Salary due is the amount of salary payable for a particular period but the related services corresponding to the amount of salary payable have already been availed by the business entity. It is also known as salary outstanding. It is a liability for the business entity. Journal Entry for Salary DueRead more
Salary due is the amount of salary payable for a particular period but the related services corresponding to the amount of salary payable have already been availed by the business entity. It is also known as salary outstanding. It is a liability for the business entity.
Journal Entry for Salary Due
Journal entry for salary due/payable can be recorded in the books of accounts using both the golden rule and the modern rule of accounting.
1. According to the “Golden rules” of accounting
a. Entry for salary due
Salary A/c | Debit | Nominal account | Debit all expenses and losses |
To Outstanding Salary A/c | Credit | Personal account (Representative) | Credit the giver |
(Being salary due)
b. Entry at the time of actual payment of the salary due
Outstanding Salary A/c | Debit | Personal account (Representative) | Debit the receiver |
To Cash/Bank A/c | Credit | Real account/Personal account | Credit what goes out/Credit the giver |
(Being salary paid)
2. According to the “Modern rules” of accounting
a. Entry for salary due
Salary A/c | Debit | Expense | Debit the increase in expense |
To Outstanding Salary A/c | Credit | Liability | Credit the increase in liability |
(Being salary due)
b. Entry at the time of actual payment of the salary due
Outstanding Salary A/c | Debit | Liability | Debit the decrease in liability |
To Cash/Bank A/c | Credit | Asset | Credit the decrease in asset |
Example
ABC Ltd did not pay salary 100,000 for the month of March 20xx due on 31st March 20xx because of lack of funds. However, they paid the due salary on 25/04/20xx.
1. Journal entry for salary due on 31/03/20xx
Salary A/c | Debit | 100,000 | Debit the increase in expense |
To Outstanding Salary A/c | Credit | 100,000 | Credit the increase in liability |
(Being salary due for the month of March 20xx)
2. Journal entry at the time of payment on 25/04/20xx
Outstanding Salary A/c | Debit | 100,000 | Debit the decrease in liability |
To Cash/Bank A/c | Credit | 100,000 | Credit the decrease in asset |
(Being salary paid for the month of March 20xx)
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As we all know, a payment is made when we purchase a good or service on a credit or cash basis. In terms of a business, a vendor (supplier/creditor) is a person who sells goods to the company on a cash or credit basis with an agreement to receive the payment within a specified period. This in turn aRead more
As we all know, a payment is made when we purchase a good or service on a credit or cash basis. In terms of a business, a vendor (supplier/creditor) is a person who sells goods to the company on a cash or credit basis with an agreement to receive the payment within a specified period.
This in turn affects the accounts payables as the vendors are the creditors of the company as well as considered a short-term liability and are recorded under the head of current liabilities in the balance sheet.
Journal entry for payment to vendor
1.
(being goods purchased from the vendor on credit)
2.
(being payment made to the vendor)
Example
XYZ Ltd. purchased goods from a vendor amounting to 60,000 on a credit basis in May and agreed to make the due payment in July. The journal entries in the books of XYZ Ltd. are as follows:
(being goods purchased on credit from the vendor)
(being payment made to the vendor in cash)
Note: In case the company purchases the goods from the vendor directly for cash then only the following entry shall be passed in the books of accounts:
Purchase a/c
Debit
To Cash a/c
Credit
(being goods purchased from the vendor for cash)
Hope this helps.
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