Payroll close fails when salary register, bank file, statutory challans and books do not agree. Monthly GL reconciliation should bridge payroll output to accounting entries.
Detailed analysis
Why this matters
Payroll generates multiple accounting entries: salary expense, employee deductions, employer contributions, reimbursement liability, payroll bank clearing, TDS/PF/ESIC payable and F&F accruals. A GL bridge prevents stale liabilities and wrong expenses.
Practical example
Example
Salary register gross is ₹1 crore. Books show ₹1.08 crore payroll expense. Reconciliation finds ₹5 lakh employer PF/ESIC, ₹2 lakh bonus provision and ₹1 lakh reversal missed last month. The close file explains all differences and clears payables.
Evidence and control checklist
| Area | What to check | Evidence to save |
|---|
| Salary register | Gross, net, deductions and employer cost. | Payroll register and summary. |
| Bank file | Net salary paid vs salary payable. | Bank upload, debit advice and failed payment report. |
| Statutory payables | TDS, PF, ESIC payable vs challans. | Challans, ECR and ESIC payment proof. |
| Provisions/accruals | Bonus, leave, gratuity and unpaid payroll. | Provision working and approval. |
| Clearing accounts | Advance, recovery, F&F and reimbursement clearing. | GL schedule and ageing. |
Common mistakes
Avoid these mistakes- Posting net salary as full expense.
- Leaving old statutory payable balances open.
- No failed-payment reconciliation.
- Ignoring payroll provisions.
- No monthly sign-off between payroll and accounts.
Validated source note
Validated on 17 June 2026
Based only on official Income Tax Department, EPFO, ESIC and Ministry of Labour source pages listed below. Check latest law, rules, portal instructions and state-specific requirements before filing or advising.
Official sources used
This article is intentionally source-limited to official Income Tax Department, EPFO, ESIC and Ministry of Labour material. Source validation date: 17 June 2026. Verify final positions with the latest law, rules, portal utilities, state rules and official instructions before filing.
FAQs
What is payroll GL reconciliation? ▾
A bridge between payroll register, bank payments, statutory challans and accounting ledgers.
Why reconcile statutory payables? ▾
To avoid stale TDS/PF/ESIC liabilities.
Should employer PF/ESIC be separated? ▾
Yes. It is employer cost, not employee deduction.
What about failed salary payments? ▾
Track and clear separately.
Who should sign off? ▾
Payroll and finance/accounts owners.