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Question
What is outstanding expense?
Solution
Expenses which have been incurred in the accounting period but not paid till the end of the accounting period are called outstanding expenses.
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RELATED QUESTIONS
What are adjusting entries?
What is meant by provision for doubtful debts? Why is it created?
Give the adjusting entries for interest on capital and interest on drawings.
Pass adjusting entries for the following:
- The closing stock was valued at ₹ 5,000
- Outstanding salaries ₹ 150
- Insurance prepaid ₹ 450
- ₹ 20,000 was received in advance for commission.
- Accrued interest on investments is ₹ 1,000.
For the fol owing adjustments, pass adjusting entries:
- Outstanding wages ₹ 5,000.
- Depreciate machinery by ₹ 1,000.
- Interest on capital @ 5% (Capital: ₹ 20,000)
- Interest on drawings ₹ 50
- Write off bad debts ₹ 500
The trial balance on March 31, 2016, shows the following:
Sundry debtors ₹ 30,000; Bad debts ₹ 1,200
It is found that 3% of sundry debtors is doubtful of recovery and is to be provided for. Pass journal entry for the amount of provision and also show how it would appear in the profit and loss account and balance sheet.
The following are the extracts from the trial balance.
Sundry debtors ₹ 30,000; Bad debts ₹ 5,000
Additional information:
(a) Write off further bad debts ₹ 3,000.
(b) Create 10% provision for bad and doubtful debts.
You are required to pass necessary adjusting entries and show how these items will appear in the profit and loss account and balance sheet.
From the following trial balance of Ramesh as of 31st March 2017, prepare the trading and profit and loss account and the balance sheet as of that date,
| Particulars | Debit ₹ | Credit ₹ |
| Stock (01.04.2016) | 40,000 | |
| Purchases | 85,000 | |
| Sales | 1,90,000 | |
| Sundry creditors | 48,000 | |
| Furniture and fixtures | 65,000 | |
| Debtors | 45,000 | |
| Cash at bank | 21,000 | |
| Wages | 37,500 | |
| Drawings | 15,000 | |
| Telephone charges | 3,000 | |
| Bad debts | 2,000 | |
| Provision for bad debts | 2,500 | |
| Discount received | 3,000 | |
| Capital | 85,000 | |
| Advertising | 15,000 | |
| 3,28,500 | 3,28,500 |
Adjustments:
- The closing stock was valued at ₹ 35,000
- Unexpired advertising ₹ 250
- Provision for bad and doubtful debts is to be increased to ₹ 3,000
- Provide 2% for discount on debtors.
Prepare trading and profit and loss account and balance sheet from the following trial balance of Madan as of 31st March 2018.
| Debit balance | ₹ | Credit balance | ₹ |
| Sundry debtors | 61,000 | Capital | 70,000 |
| Plant and machinery | 80,000 | Purchases return | 2,000 |
| Bank charges | 4,200 | Sales | 2,55,000 |
| Wages | 7,000 | Bank overdraft | 77,000 |
| Sales return | 5,000 | ||
| Purchases | 1,52,000 | ||
| Opening stock | 30,000 | ||
| Drawings | 22,000 | ||
| Establishment expenses | 20,000 | ||
| Bad debts | 800 | ||
| Business premises | 22,000 | ||
| 4,04,000 | 4,04,000 |
Adjustments:
- The closing stock was ₹ 80,000
- Provide depreciation on plant and machinery @ 20%
- Write off ₹ 800 as further bad debts
- Provide the doubtful debts @ 5% on sundry debtors.
From the following information prepare trading and profit and loss account and balance sheet of Kumar for the year ending 31st December 2017.
| Debit balance | ₹ | Credit balance | ₹ |
| Purchases | 14,500 | Sales | 20,100 |
| Coal and fuel | 600 | Bills payable | 400 |
| Carriage inwards | 750 | Rent received | 2,500 |
| Advertisement | 500 | Creditors | 2,000 |
| Carriage outwards | 400 | Capital | 5,000 |
| Bank | 1,200 | ||
| Furniture | 8,000 | ||
| Debtors | 2,250 | ||
| Bills receivable | 300 | ||
| Stock on 1st January, 2017 | 1,500 | ||
| 30,000 | 30,000 |
Adjustments:
- The closing stock on 31st December 2017 was valued at ₹ 3,900.
- Carriage inwards prepaid ₹ 250
- Rent received in advance ₹ 100
- Manager is entitled to receive commission @ 5% of net profit after providing such commission.
