Expert Advisory Committee
ICAI-Expert Advisory Committee
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1.21  Query:    

Whether dues to employees should be included in ‘sundry creditors’ or ‘other liabilities’.

 

1. A public sector company has disclosed a sum of Rs. 5.92 lacs towards liability for salary to employees under ‘Other Liabilities’ under the head ‘Current Liabilities and Provisions’. However, the Government auditors have insisted that the same should be included in sundry creditors since they are in respect of contractual obligations which are not specifically required to be included under any other head as per Part I of Schedule VI to the Companies Act, 1956. Thequerist has informed that the Government auditors have taken support for this from an opinion published in Volume VIII of Compendium of Opinions.

 

2. Thequerist has sought the opinion of the Expert Advisory Committee as to whether the outstanding amount of salaries and wages at the year end should be shown under ‘Sundry Creditors for Expenses’ or under ‘Other Liabilities’.

 

 

                                                                           Opinion                                December 31,1996

 

1. The Committee notes that Part I of Schedule VI to the Companies Act, 1956, requires disclosure of ‘Sundry Creditors’ under the head ‘Current Liabilities’. The Committee further notes that the Act does not prescribe which creditors are to be included in ‘Sundry Creditors’. The Committee is, therefore, of the view that the said term should be interpreted on the basis of its accounting and commercial usage.

 

2. The Committee notes that the ‘Guidance Note on Terms Used in Financial Statements’, defines the term ‘Sundry Creditors’ as the “Amount owed by an enterprise on account of goods purchased or services received or in respect of contractual obligations. Also termed as trade creditor or account payable”.

 

3. On the basis of the above, the Committee reiterates its earlier opinion that dues to employees towards salaries should be included in ‘Sundry Creditors’ since they are in respect of ‘contractual obligations’ which are not specifically required to be included under any other head as per Part I of Schedule VI to the Companies Act, 1956. Thus, these dues should not be included under the head ‘Other Liabilities’.

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