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CSEET · Fundamentals of Accounting · Preparation of Final Accounts for Sole Proprietorship

A trial balance shows Salaries ₹1,20,000. Adjustments: salaries outstanding ₹10,000 and salaries paid in advance ₹5,000 included in the above figure. The amount to be debited to the Profit and Loss Account for salaries is:

The salaries charged to Profit and Loss Account are ₹1,25,000. The amount paid of ₹1,20,000 is increased by the outstanding ₹10,000 and reduced by the ₹5,000 prepaid, because only the expense belonging to the current year is charged.

  1. A₹1,25,000Correct
  2. B₹1,15,000
  3. C₹1,35,000
  4. D₹1,05,000

Explanation

Expense for the year = amount paid + outstanding - prepaid = 1,20,000 + 10,000 - 5,000 = 1,25,000. Distractor ₹1,15,000 reverses both signs; ₹1,35,000 ignores the prepaid; ₹1,05,000 reverses both adjustments.

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