Outstanding expense

A/c entries 3669 views 5 replies

I have a doubt.

If an expense is outstnding at the end of the year,then we have to credit the concerned expense outstanding account...right?But my doubt is that what type of an account is that..

say,if I carries on a business and if I have not paid the salary of Rs1,00,000 to the employees ,then the adjustment entry will be

         Salary A/C   ......................................Dr

                                 To Outstanding Salary A/C. right??

 

Salary A/C,being a nominal accont has to be debited in this case by applying the golden rules of Accounting.that is debit all expenses and lossess and credit gains or profits (Rule of 'Nominal Account).

I think salary outstanding Account is definitely a personal áccount.I think I am right in this point.If it is so ,won't it be practicable to apply the rule of a personal account that is debit the receiver and credit the giver.

in the situation that I have mentioned above,salary outstanding account is credited.According to the rule of a personal account credit must be given to the " giver    ".how it is possible in the given case.I mean there is no giver in this situation.

or the credit is only on the basis of a liability that the account represents???

this is my doubt.Somebody please answer.thanks in advance

 

Replies (5)

Hi,

In the above example. you can assume Salry Outstanding as Payable to  a single person.

Salary A/c Dr

    to Salary Payable - Suri A/c Cr

Then later on when you pay, you can use the personal account rule, debti the receiver and credit the giver......where in the entry

 

Salary Payable Suri A/c Dr 

     to Bank A/c.

In the first rent Expense is the base hence you have taken Nominal Account  and the second entry the base is Salary Payable hence we need to go with Personal Account rules.

Wat i am trying to convey is we wil take only one leg of the transacton as a base and record but not the both legs.

 

Suri.

 

 

Thanks for the reply. But I think each transaction recorded should follow the golden principles of Accountancy relating to Personal, Real and Nominal Accounts without which the Accountancy cannot be termed the art that it is. So I want someboy to please explain my doubt in more detail.

who said its not following golden rules........it is following.  Can you point out in my example where it is not follwoing rules????

U already have the answer in ur question itself.  !!!!!!!

 

Outstanding Salary belongs to Representative Personal Accounts, which represent a certain person or group of persons. so, Outstanding Salary represents the accounts of employees, to whom salaries have to be paid.

When salary is not paid, it means, firm is having some amount which belongs to employees, means employees are the givers of particular amount on that date..,(even they are not directly giving to the firm,) and it surely following golden rules... Debit the receiver, credit the giver..

its as same as, firm has paid salary, but employee gave it back for the time being...:)

 

As per accounting rule  increse in asset must be debited and increse in liablity must be credited..


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