Quick Answer: Why Outstanding Expenses Are Personal Account?

What is outstanding income example?

For example, if a loan of Rs.

1,00,000 has been given @ 12% p.a.

and interest is payable monthly, if interest for one month, i.e., Rs.

1,000 has not been received by the business, the income will be earned as an outstanding Income since interest has become due but it has not yet been received by the business..

What kind of account is salary?

By definition, a Salary Account is a type of Savings Account, in which the employer of the account holder deposits a fixed amount of money as ‘salary’ every month. Who can open a Salary Account? A business (employer) has to tie-up with a bank to open Salary Accounts for its employees.

Is salary account is a real account?

Salary account is an expense account and is a nominal account.

How are Prepaid expenses recorded?

When a company prepays for an expense, it is recognized as a prepaid asset on the balance sheet, with a simultaneous entry being recorded that reduces the company’s cash (or payment account) by the same amount.

Is capital account a personal account?

Capital account is the account of a natural person, i.e. an account of person who is alive. Hence, it can be classified as a personal account.

What is the another name of outstanding expenses?

The other name for outstanding expenses is “accrued expenses”.

What are outstanding accounts?

Accounts receivable refers to the outstanding invoices a company has or the money clients owe the company. The phrase refers to accounts a business has the right to receive because it has delivered a product or service.

How many accounts are affected in a transaction?

two accountsNo account can possibly change without some identifiable cause. Thus, every transaction must touch a minimum of two accounts. Many transactions actually affect more than two accounts but at least two are impacted by each of these financial events.

What are the three golden rules of accounting?

Take a look at the three main rules of accounting:Debit the receiver and credit the giver.Debit what comes in and credit what goes out.Debit expenses and losses, credit income and gains.

Is outstanding expenses a personal account?

Outstanding expenses is a personal account and is shown in the liability side of a balance sheet.

Is outstanding rent an asset?

Outstanding expenses are those expenses which have been incurred during the current accounting period and are due to be paid, however, the payment is not made. Such an item is to be treated as a payable for the business. Examples – Outstanding salary, outstanding rent, outstanding subscription, outstanding wages, etc.

What is the entry for outstanding expenses?

Journal Entry for Outstanding ExpensesExpense A/CDebitDebit the increase in expenseTo Outstanding Expense A/CCreditCredit the increase in liability

Are salaries direct expenses?

Depending on the business you run, wages or salaries may also be viewed as direct expenses. Direct expenses are most often variable costs. These costs will fluctuate should you produce more or fewer products at any given time. The direct expense will be about the quantities produced.

What is real account example?

Examples of Real Accounts The real accounts are the balance sheet accounts which include the following: Asset accounts (cash, accounts receivable, buildings, etc.) Liability accounts (notes payable, accounts payable, wages payable, etc.) Stockholders’ equity accounts (common stock, retained earnings, etc.)

Why outstanding salary is personal account?

Answer: Outstanding Salary A/c is a Representative Personal Account as it represents a group of people to whom some amount of salary is payable. Similarly other outstanding and prepaid expenses also fall under the category of representative personal accounts.

Why are outstanding expenses credited?

Credit – Expenses Outstanding a/c The amount of expenditure that has not yet been paid is a liability for the organisation. The persons to whom the organisation owes is its creditor. As such, the amount of expenditure outstanding that has not yet been taken into the books is credited to the Expenditure Outstanding a/c.

What type of account is outstanding wages?

Outstanding wages is classified as a personal account and not a nominal account. This account represents the accounts of all those persons to whom wages have not been paid and hence, are outstanding. Therefore, it is termed as “Representative Personal Account” or simply personal account.

What is outstanding expenses account?

An Outstanding Expense is an expense which is due but has not been paid. An expense becomes outstanding when the company has taken the benefit, but the related payment has not been made. Examples of Outstanding Expenses.

What is journal entry of outstanding salary?

The first account is salary, it will be treated as like simple expense entry shown below: Salary -> Expense a/c -> Expenses Rule ->Increase in Expenses -> Debit. The second account is due but not paid yet = Outstanding Salary.