Outstanding Expenses: Meaning, Entry & Treatment
Definition
Outstanding expenses are expenses that belong to the current accounting period but have not been paid by its end — such as March salary paid in April. They are added to the expense and shown as a current liability.
| Term | Outstanding expenses |
|---|---|
| In Hindi | अदत्त व्यय (बकाया खर्च) |
| Area | Accounting |
| Search phrase | outstanding expenses |
| Try it | Prepaid expenses |
अदत्त व्यय (बकाया खर्च) — हिंदी में अर्थ
अदत्त व्यय वे खर्च हैं जो इसी लेखा अवधि के हैं पर अवधि के अंत तक चुकाए नहीं गए — जैसे मार्च का वेतन जो अप्रैल में दिया गया। इन्हें खर्च में जोड़ा जाता है और चालू देनदारी के रूप में दिखाया जाता है।
Adjustment entry and final accounts
At year end: Expense A/c Dr; To Outstanding Expense A/c. In the profit and loss account, the outstanding amount is added to the expense paid during the year. In the balance sheet, it appears under current liabilities (other current liabilities in Schedule III).
Next year, when it is paid: Outstanding Expense A/c Dr; To Bank A/c. The payment then does not hit next year's expense again.
Common outstanding expenses in a factory
March wages and salaries paid in the first week of April, the March electricity bill that arrives in mid-April, rent for the last month, interest due on a loan, and professional fees for the audit. Recording them follows the accrual principle — expenses are matched to the period they relate to, not the date of payment.
Example
Wages for March 2026 of ₹1,20,000 are paid on 7 April 2026. On 31 March: Wages A/c Dr ₹1,20,000; To Outstanding Wages A/c ₹1,20,000. If ₹13,20,000 was paid in the year, the P&L shows wages of ₹14,40,000.
Related tools and guides
Frequently asked questions
Are outstanding expenses an asset or liability?
A liability — the business owes the amount. It is shown under current liabilities.
What is the journal entry for outstanding salary?
Salary A/c Dr; To Outstanding Salary A/c — at the end of the period for salary earned but not paid.
Are outstanding and accrued expenses the same?
Yes, both mean an expense incurred but not yet paid. 'Outstanding' is the common term in Indian books.
How are outstanding expenses treated in the trial balance?
If given in the trial balance, it has already been adjusted, so it only goes to the balance sheet. If given as an adjustment, it goes to both the P&L and the balance sheet.
Related terms
- Accounts receivableAccounts receivable is the money customers owe a business for goods or services already supplied on credit. It is shown as trade receivables (debtors) under current assets.
- Accrual vs cash basis of accountingUnder the accrual (mercantile) basis, income and expenses are recorded when they are earned or incurred, whatever the payment date. Under the cash basis, they are recorded only when cash is actually received or paid.
- Balance sheetA balance sheet is a statement of what a business owns (assets) and what it owes (liabilities and owners' equity) on a particular date. Total assets always equal total equity plus liabilities.
- Cash conversion cycleThe cash conversion cycle (CCC) is the number of days between paying for raw material and collecting cash from the customer for the finished goods: days inventory outstanding plus days sales outstanding minus days payables outstanding.
- Contra entryA contra entry is a transaction between cash and bank accounts of the same business — such as cash deposited into the bank or cash withdrawn for office use — where both the debit and the credit side are cash or bank.
- Contribution marginContribution margin is selling price minus variable cost. It is the amount each sale contributes first towards fixed costs and then to profit; as a percentage of sales it is called the contribution margin ratio or P/V ratio.