CMA Foundation · Fundamentals of Financial and Cost Accounting · Adjustment Entries and Rectification of Errors
Sharma Traders paid Rs 54,000 as salaries during the year ended 31 March 2025. Salaries outstanding on 1 April 2024 were Rs 6,000 and salaries outstanding on 31 March 2025 were Rs 9,000. What is the salary expense charged to the Profit and Loss Account?
The salary expense is Rs 57,000. It is computed as cash paid Rs 54,000 plus closing outstanding Rs 9,000 less opening outstanding Rs 6,000, because the opening outstanding amount relates to the previous year and was paid in this year.
- ARs 51,000
- BRs 57,000Correct
- CRs 63,000
- DRs 54,000
Explanation
Expense = Paid + Closing outstanding - Opening outstanding = 54,000 + 9,000 - 6,000 = Rs 57,000. Rs 51,000 results from reversing the adjustments, subtracting closing and adding opening.
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