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

Salaries paid during the year were ₹1,20,000. The opening outstanding salaries were ₹10,000 and the closing outstanding salaries are ₹15,000. What amount is debited to the Profit and Loss Account for salaries?

The expense is ₹1,25,000. Salaries paid of ₹1,20,000 include ₹10,000 for the previous year, which is deducted, and ₹15,000 still owed for this year must be added. So 1,20,000 - 10,000 + 15,000 equals ₹1,25,000.

  1. A₹1,15,000
  2. B₹1,25,000Correct
  3. C₹1,30,000
  4. D₹1,45,000

Explanation

Expense for the year = paid 1,20,000 - opening outstanding 10,000 + closing outstanding 15,000 = 1,25,000. Option 1 reverses the sign of the net change in outstanding salaries, giving 1,15,000.

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