.i will upload a proper new post of income tax deduction with function in openerp.
      this post need some development too. i will share soon.
      also my exams are near, if i am late in any case then hope u don’t mind
      thanks

  4. January 9, 2011 at 7:22 pm | #9

    Hi Mohsin, how are u??
    Im working on a payroll module and want to implement a way to configure employee incomes and it can be calculated by formula or functions. The formula way will be something like income1 = income2 + hr_payroll.GetWage() * 2. I need to know how i can implement it and read incomes from hr_admin_incomes table when generate payroll and calculate the value of income by specified formula in hr_admin_incomes.formula

    Reggards from Cuba

  5. KD
    January 11, 2011 at 9:11 am | #10

    In version 5 there was an option named ‘Include in salary’ under contribution configuration in Allowances/Deduction under Human Resources—>Configuration—>Payroll. In version 6 that option is missing. can you pls tell me where that function is?

    • January 15, 2011 at 5:38 pm | #11

      @KD in ver 6 Human Resources -> Configuration -> Payroll -> Salary Heads (New Head)
      here you can find the contribution from company.

  6. January 18, 2011 at 3:22 pm | #12

    Thanks man i see V6 functionality and take some ideas to solve my issues.

    Best reggards from Cuba

    • January 18, 2011 at 5:08 pm | #13

      @Dairon ooop sorry brother i haven’t able to reply you. really sorry. don’t mind
      i am busy in my exam preparation coming feb. hope all fiends can understand my problem including @dairon

  7. haseeb
    January 26, 2011 at 2:15 pm | #14

    hi mohsin , i have been through ur blog for the payroll management, as im building my own accounting package. Im confused with the allowance , deduction that comes apart from the PF. See as of openerp, organization will have a salary account, PF account selected (PF expense) and on employee creation we would assign salary payable account as employee account and PF payable as employee PF account. So in general accounting if i have to manage deductions and allowances , should i go for different accounts both in company side aswellas employee side like allowance expense account for company , allowance recievable for employee. It would be a great help for me if u cld take me out of this big doubt.Hoping for your reply

    best regards
    haseeb

    • January 28, 2011 at 5:47 am | #15

      @haseeb
      let me try to solve your problem, see how much i solve your ambiguity.
      first of all, employee is business partner. employee provide services, and we pay for availed services.
      so in business we will maintain employee account (vendor accounts) i.e. employee salary payable (its same like vendor payable or vendor receivable accounts).

      second if your maintain a PF payable account separately that it will better (but not must) rather then maintain salary payable single account. for example an boss comes and request for balance amount for PF payable, if you maintain single salary payable account, then it will be tough to extract the balance of pf payable from single salary payable (where salary payable include both monthly salary payable plus PF payable). Conclusion if you maintain both salary payable and PF payable account separately then any time you can find the ledger balance of PF Payable. again its depend on the accountant how he/she maintain its chart of account its not must.

      Third provident is an expense on monthly basis (contribution from company). how much a company expenses occur in account of provident fund. you should maintain PF expense account separately, bcoz of two reasons a) balance of PF expense transfer to Profit and Loss Account quarterly or annually b) in case of unrecognized provident fund will be treat differently in taxation department.

  8. lmk
    February 5, 2011 at 6:38 am | #16

    Thank you very much for this tutorial. We have installed v6.0.2 with hr_payroll and hr_payroll_account as well as accounting modules. However, the employee view does not show the accounting tab like on your screen cap. Specifically, don’t have any means to specify
    1)Bank Account (Assuming this is the current account from where Salary Expense will be paid)
    2)Salary account (Assuming this is the expense account to charge to)
    3)Employee account (Assuming this is the account payable account to charge to before actual payment has been maid)
    Hence, even after we run the payslips, no accounting consequences are recorded.
    Are we overlooking something? Thanks!

  9. February 5, 2011 at 5:49 pm | #17

    @lmk when you will install hr_payroll_account module, then open employee form you will find accounting tab. there you can define these mention three accounts

  10. lmk
    February 6, 2011 at 3:08 am | #18

    Hi Mohsin, we did install hr_payroll_account and verified under Admin->Modules that t has been installed. But when we go to HR->Employee->New only the following tabs appear: “Personal Information”, “Miscellaneous”, “Categories”, “Notes”. There is no “Accounting Information” tab. We used “openerp-allinone-setup-6.0.1.exe” to install openERP. What could be wrong?

  11. February 6, 2011 at 9:48 am | #19

    @lmk brother when ever i use to comments, i always first verify my wording practically. So i have checked two files in openerpv6/bin/addons/hr_payroll_account i.e. hr_payroll_account.py and hr_payroll_account_view.xml. both files inherit the hr_employee and introduce new features in form of accounting tab.

    • zulfahmi
      February 20, 2011 at 10:28 am | #20

      Dear Mohsin,
      I open both hr_payroll_account.py and hr_payroll_account_view.xml in version 6, but I don’t find inherit view in hr_payroll_account_view.xml for accounting tab.
      Thanks for this valuable posting anyway.

  12. February 21, 2011 at 4:09 am | #21

    @zulfahmi donnlowd the latest module from launchpad.

    • zulfahmi
      February 21, 2011 at 6:58 am | #22

      Dear Mohsin,
      sorry, I couldn’t find any differences in trunk or 6.0 series

  13. Pritesh Modi
    May 10, 2011 at 9:31 am | #23

    Hello Mohsin

    very nice and helpfull post.great job

    thanks
    pritesh

  14. Cherus
    August 19, 2011 at 12:45 pm | #24

    Moshin

    Great job!

    Cherus, Kenya

  15. Ritu Sharma
    November 28, 2011 at 11:27 am | #26

    Hi Mohsin
    This is Ritu Sharma. Rs. 780 are deducted from my salary as EPF. When I check my balance in EPF online. It is EE Amt. 8921, ER Amt Rs. 2734. I am not able to understand this figures i.e EE amt. and ER Amt. Secondly, balance should be around 18000 as equal amount is deposited by employer. Kindly explain these technical terms
    Thanks

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