03-02-2009, 06:10 AM
Hi Asad,
in your question, when salary for the month of Dec was accrued, it would be
Dr Salary Expense 1000
Cr Accrued Expenses 1000
Now ledger / T Account of your Salary expense will be showing a "Debit Balance" of Rs. 12,000. Closing entry will be
Dr Profit and Loss A/c 12000
Cr Salary Expense 12000
So in this way you have transferred Dr 12000 balance to P&L Account from Salary Expense A/c....now your Expense Account has been closed by transferring its balance to Profit & Loss Account....
Accrued Expenses A/c is still showing a Credit Balance of Rs. 1000, this will be presented under Current Liabilities in the Balance Sheet of 31 December
In January when cash payment will be made to employees for the month of December, the entry will be
Dr Accured Expenses 1000
Cr Cash/Bank 1000
This entry reflects settlement of liability/reversal of accrued expenses....
satisfied??????????
in your question, when salary for the month of Dec was accrued, it would be
Dr Salary Expense 1000
Cr Accrued Expenses 1000
Now ledger / T Account of your Salary expense will be showing a "Debit Balance" of Rs. 12,000. Closing entry will be
Dr Profit and Loss A/c 12000
Cr Salary Expense 12000
So in this way you have transferred Dr 12000 balance to P&L Account from Salary Expense A/c....now your Expense Account has been closed by transferring its balance to Profit & Loss Account....
Accrued Expenses A/c is still showing a Credit Balance of Rs. 1000, this will be presented under Current Liabilities in the Balance Sheet of 31 December
In January when cash payment will be made to employees for the month of December, the entry will be
Dr Accured Expenses 1000
Cr Cash/Bank 1000
This entry reflects settlement of liability/reversal of accrued expenses....
satisfied??????????
