Outstanding salary journal entry

Salary outstanding journal entry in Accounting

Salary outstanding journal entry in Accounting

What is salary?

Salary is an expense for the business. It is to pay to an employee in exchange for services taken from him.

When salary is not paid on time its becomes outstanding therefore it needs to show in the balance sheet as it is now a liability for the firm.

now when salary is paid on time its an expense an we have to make journal entry 

Salary A/ dr

Xxxx

   To cash / Bank A/c

Xxxx

Being salary
paid

 Rules follow when salary is paid .

Salary A/

Dr all expenses and losses

Salary is expense by nature

   cash A/c

Cr what goes out  Cash is real accounts

by nature

 

Bank A/c

Cr. The giver and bank is giver in this case.

 

Outstanding salary journal entry

outstanding salary is a liability for the business, therefore, it is shown in the liability side of the balance sheet.

The rule for assets and liability

Accounts

ADD

Deduct

Assets

Debit

Credit

Liability

Credit

Debit

  •  it means + Assets in business we have to debit it.
  • When we have credit assets then we have to deduct – it from the business.
  • It means that when we have to Add means + liability in business we have credited it.
  • When we have Debit  Liability then we have to deduct – it from the business.

 

Outstanding expense journal entry example

Suppose salary to be paid Rs 10000 but not paid the salary.

here our due date of payment of salary has arrived but the salary is not paid therefore we have shown our liability which is the outstanding salary in the books of Accounts.

Journal entry will be .

Salary A/c

10,000

   To Outstanding Salary A/c

         10,000

Being salary not paid on due date.

Salary A/

Salary is expense and Dr all expense and losses

Nominal Accounts

Outstanding salary

Outstanding salary is a liability and we are Increasing our liability therefore credit O/S

Salary.

When outstanding salary is paid

Now when we pay our outstanding salary then we have to make a new journal entry to deduct our liability which is on books with the name Outstanding salary.

Journal entry will be .

Outstanding Salary A/

10,000

          To cash A/c

10000

Being outstanding salary paid

Outstanding salary in Profit and Loss Accounts

Note: only when outstanding salary not paid.

If outstanding salary not paid then it will be shown on the debit side of Profit and loss and loss accounts as it occurs in the current year and expense of this year not paid.

Particular

Amount

Particular

Amount

Outstanding salary

10000

  

Outstanding salary in balance sheet

outstanding salary is liability by nature, therefore, it is shown in the liability side of the balance sheet.

Liabilty

Amount

Assets

Amount

Outstanding salary

10000

 

 

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