Outstanding Expenses are the expenses that are due but not yet paid due to any reason. The customers already consume the service but not yet paid to the supplier. The risk and reward of products are transferred to customers but payment not yet made. The company record expenses/assets and liabilities. It will remain outstanding on company balance sheet until they are paid.
Outstanding expenses will not record base on the invoice bill from supplier. Sometimes the supplier bill invoice before/after the customer using the service or receiving goods. The expense becomes outstanding when the buyer has enjoyed the benefit but not yet paid to the other parties.
During the accounting period, businesses make many kinds of expenses and they are not able to settle all of them. The expenses that are outstanding will remain in the balance sheet as the current liabilities. The unpaid expenses at the end of the accounting period are the outstanding expenses.
Outstanding Expense Example
The company’s outstanding expenses include:
- Salary expense which not yet paid to employees.
- Rental fee which not yet paid to landlord.
- Utility Expense which not yet paid.
Outstanding Expense Journal Entries
The journal entries of journal entries are similar to normal expenses but instead of cash payment, we record accounts payable.
- To record the expense
- To settle the payable, clear outstanding expense
Note: some company may use the account name “outstanding expense” to separate it from normal accounts payable.
Outstanding Expenses Vs Accrued Expense
Outstanding and accrued expenses are similar as they both not yet paid to the supplier. However, they are not exactly the same.
Accrued Expenses are the expense which already incurs but the not yet due for payment. The supplier not yet bill to the customer. The customer estimate expense amount and make a record.
Outstanding Expenses are the expense which already incurs and past due for payment. It means the supplier already bills the invoice to the customer and it already past due for payment.