Natalia Alva

How to show outstanding expense in trial balance?

Share

1 Answer

  1. 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 on 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.

    Hope this helps.

    • 6

Leave an answer

You must login to add an answer.