The correct answer is: C. Liability side of balance sheet.
Outstanding salary is a liability because it is an amount that the company owes to its employees. It is a current liability because it is expected to be paid within one year.
The trading account and profit and loss account are part of the income statement. The balance sheet is a statement of financial position that shows the assets, liabilities, and equity of a company at a specific point in time.
Assets are resources that a company owns and expects to benefit from in the future. Liabilities are obligations that a company owes to others. Equity is the difference between assets and liabilities.
Outstanding salary is a liability because it is an amount that the company owes to its employees. It is a current liability because it is expected to be paid within one year. Therefore, it will be shown on the liability side of the balance sheet.
Here is a brief explanation of each option:
- Option A: Trading account & balance sheet. The trading account is part of the income statement. It shows the gross profit or loss of a company from its trading activities. The balance sheet is a statement of financial position that shows the assets, liabilities, and equity of a company at a specific point in time. Outstanding salary is not a part of the trading account. Therefore, this option is incorrect.
- Option B: Profit & loss account & balance sheet. The profit and loss account is part of the income statement. It shows the gross profit or loss of a company from its trading activities. The balance sheet is a statement of financial position that shows the assets, liabilities, and equity of a company at a specific point in time. Outstanding salary is not a part of the profit and loss account. Therefore, this option is incorrect.
- Option C: Liability side of balance sheet. Outstanding salary is a liability because it is an amount that the company owes to its employees. It is a current liability because it is expected to be paid within one year. Therefore, it will be shown on the liability side of the balance sheet.
- Option D: Asset side of balance sheet. Assets are resources that a company owns and expects to benefit from in the future. Outstanding salary is not an asset. Therefore, this option is incorrect.