The expense in accounting that is identified in the records before its payment is called accrued expense. It is termed as a current liability. The accrued expenses are typically recurrent and also accounted in the firmâ€™s balance sheet because there are very high chances of collection of these expense.
The expense of products and services that have been utilized in a financial period and at the same time it is due and not paid yet is called outstanding expense. Salaries or rents that are due could be examples of outstanding expenses. Students can search for difference in definition between accrued and outstanding expenses by searching for topics like accrued or outstanding expenses homework answers online.
Entry of accrued expense
This expense is one that has been used but not paid yet. This expense should be accounted in the financial period when it was used. Thus the entry of such expenses should be accounted when they are used instead of when it will be paid.
Entry of outstanding expense
These are expenses that are due and at the same time not paid yet. It is similar to a liability and maintains the rule that increment in liability should be credited and decrement in expense should be debited. The entry involves outstanding account of expense and account of expense. Learners can search for links like accrued or outstanding expenses homework answers online to learn more about entries on accrued and outstanding expenses.
Similarities between accrued and outstanding expenses
At times incomes made in a year are not received, in the same way, certain expenses whose products or services have been incurred are not paid within the accounting period, and these are the accrued and outstanding expenses. These expenses are treated in the following manner in the companyâ€™s final accounts â€“
- The expenses are added to the required expenses in the account of profit/loss.
- It is projected on the liabilities side of balance sheet under current liabilities.
Requirement of accrued or outstanding expenses on the balance sheet
The basic rules of accounting denote the requirement of recording all revenues and expenses within the period when they were made. There are times like at the beginning of a month, when the firm has to complete their accounting procedure but there could be certain expenses at that time which have been made but their supporting documents like receipts are not available at that time. In such cases, the firm studies the pattern of spending of that particular vendor and making an estimated invoice. An equivalent amount of entry is made into the journal. These expenses are needed to be noted in order to account them in the companyâ€™s financial statement. Students can log on to links like accrued or outstanding expenses homework answers online to get more information on the need for accrued and outstanding expenses.
Whether there is any difference between accrued and outstanding expenses
To learn whether there is any difference between accrued and outstanding expense we should first have a clear concept about the two. Accrued expense is the expense which is due but there is no fixed legal date for payment of that amount. For example, if a person worked for a company for a month under a contract and his payment is due but not paid yet, the company in this case has to make the payment but there is no legal boundation of a specific date of payment for the company. This is called an accrued expense of the company.
On the other hand, outstanding expense is also the payment of goods and services that is due and not paid yet. If an example is taken, suppose a company has a date of salary payment on the second of each month, thus all staff are bound to get their salary on the second, thus in this case the firm is bound legally to make the payment by the stipulated date. Thus the expense will be accrued at the end of the month and it is going to b outstanding on the second of each month. Learners can get more clarity on this topic by logging on to topics like accrued or outstanding expenses homework answers online.
The difference between accrued and outstanding expense
At times it becomes very difficult to distinguish between accrued and outstanding expenses as they are very similar to each other and has a minutely thin line of difference between each other. There are times when accrued and outstanding expenses are called synonyms. When we say accrued expense, it means that the mentioned expense has been utilized but is not due to be paid. On the contrary, outstanding expense is an expense that has been used and is also due to be paid.
We can take an example for explaining the difference between these two terms. If there is an individual working for a firm where the firmâ€™s policy is pay their staff salary in the form of cheques by the tenth of every month for the previous month. Thus for the services rendered in the previous month, the payment becomes due by the tenth of the next month. This salary accrues on a daily basis as the employee attends office every day providing their services to the company. Thus if we take salary expense of the firm into consideration, the company incurs the salary expense every day till the employees are working with them. But on the other hand, the employee has the right to receive their salary only by tenth of the succeeding month of their service. To some up, accruing expense is that which keeps increasing with passage of time and gets converted to outstanding expense when it gets due to be paid. Students need to have very clear idea about accrued and outstanding expenses and their difference, so for more information they can search for topics like accrued or outstanding expenses homework answers online and get the required clarification.
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