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Salary is an indirect expense incurred by every organization as consideration for the efforts undertaken by the employees of the organization. It is one of the most recurring transactions because it is paid monthly. It is usually paid by cheque or through net banking.
Journal entry for paid salary by cheque
I will present the journal entry using both the golden rule and the modern rule of accounting.
1. According to the “Golden rules” of accounting
| Salary A/c | Debit | Nominal account | Debit all expenses and losses |
| To Bank A/c | Credit | Personal account | Credit the giver |
(Being salary paid by cheque)
2. According to the “Modern rules” of accounting
| Salary A/c | Debit | Expense | Debit the increase in expenses |
| To Bank A/c | Credit | Asset | Credit the decrease in asset |
(Being salary paid by cheque)
Example
Samsung Inc. paid a salary amounting to 250,000 to its employees by cheque for the month of March 20xx on 31/03/20yy.
Journal entry in the books of Samsung Inc. on 31/03/20yy will be as follows-
| Salary A/c | Debit | 250,000 | Debit the increase in expenses |
| To Bank A/c | Credit | 250,000 | Credit the decrease in asset |
(Being salary paid by cheque for the month of March 20yy)