This is question for nellu chathli mam... mam in 44th minute of accounting equation lecture there was salary outstanding.. mamin salary outstanding you decreased amount from capital and added to salary outstanding column.. mam my question is thatWHY CANT WE DECREASE CASH???? instead of decreasing capital why cant we dicrease cash????because we have to pay to our workers at one point right?? so the cash will get decreased?? or the capital?? plz answer this qquestion mam. this is the quesion from class after may 9th that is the next tution slide after source document. this question is from class on 11th i thik so
Dear Student,
Salaries outstanding means amount due on account of salaries (an expense) but not paid yet. Since, the expense has not been paid, cash cannot be reduced. And the reason for reducing capital is that in a prorprietary concern, the net profit/loss after considering all expenses and incomes is added to/deducted from the capital balance, so if there is any expense then that will cause a reduction in capital even if it is not paid.
Salaries outstanding means amount due on account of salaries (an expense) but not paid yet. Since, the expense has not been paid, cash cannot be reduced. And the reason for reducing capital is that in a prorprietary concern, the net profit/loss after considering all expenses and incomes is added to/deducted from the capital balance, so if there is any expense then that will cause a reduction in capital even if it is not paid.