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

A sports club paid ₹3,60,000 for salaries during the year per its Receipts and Payments Account. Outstanding salaries were ₹30,000 at the start and ₹45,000 at the end of the year. What salary expense is charged to the Income and Expenditure Account?

The salary expense is ₹3,75,000. Cash paid of ₹3,60,000 is increased by closing outstanding salaries of ₹45,000 and reduced by opening outstanding of ₹30,000, because only the current year's expense belongs in the Income and Expenditure Account.

  1. A₹3,75,000Correct
  2. B₹3,45,000
  3. C₹3,60,000
  4. D₹3,15,000

Explanation

Expense = Paid + Closing outstanding - Opening outstanding = 3,60,000 + 45,000 - 30,000 = ₹3,75,000. Working backwards: 3,75,000 - 45,000 + 30,000 = 3,60,000 paid. The ₹3,45,000 option reverses the adjustments.

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