The Jisr system allows users to automatically adjust settlements when the option "Enable Adjusting Entries for EOS & Vacation Accruals on salary Appraisal" is enabled.
The system automatically recalculates and adjusts an employee's end-of-service and vacation settlement when their salary is increased.
Why? These settlements are often linked to the employee's base salary. If the salary increases, the expected amount of the end-of-service or the value of accrued vacation may also increase.
Practical example:
An employee was hired on 1/1. Each month, the employee's vacation accrual increases by 100. By the end of the year, the employee is entitled to 1200. However, if their salary is increased in July, and the vacation accrual is also increased to 300, the total should increase to 3600.
Monthly Accrual Entry (from January to June)
During this period, the vacation provision is accrued based on the old value (100 per month).
Monthly Journal Entry:
| Account | Debit | Credit |
| Vacation Expense | 100 | |
| Accrued Vacation Provision | 100 |
Debit Vacation Expense 100
Credit Accrued Vacation Provision 100
Explanation: To record the monthly vacation expense accrued for the employee.
This entry will be repeated 6 times (from January to June).
Total Expense: 100×6=600
Provision Balance: 600.
Journal Entries in July
In July, two important accounting events occur:
A. Retroactive Adjustment Entry
In this month, the increase in the provision for the previous period (from January to June) is recorded retroactively.
New Accrual Value: 300 per month.
Total Accrual for the Previous Period: 300×6=1800
Current Provision Balance: 600.
Required Adjustment Value: 1800−600=1200
Journal Entry for the Provision Adjustment in July:
| Account | Debit | Credit |
| Vacation Expense - Retroactive Adjustment | 1200 | |
| Accrued Vacation Provision | 1200 |
Explanation: To adjust the accrued vacation provision for the period from 1/1 to 30/6 due to a salary increase.
B. New Monthly Accrual Entry
In the same month (July), the monthly accrual entry is recorded based on the new value (300).
Monthly Journal Entry in July:
| Account | Debit | Credit |
| Vacation Expense | 300 | |
| Accrued Vacation Provision | 300 |
Explanation: To record the monthly vacation expense accrued based on the new salary.
Subsequent Journal Entries (from August to December)
From August onwards, the monthly accrual entry continues to be recorded based on the new value (300).
Monthly Journal Entry:
| Account | Debit | Credit |
| Vacation Expense | 300 | |
| Accrued Vacation Provision | 300 |
Explanation: To record the monthly vacation expense based on the new salary.
The importance of this option:
- Accounting accuracy: Ensures that the amounts allocated for end-of-service benefits and vacation pay in the company's accounting records always reflect its current obligations based on employees' updated salaries.
- Compliance: Helps companies comply with laws and regulations related to end-of-service benefits and vacation pay, which often require accurate accounting of these benefits.
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