Modern approach of journal entry

Journal Entry of Salary

Salary is an indirect expense, Salary is paid to a fixed amount to the employees over a period of time, Salary expense is related to the General, Sales, Profit of the Company, Administrative Activity, etc. Salary expense is recorded under profit & loss on the debit side, Salary income is recorded under profit & loss on the credit side, Salary Book on a monthly basis and Yearly Basis, etc.

Journal Entry Pass In 2 Ways Modern Approach and Traditional Approach

First Discussed Modern Approach and Traditional Approach

Traditional Approach i.e.  3 Golden Rules 

Golden Rules Applied in Journal Entry Such as Real Account, Personal Account, and Nominal Account

Modern Approach

Modern Approach Use If These Accounts Are Increase Then Debit If These Account Increase, Then Credit,  Easy is a Modern Approach, Big Professional Highly Uses Modern Approach Such as CA Chartered Accountant

In the Modern Approach Assets and Expenses if Made and Increase Then Debit and Assets and Expenses if Decrease Then Credit

And In the Modern Approach Liability, Capital and Income Increase Then Credit and Liability, Capital and Income Decrease Then Debit.

Salary Paid Entry

Journal Entry of Salary Paid by Cash with Golden Rules

 

Salary A/c Dr. Because Debit All Expense & Losses (Nominal Account)

To Cash A/c Because Credit What Goes Out (Real Account)

Salary is an Indirect Expense and Cash is a Current Assets

 

Journal Entry of Salary Paid by Cash with Modern Approach

Salary A/c Dr. Because Debit the Increase in Expense

To Cash A/c Because Credit the Decrease in Asset

Salary is an Indirect Expense and Cash is a Current Assets

 

Journal Entry of Salary Paid by Bank with Golden Rules

 

Salary A/c Dr. Because Debit All Expense & Losses (Nominal Account)

To Bank A/c Cr. Because Credit the Giver (Personal Account)

Salary is an Indirect Expense and Bank is a Current Assets

 

Journal Entry of Salary Paid by Bank with Modern Approach

Salary A/c Dr. Because Debit the Increase in Expense

To Bank A/c Cr. Because Credit the Decrease in Asset

Salary is an Indirect Expense and Bank is a Current Assets

Salary Received Entry

Journal Entry of  Salary Received By Cash with Golden Rules

Cash A/c Dr. Because Debit What Comes In (Real Account)

To Salary Received A/c Cr. Because Credit  All Income & Gains (Nominal Account)

Cash Is a Current Assets and Salary Received Is an Indirect Income

Journal Entry of  Salary Received By Cash with Modern Approach

Cash A/c Dr. Because Debit the Increase in Asset 

To Salary Received A/c Cr. Because Credit  the Increase in Income 

Cash Is a Current Assets and Salary Received Is an Indirect Income

Journal Entry of  Salary Received By Bank with Golden Rules

Bank A/c Dr. Because Debit The Receiver (Personal Account)

To Salary Received A/c Because Credit  All Income & Gains (Nominal Account)

Bank Is a Current Assets and Salary Received Is an Indirect Income

Journal Entry of  Salary Received By Bank with Modern Approach

Bank A/c Dr. Because Debit the Increase in Asset 

To Salary Received A/c Because Credit  the Increase in Income 

Bank Is a Current Assets and Salary Received Is an Indirect Income

Remembering Key Point

If Salary Advanced Paid Then Asset

If Salary Advanced Received Then Liability

If Salary is Payable Then Liability

If Salary is Receivable Then Asset

Double Entry System

Journal Entry of Salary Payable and Paid Double Entry System

Salary Payable Entry Booked

Salary A/c Dr. (Indirect Expense)

To Salary Payable A/c (Current Liability)

If Salary Payable A/c Paid

Salary Payable A/c Dr.

To Cash/Bank A/c

Remembering Point For Salary Payable

Salary payable means salary is not paid yet. either salary paid in next month or next year. then salary is booked by payable. Because the expenses are booked, only the payment is left. And when the expense is yet to be paid, then the liability is created.

Example:

Salary Exp Payable to Harish Person

Salary Exp A/c Dr. (Indirect Exp- Nominal Account)

To Harish Payable A/c (Current Liability- Personal Account)

If Harish Payable A/c Paid

Harish Payable A/c Dr.

To Cash/Bank A/c 

Salary Advanced Paid and Booked Entry Double Entry System

Advanced Salary A/c Dr. (Current Asset)

To Bank A/c (Current Asset)

 

Salary A/c Dr. (Indirect Exp)

To Advanced salary (Current Asset)

This entry pass in next month or next year 

Remembering Point For Advanced Salary

An asset is created when the expense is paid in advance. But the expense will be created next month or next year, and the Asset will be closed. If salary is received in advance then liability will be created.

Example:

Salary Advanced Paid to Harish Person

Advanced Paid Entry

Harish Advanced Salary A/c Dr. (Current Asset)

To Bank/Cash A/c (Current Asset)

Advanced Booked 

Salary A/c Dr. (Indirect Expense)

To Harish Advanced Salary A/c (Current Asset)

Salary Advanced Received and Booked Entry Double Entry System

Advanced Received Entry

Bank A/c Dr. (Current Asset)

To Advanced Salary A/c (Current Liability)

Advanced Book Entry 

Advanced Salary A/c (Current Liability)

To Salary Received A/c (Indirect Income)

This entry pass in the next month or next year 

Example:

Salary advance received from Arin Company Rs.10000

Bank A/c Dr. 10000

To Arin Company A/c 10000 (Liability)

Arin Company A/c 10000 (Liability)

To Salary Received A/c 10000 (Indirect Income)

This entry pass in the next month or next year Because of Closed Liability A/c and Create Income Account

Salary Outstanding Received or Receivable and Booked Entry Double Entry System

Outstanding Salary Entry

Outstanding Salary A/c Dr. (Current Asset)

To Salary Received A/c (Indirect Income)

Outstanding Salary Received Entry

Bank A/c Dr.  (Current Asset)

To Outstanding Salary A/c Dr. (Current Asset)

This entry pass in the next month or next year

 

Example:

Salary Receivable From Adin Company Rs.20000 (salary is not received within the financial year)

Salary Receivable/Outstanding Salary A/c Dr. 20000 (Current Asset)

To Salary Received A/c 20000 (Indirect Income)  

Bank A/c Dr. 20000 (Current Asset)

To Outstanding Salary A/c Dr. 20000 (Current Asset)

This entry pass in the next month or next year Because Closed Asset i.e. Salary Receivable/Outstanding Salary A/c

FAQ

What is the journal entry of the salary paid in advance of rupees 4000?

Advanced Salary A/c Dr. 4000 (Current Asset)

To Bank A/c 4000 (Current Asset)

Second Entry

Salary A/c Dr. 4000 (Indirect Expense)

To Advanced Salary A/c 4000 (Current Asset)

This entry passes in the next month, year, etc. Because Booked Expense and Closed Advance Salary Current Asset.

What will be the journal entry for a salary paid 4000 and still unpaid 1000 on the same day?

Salary A/c Dr. 5000 (indirect Expense)

To Bank A/c 4000 (Current Asset)

To Salary Payable A/c 1000 (Current Liability)

If 1000 Unpaid Salary Paid on The Same Days 

Salary Payable A/c Dr. 1000 (Current Liability)

To Bank A/c 1000 (Current Asset)