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CMA Intermediate · Financial Accounting · Financial Statements of Not-for-Profit Organisations

A library trust's Receipts and Payments Account shows payment of salaries ₹1,80,000. Outstanding salaries were ₹12,000 at the start and ₹20,000 at the end of the year. What amount of salaries is debited to the Income and Expenditure Account?

Salaries debited to the Income and Expenditure Account are ₹1,88,000. Cash paid of ₹1,80,000 is reduced by opening outstanding of ₹12,000, which relates to the previous year, and increased by closing outstanding of ₹20,000, which relates to the current year.

  1. A₹1,72,000
  2. B₹1,88,000Correct
  3. C₹1,80,000
  4. D₹2,12,000

Explanation

Expense = payment ₹1,80,000 less opening outstanding ₹12,000 plus closing outstanding ₹20,000 = ₹1,88,000. The ₹1,72,000 option reverses the adjustment for outstanding amounts. The ₹1,80,000 option ignores accrual.

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