Difference between salary outstanding and salary prepaid
Answers
Answer:
Answer: Outstanding salary is a personal representative account. As per matching concept, salary is due but not yet paid. So, Unpaid salary to be shown as liability under 'Expenses Payable' or 'Salary Payable' in Balance sheet on liabilities side and on other aspect of dual entry to be placed in Profit & Loss Account.
Outstanding Expenses
Sometimes in the normal course of , an enterprise may have some expenses relating to which the payment is due at the end of the year. We know these expenses as Outstanding Expenses.
, salary, rent, interest on the loan, etc. are examples of such expenses that may remain due at the end of the accounting year.
However, we need to record them as they relate to the incomes of the current year. Like all other expenses, they are also a charge against the profit of the current year.
Prepaid Expenses
In the normal course of business, some of the expenses may be paid in advance. However, the organization may not receive the benefits from these expenses by the end of the current accounting year. We call these expenses as prepaid expenses. We treat them as current assets.he Prepaid Expense A/c appears on the assets side of the Balance Sheet. While preparing the Trading and Profit and Loss A/c we need to deduct the amount of prepaid expense from that particular expense.