The value of Outstanding Salary is Rs. 5,000. Outstanding salary was paid off. What is the effect in Revaluation Account, Partner's Capital Account, Balance Sheet?
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If outstanding salary was appearing in the balance sheet of the firm, then it means that it was a liability that has been paid. In this case, their would be no effect on revaluation, only in balance sheet liability and asset both would reduce.
Now in case outstanding salary was not appearing in the books of accounts, i.e it is the expense which has to be booked not then, we would create this liability from revaluation and then pay it from cash/bank account by passing the following journal entry:
Effect in revaluation: It would cause revaluation account to be debited by Rs 5,000/-
Effect on Partners capital account: Partners capital account would be affected by net profit or loss on revaluation.
Effect on Balance sheet : Asset and liability side both would reduce by Rs 5,000/-.
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If outstanding salary was appearing in the balance sheet of the firm, then it means that it was a liability that has been paid. In this case, their would be no effect on revaluation, only in balance sheet liability and asset both would reduce.
Journal in the books | ||||
Date | Particulars | Debit | Credit | |
Outstanding Salary A/c | Dr. | 5,000 | ||
To Bank A/c | 5,000 | |||
(Being Outstanding salary paid) |
Now in case outstanding salary was not appearing in the books of accounts, i.e it is the expense which has to be booked not then, we would create this liability from revaluation and then pay it from cash/bank account by passing the following journal entry:
Journal in the books | ||||
Date | Particulars | Debit | Credit | |
Revaluation A/c | Dr. | 5,000 | ||
To Outstanding Salary A/c | 5,000 | |||
(Being Outstanding salary to be paid) | ||||
Outstanding Salary A/c | Dr. | 5,000 | ||
To Bank A/c | 5,000 | |||
(Being Outstanding salary paid) |
Effect in revaluation: It would cause revaluation account to be debited by Rs 5,000/-
Effect on Partners capital account: Partners capital account would be affected by net profit or loss on revaluation.
Effect on Balance sheet : Asset and liability side both would reduce by Rs 5,000/-.
Hope this helps
Please get back to us in case of any query
Keep posting
Regards