Outstanding Expenses, Accrued Incomes

25/12/2020 0 By indiafreenotes

Outstanding Expenses

An Outstanding Expense is an expense which is due but has not been paid.

Outstanding expenses are those expenses which have been incurred during the current accounting period and are due to be paid, however, the payment is not made. Such an item is to be treated as a payable for the business.

Examples: Outstanding salary, outstanding rent, outstanding subscription, outstanding wages, etc. Outstanding expenses are recorded in books of finance at the end of an accounting period to show the true numbers of a business.

The outstanding expense is a personal account and is treated as a liability for the business. It is also shown on the liability side of a balance sheet.

Sometimes in the normal course of business, an enterprise may have some expenses relating to which the payment is due at the end of the year. We know these expenses as Outstanding Expenses.

Wages, salary, rent, interest on the loan, etc. are examples of such expenses that may remain due at the end of the accounting year.

However, we need to record them as they relate to the incomes of the current year. Like all other expenses, they are also a charge against the profit of the current year.

An expense becomes outstanding when the company has taken the benefit, but the related payment has not been made.

  • Rent past due but not yet paid
  • Bills past due but not yet paid
  • Subscriptions past due but not yet paid

Journal Entry of an Outstanding Expense

Date Description Amount
MM/DD/YY Expense A/c Debit Rs. A​
MM/DD/YY Outstanding Expense A/c Credit Rs. A

Accrued Incomes

It may so happen that we may earn some incomes during the current accounting year but not receive them in the same year. Such income is accrued income.

The Accrued Income A/c appears on the assets side of the Balance Sheet. While preparing the Trading and Profit and Loss A/c we need to add the amount of accrued income to that particular income.

The Journal entry to record accrued incomes is:

Date Particulars Amount (Dr.) Amount (Cr.)
Accrued Income A/c Dr.
To Income A/c
(Being recording of accrued incomes)