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    Individuals employed in an organization receive salary but salaried individuals do not maintain books of accounts. They are not required to pass any journal entry and prepare financial statements. So, it is assumed that the question asked is “journal entry for salary paid” and not for salary receiveRead more

    Individuals employed in an organization receive salary but salaried individuals do not maintain books of accounts. They are not required to pass any journal entry and prepare financial statements.

    So, it is assumed that the question asked is “journal entry for salary paid” and not for salary received. An employer paying salary to his employees will be required to pass the journal entry in his books of accounts for salary paid.

    Journal Entry for Salary Paid

    I will present the journal entry in the books of the employer for salary paid using both the golden rule and the modern rule of accounting.

    1. According to the “Golden rules” of accounting

    Salary A/cDebitNominal accountDebit all expenses and losses
     To Cash/Bank A/cCreditReal account/Personal accountCredit what goes out/Credit the giver

    (Being salary paid by cash/cheque)

    2. According to the “Modern rules” of accounting

    Salary A/cDebitExpenseDebit the increase in expense
     To Cash/Bank A/cCreditAssetCredit the decrease in asset

    (Being salary paid by cash/cheque)

    Example

    1. Textile Inc. paid salary amounting to 500,000 to its employees by cheque or through online modes for the month of March 20xx on 31/03/20xx.

    Journal entry in the books of Textile Inc. on 31/03/20xx will be as follows-

    Salary A/cDebit500,000Debit the increase in expense
     To Bank A/cCredit 500,000Credit the decrease in asset

    (Being salary paid by cheque or through online modes for the month of March 20xx)

    2. Jute Inc. paid salary amounting to 75,000 to its employees in cash for the month of March 20xx on 31/03/20xx.

    Journal entry in the books of Jute Inc. on 31/03/20xx will be as follows-

    Salary A/cDebit75,000Debit the increase in expense
     To Cash A/cCredit 75,000Credit the decrease in asset

    (Being salary paid in cash for the month of March 20xx)

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