Salary 4000 of 10 months. so rent per month=4000/10=400 so outstanding salary 400*2=800 will be added to salary in profit and loss account and will be shown as liability in balance sheet as current liabilities

In accounting, the treatment of salaries and salaries outstanding is crucial to accurately reflect the financial position and performance of a company. Salaries are the compensation paid to employees for their services, while salaries outstanding refers to the amount of unpaid salaries at the end of an accounting period. Both these items require appropriate treatment in the financial statements to ensure accurate reporting.


Salaries are a significant expense for any business, and they need to be properly recognized and recorded in the financial statements. The treatment of salaries involves the following steps:

1. Record Salaries Expense: The salaries paid to employees during the accounting period are recorded as an expense in the income statement. This expense is deducted from the revenue to calculate the net income.

2. Allocate Salaries to Relevant Accounts: Salaries may need to be allocated to different accounts based on the nature of the work performed by employees. For example, salaries of production workers may be allocated to the cost of goods sold, while salaries of administrative staff may be allocated to administrative expenses.

3. Record Salaries Payable: Salaries that have been earned by employees but not yet paid at the end of the accounting period are recorded as salaries payable in the balance sheet. This liability represents the amount owed by the company to its employees.


Salaries outstanding refers to the unpaid salaries at the end of an accounting period. When salaries remain unpaid for more than one accounting period, they are considered as salaries outstanding. The treatment of salaries outstanding involves the following steps:

1. Accrue Salaries Expense: The amount of unpaid salaries for two months is accrued as an expense in the income statement for the current accounting period. This ensures that the expenses are recognized in the period in which they are incurred, matching the expenses with the revenues generated during that period.

2. Record Salaries Payable: The accrued salary expense is recorded as salaries payable in the balance sheet. This represents the amount owed by the company to its employees for the unpaid salaries.

3. Adjustment Entry: An adjusting entry is made in the accounting records to reflect the accrual of salaries expense and the creation of salaries payable. This ensures that the financial statements accurately reflect the company's obligations and expenses.


The treatment of salaries and salaries outstanding is essential for accurate financial reporting. Salaries are recorded as an expense in the income statement and may need to be allocated to relevant accounts. Salaries outstanding are accrued as expenses in the current period and recorded as salaries payable in the balance sheet. Proper treatment of these items ensures that the financial statements provide a true and fair view of the company's financial position and performance.