Bookkeeping provides a straightforward, timely, factual narrative of a company’s financial situation. Finance teams serve as reality checkers for business leaders: Can the company afford to bring on a fresh engineer? How much leeway does the company have? Is there a department that overspends on operating costs?
This post will focus on a specific section of accounting called an outstanding expenses journal entry. This article will take you through the nuances of this particular journal entry.
The foundational building blocks that offer the solutions to these and many other questions are found in journal entries. In the entries, important information is included, including when from which accounts and how much was debited and credited. In the end, each journal entry is submitted to the general ledger and corresponds to a single distinct business transaction.
What Exactly is an Accounting Journal Entry?
The date, the balance to be debited and credited, a clear transaction summary, and the accounts involved are all included in each journal entry, along with other information pertinent to a single commercial transaction. Depending on the business, it could include a list of the impacted subsidiaries, tax information, and further details.
For the financial reports based on the general ledger (GL) accounts to be accurate and complete, it is essential to accurately and completely input journal data. Recurring journal entries can be automated and templated in today’s accounting software, reducing the possibility of error.
What Do Accounting’s Outstanding Expenses Mean?
The unpaid expense is a specific personal account with a credit balance, and the business firm must handle it as a liability. The liability section of a company’s balance statement shows the Outstanding Expense. These costs must be recognized whether they are repaid or not if accounting is to be done accurately.
An expense that is past due but hasn’t been paid is an outstanding expense. When a benefit has been received, but the associated disbursement has not been made simultaneously, the expense becomes unpaid to the company.
Understanding The Journal Entry For Outstanding Expenses:
Several actions must be taken to make an outstanding expense journal entry. These actions involve locating the GL accounts, determining which accounting norms correspond to them, and putting those rules into practice. The following section will discuss these steps in detail:
Which GL Accounts Are Concerned With This Transaction?
The Outstanding Expenses GL and Expenses GL accounts are two accounts that are involved in this transaction.
What Norms Apply In This Situation?
Every discipline, including accounting, has its guiding concepts and standards. These basic accounting concepts must be followed. As a liability account, outstanding expense GL belongs in the domain of personal accounts. The second one is the Nominal Account Category and is an expense GL.
Final Thoughts:
The unpaid expense is considered a liability for the company even though it is a personal account with a credit balance. The outstanding expenses journal entry will be a debit to the expenses and a credit to the liability. It appears on the liabilities side of a company’s balance sheet. Whether or not they are paid, these costs must be recognized for accounting purposes.
