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| Outstanding Salary Journal Entry |
The outstanding salary means salary that has been earned by employees but has not yet been paid as of the end of an accounting period. It is important to book the outstanding salaries, for the financial position and obligation of the company. This journal entry is usually booked at the end of the accounting period when financial statements are prepared.
Journal Entry For Outstanding Salary
Salary Expense Account Debit
Outstanding Salary (Liability) Account Credit
- Salary Expense account debit because of increase in expense and recorded on Profit and Loss or Income Statement.
- Outstanding Liability credit because of an increase in liability and recorded on the Balance Sheet Liability side.
This above journal entry recognizes the expense in the profit and loss and books the liability on the balance sheet side. but when the salary is actually paid in the next accounting period. and the second entry will be booked to reduce the liability i.e. Outstanding Salary at the time of payment will made and also reduce the Asset i.e. cash or bank balance because of payment will made.
Journal Entry For payment of Outstanding Salary
Outstanding Salary Account Debit
Cash or Bank Account Credit
- Outstanding Salary Account Debit because of a decrease the liability and recorded on the balance sheet.
