What is meant by Salaries Outstanding Accounts?
Answer Posted / ma10kumar
"Outstanding" means "due for payment but not paid yet".
Thus, Salaries outstanding accounts represent the amount of
salary that the organization has to pay its employees,
which has not paid to them yet or which the employees has
not collected yet.
Here, the term due represents the account closing period.
For example, if an organization is paying salaries only on
4th of the following month and closing its books monthly,
then as on the last business day of every month, all the
salary for the particular month should be booked as
outstanding salary to disclose the accurate profit for the
month and the correct financial position of the company.
From Accounting perspective, while booking outstanding
salaries, we should be debiting "Employees' Salary Account"
and credit "Salaries Outstanding Account" (since we have
not paid it yet). At the time of actual payment of Salary,
we will reverse salary outstanding by debiting it and
crediting "Cash / Bank Account".
- Ma10kumar, Chennai
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