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Understanding Salary Accounts: Which Head Do They Fall Under?

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Created on
April 27, 2023


What’s Inside

A salary account is a type of bank account that employers use to pay salaries to their employees via electronic transfer of funds. This type of account typically offers features such as low or no balance requirements, zero or low fees, and free or discounted services such as ATM withdrawals, online banking, and mobile banking. Salary accounts are designed to facilitate the smooth and efficient processing of payroll transactions and to provide employees with easy access to their salaries.

Is a Salary Account same as a Saving Account?

If you have any form of confusion that your salary account is a current account, then you need to know that your salary account falls under the category of a savings account as it offers similar features such as free ATM withdrawals, internet banking, mobile banking, and more.

Salary Account Comes Under Which Head

From an accounting perspective, salaries are classified as indirect expenses, which fall under the category of expenses. Indirect expenses refer to the costs incurred by a company to operate its business, which cannot be directly associated with the production of goods or services. These expenses are recorded in the income statement, which presents a company's financial performance by showing its revenues and expenses over a specific period, such as a quarter or a month. Typically, indirect expenses are also reported in the income statement along with other expenses.

Benefits of Salary Account

  • No minimum balance requirement
  • Higher interest rates
  • Free ATM/debit card
  • Free online banking services
  • Free chequebook facility
  • Free SMS and email alerts
  • Free fund transfer facility
  • No account maintenance fees
  • Access to exclusive offers and discounts

Documents Required for Opening a Salary Account

The documents required for opening a salary account may vary from bank to bank. However, the most commonly required documents include:

  • KYC documents, such as Aadhaar card and PAN card
  • Proof of address, such as a utility bill or rental agreement
  • Proof of employment, such as a salary slip or employment letter
  • Passport-size photographs


Salary accounts are a critical component of personal finance, providing employees with a convenient and efficient way to receive their monthly salaries. Understanding the various features and benefits offered by salary accounts can help you make informed decisions when selecting a bank account that suits your needs.

With Fi Money, you can easily manage your salary accounts, and track your expenses at a single platform.

Frequently Asked Questions

What category or head do salary accounts typically fall under in financial or accounting terminology?

Salary accounts are often classified as "Current Liabilities" in financial or accounting terms. This is because the wage amount is owed to the employee by the company and is anticipated to be paid within a particular time frame, usually a month. It falls under the category of current liabilities since it is a liability that is expected to be resolved in the near future.

How are salary accounts typically classified or categorized in financial statements or charts of accounts?

In financial statements or charts of accounts, salary accounts are often grouped or categorized under the "Employee Compensation" heading. All costs associated with employee salaries, wages, bonuses, and benefits are included in this part, which is a subsection of operational expenditures.

Salary accounts may be further divided into groups according to their characteristics under the "Employee Compensation" section.

For effective financial reporting and analysis, the proper categorization of payroll accounts in financial statements or charts of accounts is essential. It aids in determining patterns in employee pay costs over time, assessing the success of compensation plans, and contrasting compensation costs across various time periods or businesses.

Are there any specific accounting standards or guidelines that dictate the treatment of salary accounts in financial reporting?

Yes, there are specific accounting standards and guidelines that dictate the treatment of salary accounts in financial reporting. In India, the International Financial Reporting Standards (IFRS) guide the accounting treatment of salary accounts.


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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