Salary paid journal entry refers to the recording of wage/salary payments made to staff. This is a record of all the entries when a company pays the employees by cash, cheque or through bank transfer. You need to know how to record the prescribed journal entry in the books of accounts. Every case whether it be about paying salary in advance or clearing dues against a particular person like Ram, Gopal or Mohan, needs to be treated properly in the journal. It shows the company’s expense and the payment option. However, there are various types of types such as salary paid in cash journal entry, paid salary by cheque journal entry or salary paid in advance journal entry. But there is a way that you will also keep your books accurate and complete.
Understanding the Basics of Salary Journal Entry
Here it is first important to learn the basic process of how to record salary. Salary is a business expense for the company. When salary is paid by the company it decreases Cash or Bank balance. It also increases expenses. That is why the journal entry impacts both sides of the accounting equation.
What to Expect When You Pay Salary?
When you pay salary:
- It gets treated as an expense (debit entry).
- Record fits payment mode (cash, cheque or bank) as credit recorder
- This, in turn, renders the books well-balanced.
Example:
You disbursed the salary of ₹20,000 to one of your employees in cash.
The journal entry will be:
Salary Account Dr. ₹20,000
To Cash Account ₹20,000
Main Points to Note:
- Always debit Salary Account.
- On payment mode (Cash/Bank/Cheque) give credit.
- If salary is paid to an individual (Gopal, Ram) use personal account name.
Types of Salary Paid Journal Entry
There are several cases of entry passes when salary is paid. These entries are the foundation of accounting, recording the pay for each employee, including bonuses, wages, commission and overtime. Depending on the payment methods and circumstances, the journal entry will not remain the same. Let’s divide them into segments and explain with examples.
Salary Paid in Cash Journal Entry
This is the most basic entry. When salary is given through cash, it debits the salary account and credits the cash account as cash is an income. The entry is as follows if you pay salary in hand:
Salary Account Dr.
To Cash Account
Example:
Paid Salary of ₹10,000 to staff by Cash.
Entry:
Salary Account Dr. ₹10,000
To Cash Account ₹10,000
This is a very straightforward but very popular entry. It is used by many small businesses in India.
Salary Paid Through Cheque Journal Entry
When a cheque is given for salary payment, then it debits the salary account and credits the bank account. Here the bank account is credited as payment is made through cheque. If you pay salary by cheque the entry is posted in respect of bank or Bank Account.
Entry:
Salary Account Dr.
To Bank Account
Example:
Cheque payment of ₹15,000 salary to staff.
Entry:
Salary Account Dr. ₹15,000
To Bank Account ₹15,000
This entry is called paid salary by cheque journal entry. In wage in lieu journal entries, you record the salary paid in advance.
Salary Paid in Advance Journal Entry
When advance payment of salary is done, initial entry records payment as prepaid expense. It debits the advance salary account and credits the cash or bank account depends on the mode of payment.Businesses pay salary before the due date sometimes. This is referred to as an advance salary. It becomes a prepaid expense.
Entry at the time of advance payment:
Advance Salary Account Dr.
To Cash/Bank Account
Then on the due date:
Salary Account Dr.
To Advance Salary Account
Example:
Paid ₹12,000 in advance to the staff.
Entry:
Advance Salary Account Dr. ₹12,000
To Cash Account ₹12,000
It is the salary paid in advance journal entry.
Named Entries: Paid Salary to Specific Persons
Sometimes entry in a journal is passed using the name of specific persons and in these cases entry is passed using a name. The named persons can be Ram, Gopal, Mohan. We pay salary to such persons. Let us understand these.
Journal Entry for Paying Salary to Gopal
Salary paid to gopal debit the salary expense account and credit the cash or bank account depending on the mode of payment. You give the entry in the name of the employee Gopal when you are paying salary directly to him.
Entry:
Gopal Account Dr.
To Cash/Bank Account
That is when salary is treated as payable first. Or you can do a recording:
Salary Account Dr.
To Cash Account
(With narration: Gave salary to Gopal)
Example:
Gave Salary to Gopal by cheque (Paid ₹8,000).
Entry:
Salary Account Dr. ₹8,000
To Bank Account ₹8,000
So, you are asked, proceeds salary for Gopal.
The journal entry for the salary paid to Gopal.
Salary Paid to Ram Journal Entry
When you pay Ram, Same format apply.
Entry:
Salary Account Dr. ₹10,000
To Cash Account ₹10,000
(Narration — Remuneration given to Ram)
Ram Salary Paid Journal Entry or Salary Paid Journal Entry for Ram.
Salary Paid to Mohan Journal Entry
For Mohan:
Entry:
Salary Account Dr. ₹9,000
To Cash Account ₹9,000
(Payroll: Salary to Mohan)
This is journal entry for salary paid to Mohan.
Such examples are useful in personal accounting and small business ledgers where you care about employee names.
Journal Entry for Paid Salary to Staff Journal Entry
When salary is paid to staff by the company, it debits the salary payable account and credit cash or bank account. It depends on how the payment is made. This is for when you pay out general salaries without naming names.
Entry:
Salary Account Dr.
To Cash/Bank Account
Example:
(Paid ₹30,000 to staff by cheque.)
Entry:
Salary Account Dr. ₹30,000
To Bank Account ₹30,000
(Narration: Staff were paid salary)
Paid salary to staff journal entry This is called paid salary to staff journal entry
Journal Entry of Pay Salary by Cheque
When a company pays salaries through cheque, it debits the salary expense account and credit the bank account. It shows the expense of the company and decreases the company’s bank balance. This is the same but focuses on the way of payment.
Entry:
Salary Account Dr.
To Bank Account
This denotes salary paid by cheque journal entry.
These adjustments enhance precision in accounting records. You should write proper narration and amounts in Tally or physical books.
Salary Paid Journal Entry Format
There are various cases of salary paid like in cash, cheque, advance etc. It depends on the mode of payment and time at which payment is made and the following entries are passed as given below. Let us condense journal entries to learn easily:
| Situation | Journal Entry |
| Paid salary in cash | Salary A/c Dr. To Cash A/c |
| Paid salary by cheque | Salary A/c Dr. To Bank A/c |
| Paid salary in advance | Advance Salary A/c Dr. To Cash/Bank A/c |
| Adjust advance salary on due date | Salary A/c Dr. To Advance Salary A/c |
| Paid salary to Gopal | Salary A/c Dr. To Cash/Bank A/c (narrate Gopal) |
| Paid salary to Ram | Salary A/c Dr. To Cash/Bank A/c (narrate Ram) |
| Paid salary to Mohan | Salary A/c Dr. To Cash/Bank A/c (narrate Mohan) |
| Paid salary to Staff | Salary A/c Dr. To Bank A/c (narrate staff) |
For making journal entries in exams or business accounts, use this format.
Common Mistakes to Avoid
Common mistakes made by Indian students in their journal entries:
- Relying on an incorrect account name (like recording Wages instead of Salary)
- Not mentioning how you will be paying
- Narration in a passive voice
- Salary paid salary in the advance
You have to be clear with concept and keep in mind about which account goes where in debit or credit.
Relevance to ACCA Syllabus
You Study Journal entries in three different papers in ACCA such as FA, MA, and AA as per ACCA Syllabus. Candidates should be familiar with expense classification, double-entry bookkeeping, and the effects on the financial statements. Journal entry for salary paid is matters related to real world accounting work and examination questions.
Salary Paid Journal Entry ACCA Questions
Q1. What will be the journal entry for cash-paid salary?
A. Cash A/c Dr., Salary A/c
B. Salary A/c Debit, To Cash A/c
C. Salary A/c Dr., To Bank A/c
D. Capital Account Debited & Salary Account Credit.
Answer: B
Q2. If Ram’s salary is paid by cheque, what will be the entry?
B. Cash A/c Dr., To Salary A/c
B. Bank A/c debit, To Salary A/c
C. Dr. Salary A/c, To Bank A/c
D. Salary Payable A/c Dr, To Bank A/c
Answer: C
Q3. What is Salary Account type of account?
A. Asset
B. Liability
C. Income
D. Expense
Answer: D
Q4. What types of accounts are debits?
A. Salary A/c
B. Advance Salary A/c
C. Capital A/c
D. Cash A/c
Answer: B
Q5. Gopal Cash Salary Of ₹10,000 paid. What will be credited?
A. Gopal A/c
B. Salary A/c
C. Cash A/c
D. Expense A/c
Answer: C
Relevance to US CMA Syllabus
Sadly, because you are US CMA, this guide must revise the part of cost control, budgeting, internal managerial reporting. Having a basic understanding of the journal entries for salary paid will help you in preparing variance reports, cost analysis, cash flow statements, etc. That ties into the sections on performance management and financial reporting.
Salary Paid Journal Entry US CMA Questions
Q1. In the income statement, salary is classified under which type?
A. Administrative Expense
B. Non-operating Expense
C. Financing Cost
D. Revenue
Answer: A
Q2. There is no hint of advance salary in your data.
A. Variable cost
B. Deferred cost
C. Capital expenditure
D. Operating revenue
Answer: B
Q3. Salary paid is when preparing a cash flow statement(indirect method):
A. Added to Net Income
B. Deducted from Net Income
C. Not shown
D. Reported in cash flows from investing activities
Answer: B
Q4. Paid salary by cheque. How does this affect accounts?
A. Increase in liabilities
B. Increase in bank balance
C. Diminution of the healthy bank balance and grow of the expense
D. No change
Answer: C
Q5. What type of cost is salary paid to staff?
A. Fixed cost
B. Direct cost
C. Opportunity cost
D. Non-controllable cost
Answer: A
Relevance to US CPA Syllabus
It covers accounting principles (GAAP), preparation of financial statements, and adjustments. FAR (Financial Accounting & Reporting) and AUD (Auditing) sections of US CPA included journal entries such as salary payments. These entries provide insight into internal controls and also allow you to see whether expenses have been correctly classified.
Salary Paid Journal Entry US CPA Questions
Q1. What type of account is salary payable?
A. Current Asset
B. Fixed Asset
C. Current Liability
D. Deferred Expense
Answer: C
Q2. Which entry makes salary prepaid?
A. Salary A/c Debit To Advance Salary A/c
B. Salary A/c, Cr, To Cash A/c
C.Salary Advance A/c Dr. To Salary A/c
D. To Revenue A/c Dr., Salary A/c
Answer: C
Q3. What financial statement presents wages paid as expense?
A. Balance Sheet
B. Cash Flow Statement
C. Income Statement
D. Notes to Accounts
Answer: C
Q4. A company pays salary to Mohan through cheque. Which accounts are affected?
A. Salary and Mohan
B. Salary and Cash
C. Salary and Bank
D. Mohan and Cash
Answer: C
Q5. This concept makes it necessary to record salary in the period it is earned.
A. Matching Principle
B. Materiality
C. Going Concern
D. Conservatism
Answer: A
Relevance to CFA Syllabus
Salary journal entries are a part of Financial Reporting & Analysis (FRA) in CFA Level I. They impact income statements, balance sheets, and cash flow analysis. Operating expenses such as salary directly drive not only profit margins, but also ratios and forecasting models that, for example, inform automated credit decisions.
Salary Paid Journal Entry CFA Questions
Q1. How salary expense reworks into operating income.
A. It increases it
B. It decreases it
C. It has no effect
D. It is added back
Answer: B
Q2. How do you record earned but unpaid salary?
A. Prepaid expense
B. Accrued expense
C. Deferred income
D. Non-current asset
Answer: B
Q3. Read More: Balance Sheet: Its Types, Functions, and Terminology
A. Retained Earnings
B. Current Asset
C. Accrued Liability
D. Equity
Answer: C
Q4. Note that payment of salary is cash going out, so a decrease in cash would impact which section of the cash flow statement?
A. Investing activities
B. Financing activities
C. Operating activities
D. Non-cash disclosure
Answer: C
Q5. What is the importance of correctly entering salary expense in valuation?
A. It affects net sales
B. It has an impact on capital structure
A. It raises the revenue but also affects the net income and EPS.
D. It has no impact valuation
Answer: C
