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CMA Intermediate · Financial Accounting · Final Accounts of Commercial Organisations

Gupta & Co. closed its books on 31 March with salaries paid of Rs 1,20,000, which includes Rs 10,000 paid in advance for April. Salaries of Rs 15,000 for March are still unpaid. What amount should be debited to the Profit and Loss Account for salaries?

The Profit and Loss Account should be debited with Rs 1,25,000. The amount paid is reduced by the Rs 10,000 prepaid for the next year and increased by the Rs 15,000 outstanding for the current year, giving the expense that belongs to the year.

  1. ARs 1,25,000Correct
  2. BRs 1,45,000
  3. CRs 1,15,000
  4. DRs 1,20,000

Explanation

Expense for the year = 1,20,000 - 10,000 prepaid + 15,000 outstanding = 1,25,000. Rs 1,15,000 arises from subtracting the outstanding amount instead of adding it.

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