Sign In

For the sake of quality, our forum is currently "Restricted" to invitation-only. In case if you wish to join our forum, please send an email seeking an invitation to "[email protected]".

Forgot Password

Lost your password? Please enter your email address. You will receive a link and will create a new password via email.

Captcha Click on image to update the captcha.

You must login to ask question.

Natalia Alva

What is the journal entry for outstanding salary?

Share

1 Answer

  1. This answer was edited.

    Outstanding Salary

    Example- Company A Ltd pays their employees a monthly salary of 25,000. The company has a policy that it pays the previous month salary to its employees on 10th of next month. Salary for March is due and is duly to be paid by the 10th of April as per the company policy. Journalise the following transaction for salary due and paid in the books of ABC and Co.
    In the Books of ABC and Co.

    DateParticularsL.F.AmountNature of AccountAccounting Rule
    31st MarchSalary a/c       Dr25,000NominalDebit- All Expense and Losses
     To Outstanding Salary a/c 25,000Representative PersonalCredit- The Giver

    (Being salary due for March)

    DateParticularsL.F.AmountNature of AccountAccounting Rule
    1st AprilOutstanding Salary a/c       Dr25,000Representative PersonalDebit- The Receiver
     To Cash/Bank a/c 25,000RealCredit- What goes out of the business

    (Being salary paid)

    Accounting Treatment

    Outstanding salary is added to the salary and shown on the debit side of profit and loss account. It is further shown under the head current liabilities in the balance sheet. Outstanding salary is also known as Salary due (or) Salary payable.

    Modern Accounting Approach

    We will record the same transaction by following the modern rules of accounting
    In the Books of ABC and Co.

    DateParticularsL.F.AmountNature of AccountAccounting Rule
    31st MarchSalary a/c       Dr25,000ExpenseDebit- The Increase in Expense
     To Outstanding Salary a/c 25,000LiabilityCredit- The Increase in Liability

    (Being salary due for March)

    DateParticularsL.F.AmountNature of AccountAccounting Rule
    1st AprilOutstanding Salary a/c       Dr25,000LiabilityDebit- The Decrease in Liability
     To Cash/Bank a/c 25,000AssetCredit- The Decrease in Asset

    (Being salary paid)

    • 0

Leave an answer