Accrued expenses or outstanding expenses
Expenses which have been incurred but not been paid for till the end of the accounting year are known as Accrued expenses or outstanding expenses.
For example,
Total salaries to be paid for the year were $10,000, but by the end of the year $1000 were not paid and will be treated as outstanding salary.
Adjusting Entry
| Salaries Account | Dr. | |
| Outstanding Salaries Account | ||
| (Being salaries outstanding) | ||
Accounting treatment
Outstanding expense amount is added to that particular expense account in the Profit and loss or Trading Account because it was the expense for that year. (Based on the matching principle)
Outstanding expenses are liabilities for the business. Thus they will appear under the Current Liabilities in the Balance Sheet.
Note: If the Outstanding expense appears in the Trial Balance then it will only be recorded in the Liabilities side of the Balance Sheet.