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

Greenfield Association paid Rs 48,000 as salaries during the year. Outstanding salaries were Rs 6,000 at the beginning and Rs 9,000 at the end of the year. What is the salaries expense debited to the Income and Expenditure Account?

The salaries expense is Rs 51,000. Payments of Rs 48,000 are reduced by the opening outstanding of Rs 6,000, which relates to the previous year, and increased by the closing outstanding of Rs 9,000, which belongs to the current year under the accrual basis.

  1. ARs 45,000
  2. BRs 51,000Correct
  3. CRs 48,000
  4. DRs 63,000

Explanation

Expense = payments - opening outstanding + closing outstanding = 48,000 - 6,000 + 9,000 = 51,000. Rs 45,000 results from reversing the adjustments, and Rs 48,000 ignores accrual.

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