Loading....
Coupon Accepted Successfully!

 

Outstanding Expenses


Expenses which have been incurred during the year and whose benefit has been derived during the year, but not paid for yet are called outstanding expenses. At the end of the accounting year, all such expenses must be brought into the books; otherwise the profit will be overstated.

These include outstanding wages, salaries etc.

 

Outstanding Expenses are shown as liabilities in the Balance Sheet under liabilities. The adjusting entry for this is:
Expense A/c Dr.
To Outstanding Expenses A/c

 

Where the outstanding expenses are shown in the Trial Balance, it means that the adjusting entry has already been passed. In such a case, outstanding expenses will be shown only in the Balance Sheet as a liability.

 

Example 1 - Salaries paid during the year Rs. 1,10,000 (given in the Trial Balance). Salaries outstanding at the end Rs. 10,000 (given in the additional information outside the Trial Balance). In this case the following adjusting entry will be passed.

 

Salaries A/c Dr. Rs. 10, 000
To Salaries Outstanding A/c Rs. 10, 000

Salaries Account (Rs. 1, 20,000) will be closed by transferring to the Profit and Loss Account and Salaries outstanding (Rs. 10, 000) will be shown as liability in the Balance Sheet. It is shown as follows:
Salaries Outstanding A/c
Dr.     Cr.

Particulars

Rs.

Particulars

Rs.

To Balance C/d

10,000

By Salaries A/c

10,000

 

Salaries A/c

Dr.     Cr.

Particulars

Rs.

Particulars

Rs.

To Bank

To Salaries Outstanding A/c

1,10,000

 

10, 000

1, 20, 000

 

By Profit and Loss A/c

1,20,000

 

 

1, 20,000

 

 

Profit and Loss Account

Dr.     Cr.

Particulars

Rs.

Particulars

Rs.

To Salaries 1,10,000

Add: O/S 10,000

------------

 

 

 

1,20,000

 

 

1, 20, 000

 

   


Balance Sheet

Liabilities

Assets

Salaries Outstanding 10, 000

 

Next year, at the time of payment, the salaries outstanding Account is debited. The principle illustrated above applies to all expenses.




Test Your Skills Now!
Take a Quiz now
Reviewer Name