Select the amount of salary to be shown in the Income and Expenditure Account at the end of the current accounting year of a Not-for-Profit Organisation.
The salary paid during the current accounting year is ₹26,000, which includes two months' salary of the previous year, and one month's salary of the current year is still outstanding.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → ₹24,000
The Income and Expenditure Account shows the expense of the current year only: cash paid is adjusted for amounts of other years and for amounts still outstanding.
The ₹26,000 paid covers 2 months of the previous year and 11 months of the current year (one month is still outstanding).
Months paid for = 2 + 11 = 13
Salary per month = ₹26,000 ÷ 13 = ₹2,000
Salary of the current year = 12 × ₹2,000 = ₹24,000
Check: ₹26,000 − ₹4,000 (previous year) + ₹2,000 (outstanding) = ₹24,000.