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?

Dear Student


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
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  • 15
outstanding salary is an expense for the firm. the entry will be revaluation a/c dr to cash a/c 5000 . no effect in partners capital a/c . in balance sheet o/s salary apeearing in balance sheet will be removed and cash will reduce by 5000.
  • -1
balance sheet
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