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What are Outstanding Expenses?

Outstanding expenses are those expenses that have already been incurred but have not been paid yet. For accounting purposes, these expenses need to be charged against profit in the current year whether they are paid or not. Outstanding expense is a personal account and it will be shown as a liability in the Balance Sheet with a credit balance.

For Example:

In the financial year 2023- 2024, a business firm ABC Ltd. receives professional services from a vendor worth Rs 1,00,000. However, in reality, there might be a delay in payments by ABC Ltd. due to less liquidity / financial crunch. ABC Ltd. promises to pay the amount of Rs. 1,00,000 to the vendor next year in July 2023.

This means that ABC Ltd. has availed of the services in the FY 2022–2023, however, it will make the payment in July 2023. Professional fees of Rs.1,00,000 will be an outstanding expense for ABC Ltd.

Examples of Outstanding Expenses

The examples of outstanding expenses incurred by a business are as follows:

  1. Outstanding rent
  2. Outstanding salary
  3. Outstanding wages

Simply put through outstanding expenses in business means, expenses which is not yet paid. In this case, the business is liable for paying these expenses. These expenses are accounted for at the end of the year or over some time to do accounting procedures with accuracy and also so that the business individuals get a fair image of how much they owe to the outsiders.

What are Outstanding Expenses in Accounting?

The Outstanding Expense is represented on the liability side of the balance sheet of a business. To perform accounting with accuracy, these expenses are required need to be realized whether they are paid or not. It is a type of expense that is due but has not been paid. This expense becomes outstanding to the company when, this has taken the benefit, but the related payment has not been made simultaneously. Examples of Outstanding Expenses – Rent due but not yet paid.