Outstanding expenses meaning


Outstanding Expenses

What is an Outstanding Expense in Accounting?

Outstanding Expense is those expenses that are incurred during a particular financial period and due to be paid in the future. However Outstanding expenses are recorded in books to show our liability to pay our due expense in the next financial period or year.

The recording of outstanding expenses helps to track the dues to be paid in the future.

Example of Outstanding Expenses

Example 1.

Suppose in Financial year 1 April 2019 to 31 Dec 2020 wages paid is Rs. 11000 but the last month wages not paid Rs 1000.

Therefore wages not paid in a particular financial year are outstanding.

To record the entry of outstanding Expenses in books of accounts we should know that When we ADD Assets in Business we Debit our Asset Similarly, When we ADD Liability in Business we Credit our Liability And When we Minus or deduct Asset in business we Credit our Asset Similar when we Minus or deduct our Liability form business we Debit our liability ir can be more clear from the picture given below.


Now as per above example our liability to 1000 is created in the books of accounts, therefore, we have to book our liability by crediting it the journal entry for the above in the books of accounts will be

wages outstanding journal entry

Wages A/c Dr.    1000

To O/S Wages A/c    1000

(Being wages due )

When outstanding wages is paid .

Outstanding Wages A/c Dr.  1000

    To cash                                      1000

 Outstanding  Rent journal entry

Example 2


Rent paid during the year is Rs 1,10,000 rent for the year is Rs 120,000.

Under such condition

When Rent is Paid

Rent A/c  Dr. 1,10,000

To Cash A/c     1,10,000

(being rent paid )

Journal entry for outstanding rent will be

Rent A/c Dr   10,000

To O/S Rent A/c   10,000

(being Rent Outstanding)

Some examples of outstanding expenses

Question 1.

A loan is taken from Bank Rs 100000 on 1 Dec 2019. interest payable 12% per annual. FY close on 31 March 2020.

Case 1

If Interest paid Rs 2000.


Year loan 100000 X 12% = 12000

4 month interest 12000/12= 1000 int.=1000X4 = 4000

Loan taken from Bank Rs 100000 on 1 Dec 2019. interest payable 12% per annual. FY close on 31 march 2020.

Case 1

Interest paid


    To cash A/c


  To Interest on loan payable A/c 


here interest payable is an outstanding expense

Question 2.

A loan was taken from Bank Rs 100000 on 1 Dec 2019. interest payable 12% per annual. FY close on 31 march 2020.

Case 2

Interest paid Rs 8000.

Int. on Loan


Interest on LoanDr.


  To  Cash


Question 3.

A loan is taken from Bank Rs 100000 on 1 Dec 2019. interest payable 12% per annual. FY close on 31 March 2020.

Case 3

No interest paid

Int. on Loan Dr


      To Interest on loan payable A/c 


 (outstanding expense)

Outstanding expense in case of the bill received not paid.

Suppose we received a bill of mobile Phone  Rs 10,000 on 1 December 2020 and paid on 15 December 2020.

When a bill is received on 1 Dec. we have to note it down in books of accounts.

Mobile Phone exp. Dr.   10,000

   To Mobile phone bill payable     A/c                                        10,000

(being mobile phone bill received and payable )

When a bill is paid on 15 December.

Mobile phone bill payable A/c 10,000

   To Cash A/c     10,000

(being bill paid)

Ledger of Outstanding expense

Outstanding expense is liability by nature therefore its have credit balance means its credit side is more than the debit side lets understand it with the example given below

Suppose Salary not paid for the month is Rs 10,000

Journal entry for the above will be 

Salary A/c Dr.     10,000

To outstanding Salary A/c    10,000

(being salary not paid)

when we post the entry in the ledger of outstanding expense then 

Outstanding Expense Ledger 






By salary A/c


To balance  C/d






Therefore Oustanding expense is liability because it has credit balance.

Outstanding Expense in Profit and loss accounts or Income statement

Outstanding expense is an expense not paid for this year therefore it is added to debit side of the expense made.

Example salary not paid during the year 5000 that need to be added to salary 12000.





To salary 12000

+ outstanding Salary 5000



Outstanding expense in BalanceSheet

Outstanding expenses is asset or liability.

Outstanding Expense is liability therefore it is shown in the liability side of balance sheet and therefore it transferred to next accounting year






O/S Expense



Adjustment of Outstanding Expense

Understand with example

January Salary paid Rs 5000 actual salary Rs .10000.

It means Salary 5000 is not paid it is outstanding or payable.

Salary A/c Dr.


    To Cash A/c


    To outstanding Salary  A/c


Being salary paid and outstanding written

February salary paid with adjustment of last month salary.

In this month we pay salary with outstanding salary not paid last month.

The journal entry for the above will be.

Salary A/c Dr.


 Outstanding Salary  A/c


           To Cash   A/c


Being salary paid with outstanding

outstanding expenses are current liabilities

they are those  debts or obligations that are due to be paid to creditors within one year

FAQ of outstanding Expense

What is the Balance of outstanding expenses?

The outstanding expense has a credit balance means when we create a ledger of outstanding expenses its Credit side is more than the Debit balance.

Why outstanding expense is a liability and why it is shown in the profit and loss accounts?

Outstanding expense it liability because it’s our obligation to pay in near future We cannot keep it pending for a long time and we have to pay them.

It is shown in the Profit and loss accounts and added to expense because it is the expense of Accounting which are for one year and to find the true or actual profit we need to add it in particular expense.

what if outstanding expenses are shown in the Trial balance?

If outstanding expense is shown inside the trial balance it means the outstanding expense is already adjusted and we need not to show them in the profit and loss account we can show them only in the Balance sheet on the Liability side.

Short MCQ outstanding Expense quiz

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