but the amount of salary(which is due to employees) is now belonging to the employees because they have earned it after providing service to the business for a month. In 1st step: – the whole month employees provide services to the business and after completion of the month, the amount of the salary becomes due.Ģnd step: – The business did not make paid salaries to its employees. Like: Outstanding expenses a/c represents the individual or group of persons whose amount of expenses is not paid yet to them.Īccording to the above, the outstanding salaries account will be treated with the help of representative personal rules. Representative Person: It means the Representative of a natural person or group of persons.Artificial Person: It means made by the law like Ram & Sons Ltd., HAPPSS Store Ltd., Amazon India Pvt.Natural Person: It means made by Nature like Mr Ram, Mr sham, Mrs Sita, Miss Gita, etc.
The second account is Outstanding Salary A/c (as explained above the amount due but not paid yet will be treated as an outstanding expense) so the personal rule is applied to itĮxplanation of the personal rule: there are three types of persons So it will be treated as follows: Name of Account The first account is Salaries A/c, as we have already discussed in the previous articles the salaries are the expense of the business. Salary for the Month of Jan-18 Rs 50,000 due but not paid yetĪfter scanning the whole journal entry we have found the two accounts:
So with the help of the following example, you will understand it in an easy way.Įxample of Journal entry for creating outstanding expenses with the golden rule : The journal entry for the outstanding expense with the golden rules of accounting is a little bit difficult to understand, But I have tried my best in this article to make it easy to understand. Journal entry for outstanding expenses with the golden rule:
#Due to due from journal entry full#
So this is the main reason which restricts every business to maintain the outstanding expenses accounts.Ĭlick out our full article on the principle of accounting. Ethier these expenses or incomes are paid/received or not. Why do we need to maintain an outstanding expenses account?Īccording to the Accrual Accounting Principle, the business has to record all expenses and income of the current period in the financial statement/report of the same period to know the exact profit or loss of the same period. Rent due for the office building but not paid.Salary and Wages due for the month but not paid.In simple amount due for expense but not paid yet. It will be treated as a current liability for the business. for the month, for the quarter, for the semester or for the year. The current period may vary as per the financial reporting period of the business i.e. The outstanding expense means when the business already availed the services from someone during the current period but did not pay him till the end of the current period. But first, you have to know the meaning of outstanding expense. The correct rule is the personal rule which is applicable to the transactions related to the outstanding expenses.
#Due to due from journal entry how to#
so we help you to understand, how to apply the correct golden rules of accounting on the transactions related to the outstanding expenses. All the liabilities are created with personal rule. So we already know that in the golden rules of accounting there is no specific rule for liabilities like modern rules of accounting.
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