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Adjustment: Outstanding Expenses Video Lecture | SSC CGL Tier 2 - Study Material, Online Tests, Previous Year

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FAQs on Adjustment: Outstanding Expenses Video Lecture - SSC CGL Tier 2 - Study Material, Online Tests, Previous Year

1. What are outstanding expenses?
Ans. Outstanding expenses refer to the expenses that have been incurred but not yet paid by the company. These expenses are recorded in the books of accounts as liabilities and are typically settled within a specific time frame.
2. Why are outstanding expenses considered an adjustment?
Ans. Outstanding expenses are considered an adjustment because they need to be accounted for in the financial statements to accurately reflect the company's financial position. By recognizing these expenses as liabilities, the company ensures that its financial statements provide a true and fair view of its financial health.
3. How are outstanding expenses recorded in the books of accounts?
Ans. Outstanding expenses are recorded by debiting the respective expense account and crediting the outstanding expense account. This ensures that the expense is recognized in the appropriate period while also reflecting the liability in the balance sheet.
4. What is the impact of outstanding expenses on the company's financial statements?
Ans. Outstanding expenses have an impact on both the income statement and the balance sheet. On the income statement, these expenses are recognized as an expense, reducing the company's net income. On the balance sheet, outstanding expenses are recorded as liabilities, reducing the company's equity.
5. How are outstanding expenses settled?
Ans. Outstanding expenses are typically settled by making the necessary payment to the respective party. Once the payment is made, the outstanding expense account is debited, and the cash/bank account is credited, effectively reducing the liability and the company's cash position.
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