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Salary due is the amount of salary payable for a particular period but the related services corresponding to the amount of salary payable have already been availed by the business entity. It is also known as salary outstanding. It is a liability for the business entity.
Journal Entry for Salary Due
Journal entry for salary due/payable can be recorded in the books of accounts using both the golden rule and the modern rule of accounting.
1. According to the “Golden rules” of accounting
a. Entry for salary due
| Salary A/c | Debit | Nominal account | Debit all expenses and losses |
| To Outstanding Salary A/c | Credit | Personal account (Representative) | Credit the giver |
(Being salary due)
b. Entry at the time of actual payment of the salary due
| Outstanding Salary A/c | Debit | Personal account (Representative) | Debit the receiver |
| To Cash/Bank A/c | Credit | Real account/Personal account | Credit what goes out/Credit the giver |
(Being salary paid)
2. According to the “Modern rules” of accounting
a. Entry for salary due
| Salary A/c | Debit | Expense | Debit the increase in expense |
| To Outstanding Salary A/c | Credit | Liability | Credit the increase in liability |
(Being salary due)
b. Entry at the time of actual payment of the salary due
| Outstanding Salary A/c | Debit | Liability | Debit the decrease in liability |
| To Cash/Bank A/c | Credit | Asset | Credit the decrease in asset |
Example
ABC Ltd did not pay a salary of 100,000 for the month of March 20xx due on 31st March 20yy because of lack of funds. However, they paid the due salary on 25/04/20yy.
1. Journal entry for salary due on 31/03/20yy
| Salary A/c | Debit | 100,000 | Debit the increase in expense |
| To Outstanding Salary A/c | Credit | 100,000 | Credit the increase in liability |
(Being salary due for the month of March 20yy)
2. Journal entry at the time of payment on 25/04/20yy
| Outstanding Salary A/c | Debit | 100,000 | Debit the decrease in liability |
| To Cash/Bank A/c | Credit | 100,000 | Credit the decrease in asset |
(Being salary paid for the month of March 20yy)