What is paid wages in cash journal entry?

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In this growing competitive world, every organization needs to retain its loyal and trustworthy staff members and make a timely payment towards wages and salaries to its workers and employees. Timely payment not only motivates and built the confidence of the workers and employees but also encourages them to achieve the organization’s short-term and long-term goals.

Journal Entry for wages paid in cash

This entry can be recorded in the books of accounts by using two different approaches of accounting. They are;

1. Traditional Accounting Approach

Particulars L.F. Amount Nature of Account Accounting Rule
Wages a/c Amt Nominal Debit- All expenses and Losses
 To Cash a/c  Amt Real Credit- What goes out of the business.

(Being paid wages in cash)

 

2. Modern Accounting Approach

Particulars L.F. Amount Nature of Account Accounting Rule
Wages a/c Amt Expense Debit- The Increase in Expense
 To Cash a/c  Amt Asset Credit- The Decrease in Asset.

(Being wages paid in cash)

 

Example

On 4th March, Anna Ltd. makes a payment towards wages amounting to 40,000 in cash. Journalise the following transaction in the books of Anna Ltd.

In the Books of Anna Ltd.

Date Particulars L.F. Amount Nature of Account Accounting Rule
4th March Wages a/c 40,000 Expense Debit- The Increase in Expense
 To Cash a/c  40,000 Asset Credit- The Decrease in Asset.

(Being wages paid in cash)