Question

Outstanding salary is

• A. Real Account
• B. Nominal Account
• C. Personal Account
• D. None of these

Hint:

Personal Accounts include debtors and creditors; always check the nature of the transaction.

Answer 1

The Correct Option is C

The question provided asks about the classification of "Outstanding salary" in the context of accounting. To determine the correct account type, we need to understand the classifications of accounts commonly used in accountancy:

• Real Account: These accounts relate to assets and liabilities. Real accounts do not close at the end of the financial year and are carried forward.
• Nominal Account: These accounts relate to income, expenses, losses, and gains. They are temporary accounts and are closed at the end of each accounting period.
• Personal Account: These accounts relate to individuals, companies, firms, and other entities. Personal accounts can include both natural persons and artificial or institutional persons.

Given these definitions, let's look at "Outstanding salary":

• Outstanding salary refers to the salary that is due to employees but has not yet been paid by the company. It is a liability to the company because it's an amount that needs to be settled.
• Since it pertains to an amount the company owes to individuals (employees), it falls under the Personal Account category. In accounting, outstanding expenses are treated as liabilities and are considered an obligation to other persons or entities.

Hence, the correct classification for "Outstanding salary" is a Personal Account. This is because it signifies an obligation to pay employees, aligning with the definition of personal accounts. The options can be ruled out as follows:

• Real Account: Incorrect, because outstanding salary does not pertain to an asset or a tangible/intangible resource.
• Nominal Account: Incorrect, because it is not an income or expense account that closes at the end of the period. Instead, it carries forward as a liability until paid.
• None of these: Incorrect, as discussed earlier, outstanding salaries clearly belong to Personal Accounts.

Therefore, the correct answer is Personal Account.