Accrued or outstanding

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Nidhi khandelwal (Querist)
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18 August 2016 Hi,
I am having one doubt regarding Accrued or Outstanding Term.
Can we use Accrued term in case of expenses ? and if yes can any one come with concept.

Regards,
Nidhi

Amol S Joglekar

Amol S Joglekar (Expert)
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18 August 2016 basically you need to decide the SIDE from which you want to view the transaction....
See, the point is...EXPENSES of spender may be INCOME of receiver
So to say, the same transaction is called as payment from one side.....the other side calls it as receipt...
Please dont get yourself confused....First decide from which side you want to REPORT.....debtor's OR creditor's?

Nidhi khandelwal

Nidhi khandelwal (Querist)
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18 August 2016 I am debtor side.. Suppose I have to pay some expenses to someone.
Now can you come with concept Beacause their is one concept of Accrued or Outstanding in sense fo expense which I read on CPT.

Thanks!!!

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Amol S Joglekar

Amol S Joglekar (Expert)
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18 August 2016 Assuming
The corporation tax (Property Tax) falls due to be paid on 1st day of financial year...i.e. 1st April 2016. Ok?
The same is paid on say 01/06/2016
For these 2 months.....we will say that the expenses of property tax is outstanding.....i.e. yet to be paid...
is it ok?....then we can proceed further

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Nidhi khandelwal

Nidhi khandelwal (Querist)
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18 August 2016 Lets do some changes in this ex. Suppose my financial year is April 2015 to March 2016.
I am having a rental agreement with party in which every 3 months I have to pay the rent. The rental agreement is starting from 1st May 2015 , It means I will pay my rent like May,June,Juy.
Now In the end of FY 16 my rent 4th installlment due date is April.
Now What I should give the treament of rent in my book in BS on 2016

Kaushik Joshi

Kaushik Joshi (Expert)
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19 August 2016 For expense payable use the term Outstanding. So in your example it'll be Outstanding rent payable.

Amol S Joglekar

Amol S Joglekar (Expert)
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19 August 2016 Since you have opened a good topic.....let us simultaneously discuss the method of accounting as well....
In CASH system of accounting : The entries would be passed as and when payment is made whether or not the same PERTAINES to the financial year 2015-16.
In ACCRUAL system of accounting, on the other hand, the items which pertain to the financial year 2015-16 are entered in books of accounts.
This calls for doing a PROPORTIONATE calculation....(The good example is as that of quoted by you, about rent payment..... for the financial year 2015-16, since your rent agreement starts from 01/5/2015...... 11 months rent pertains to FY 2015-16. While Payment would have been made as May 2015 (for May, jun, jul 2015)
Aug.2015 (for aug,sep,oct 2015), Nov2015 (for nov,dec,2015+jan2016) and Feb2016 (for feb,mar and apr2016)
In this case, the Apr 2016 rent falls under "Paid in advance" so far as financial year 2015-16 is concerned? Right?
So in the balance sheet as on 31/03/2016, rent paid in advance for 1 month will be reflected under asset side
Now tell me what next you need?