Outstanding Expenses Meaning
During the usual course of a business, there are expenses that will be incurred during the current accounting period and are not paid or in other words, there are certain expenses that take place during the current accounting period but payment for the same are not made, such expenses are called outstanding expenses.
The outstanding expense is a personal account with a credit balance and is treated as a liability for the business. It is recorded on the liability side of the balance sheet of a business.
For accounting accuracy, these expenses need to be realised whether they are paid or not. Like the other expenses incurred by a business, it is also charged against the profit that is obtained for the current year.
Outstanding Expense Journal Entries
The following journal entry can be passed in case of outstanding expenses.
Expense A/c Dr.
To Outstanding Expense A/c
(For recording the expense of the current year outstanding)
Outstanding expenses are reflected on the liability side of the balance sheet and at the time of Trading and Profit and Loss A/c preparation, the outstanding expenses should be added to the particular expenses category to which it belongs.
This can be illustrated with a sample question.
The company trial balance shows wages at Rs.12000, but wages of Rs. 1000 for the month of December is yet to be paid (as on 31st December 2019)
It can be represented as
Wages A/c Dr. 1000
To Outstanding Wages A/c 1000
(Being unpaid wages brought to account)
Examples of Outstanding Expenses
The examples of outstanding expenses incurred by a business are as follows:
- Outstanding rent
- Outstanding salary
- Outstanding wages
This was all about the topic of Outstanding expenses, which is an important concept studied by students of Accountancy in Commerce stream. For more such interesting topics, stay tuned to CoolGyan’S.
Frequently Asked Questions on Outstanding Expenses
Does outstanding expenses a/c have a debit or credit balance?
Outstanding expenses a/c is a personal account having a credit balance.
How are outstanding expenses treated in accounting?
Outstanding expenses are treated as liabilities in the balance sheet of a company.