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Outstanding expenses such as outstanding salary, rent, wages, etc. are shown in the trial balance on the credit side as they are a liability for the business. I would like to explain this further with the help of an example which is as follows;
The trial balance of XYZ Ltd. shows the amount of rent as 7,000, however, rent amounting to 4,000 has not been paid yet for March.
This outstanding rent of 4,000 is shown in the Trial balance as follows:
Trial Balance as of 31st March, YYYY
|Plant & Machinery
- When the outstanding expenses are already shown in the Trial balance it means that the adjusting entry has already been recorded in the books of accounts.
- It shall be shown in the balance sheet of the company under current liabilities and no adjustment is required in the Profit and loss a/c.
- However, If outstanding expenses are not shown in the Trial balance then these expenses, shall be added to their respective account and recorded on the debit side in the Profit and loss a/c.
>Related Long Quiz for Practice Quiz 34 – Outstanding Expenses