How to show outstanding expense in trial balance?

-This question was submitted by a user and answered by a volunteer of our choice.

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;

Example

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

PARTICULARS DEBIT CREDIT
Debtors 50,000
Cash 4,000
Sales 1,30,000
Purchases 90,000
Bank Loan 50,000
Rent 7,000
Salary 5,000
Outstanding Rent 4,000
Creditors 27,000
Plant & Machinery 40,000
Investments 15,000
2,11,000 2,11,000

 

Note

  • 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



 

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