Operations of any business organization requires certain expenses, firms cannot function without such expenses. There are several types of expenses involved, outstanding expenses are also a form of expenses required to run a company. Expenses that have been made and utilized during the financial period that are still due and not paid yet are called outstanding expenses. The salaries or rents that are outstanding are examples of such expenses. These expenses are noted down in the accounting books towards the end of the operating cycle. In the balance sheet, the outstanding expenses are mentioned on the side of liabilities. Generally, transactions made during a business are recorded when they occur but the payments are not necessarily made at the same time. Actual payment scan be made later as well resulting in outstanding expenses. To know more about these expenses, students can search online for topics like outstanding expenses homework answers.
Recording outstanding expenses in journal entry
When outstanding expenses are recorded in journal entry, it is done in the following format â€“
Account of expense â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦ Debit
To account of outstanding expense â€¦â€¦â€¦â€¦ Credit
For example, if in a particular month, $40,000 was due for being paid for salaries that could not be paid for certain reasons. This has to be recorded in the accounting books with the required journal entry as follows â€“
Account of expense â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦ $40,000
To account of outstanding expense â€¦â€¦â€¦â€¦ $40,000
To know more about such examples on recording outstanding expenses in journal, students can search links like outstanding expenses homework answers online.
Benefits of making journal entry for outstanding expenses
There are certain benefits of adding records of outstanding expenses in journal entry. These are as follows â€“
- Outstanding expenses are ones that are due at the end of an operating period and have not been paid yet. This means that the services that could be availed from these expenses have already been obtained although the payment has not yet been made, so it is extremely important to keep a record of these expenses in the journal entry. In the journal entry, the outstanding expenses are noted in the side of debits. It is mentioned in the profit, loss account so that the expenses can be analyzed in comparison to the revenues. This will in turn help in showing net loss or profit.
- When outstanding expenses are recorded in journal entry, it becomes easier to show accurate liabilities. This entry in the journal entry can help in projecting the actual financial condition of the firm towards the end of the accounting period. Students can search for topics like outstanding expenses homework answers online to know about more such advantages of outstanding expenses.
Outstanding expenses on balance sheet
When outstanding expenses are recorded in the balance sheet, it is done in the column of liabilities. Showing the outstanding expenses in trial balance denotes passing of the adjusting entry.
Result of outstanding expenses on the financial statement
In the account of profit and loss, the outstanding expenses are added to the required expenses because in this case, it is in relation to the present year and will be shown in the form of liability in the balance sheet.
Effect of adjustment of outstanding expenses on financial statement
The different effects of outstanding expense adjustment on financial statement of a company are as follows â€“
- When outstanding expenses are non-periodic in nature, they are termed as direct expenses. In such case, these are combined to the total purchases in the price of the goods sold column of the income statement. These are projected under the column showing current liabilities in the balance sheet.
- When outstanding expenses are periodic in nature, they are called operating expenses. In this case, these are subtracted from the total income in the column of the operating costs of the income statement. This is again mentioned in the current liabilities column. Learners can get more information on effects of adjustments of outstanding expenses by searching topics like outstanding expenses homework answers
Outstanding expense adjustments in final accounts
The expenses that are due in the present accounting year and will be paid in future are the outstanding expenses, these payments are postponed. To get the actual results, noting such expenses in the year when they were incurred are necessary even when the payment is done later. Thus the final account of the financial period should contain the record of all outstanding expenses. Just to say that all outstanding expenses that are a part of liability account should be noted in the accounting period in case they are in relation to the financial year.
Taking help regarding outstanding expenses from online portals
Knowledge of outstanding expenses is very important for students. Apart from private tuitions, various online portals can also provide substantial amount of information on outstanding expenses. Today online educational help has become prevalent among learners due to various reasons. While studying online, students do not have to waste time due to transport to the learning center, they can easily study at the comfort of their homes. This mode of study is convenient as well as students do not need to get into uncomfortable formals to attend classes. There is another provision of saving money as there are no charges required for transport. Students can also study at their convenient time as there is no routine to be followed. Students can continue their jobs and study at the time that is preferable to them. Students can thus learn more on the topic by searching for outstanding expenses homework answers online.