Mr. Suresh is working for Raina Ltd. Consider the following particulars: Particulars Year 2023-2024 Year 2024-2025 Annual salary 30,00,000 30,00,000…

CA Intermediate · Advanced Accounting · MTP · January 2026
Mr. Suresh is working for Raina Ltd. Consider the following particulars: Particulars Year 2023-2024 Year 2024-2025 Annual salary 30,00,000 30,00,000 No. of working days during the year 300 days 300 days Leave allowed 10 days 10 days Leave taken 7 days 13 days Leave carried forward to next year 3 days Nil Based on past experience, Raina Ltd. assumes that Mr. Suresh will avail the unutilized leaves of 3 days of 2023-2024 in 2024-2025. Raina Ltd. contends that it will record - 30,00,000 as employee benefits expense in each of the years 2023-2024 and 2024-2025, stating that the leaves will, in any case, be utilized by 2024-2025. Comment on the accounting treatment proposed to be followed by Raina Ltd. Also pass journal entries for both the years

Suggested Answer and Working Notes:

The expenditure to be recognized will be as under: Particulars Year 2023-2024 Year 2024-2025 (i) Annual salary (A) 30,00,000 30,00,000 (ii) No. of working days (B) 300 days 300 days (iii) Salary cost per day (A/B) 10,000/day 10,000/day (iv) Leaves C/f / (Utilized) 3 days (3 Days) (v) Expense to be recognized [i + (iii x iv)] 30,30,000 29,70,000 Journal entries Particulars Particulars ₹ Employee benefit expense. Dr. 30,30,000 To Cash 30,00,000 To Provision for Leave encashment 30,000 Provision for leave encashment. Dr. 30,000 Employee benefit expense Dr. 29,70,000 To Cash 30,00,000

Topics: AS 15

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