Is Previous Year Outstanding Expenses Paid Current Asset in Our Balance Sheet

Question by Student

Is Previous Year Outstanding Expenses Paid Current  Asset  in Our Balance Sheet?

Answer by Me 

Yes, If you have previous year outstanding expenses and you paid this current year, it is your current asset in your balance sheet. It is not asset which you bought this current year. It is your asset because your liability has decreased because you have paid it.

Same money can be used for buying new asset for showing in balance sheet but you are so truthful you have given the truthful commitment and use your curent year cash or bank balance for paying your previous year outstanding expenses. Due to this truthfulness and power of truthfulness, you have gained the ability to convert your cash or bank current asset into fulfilment of your truthful committement. So, if have total paid your pervious year outstanding expenses. In balance sheet, you can either show both previous year outstanding expenses as liability and paid prvious year outstanding expenses as asset. So, balance will zero or you can deduct paid amount from total your outstanding expenses.

I have explained it through my mindmap.

In this mind map. Vijay has to pay $ 1 Lakh to abc company but unable to pay same at the end of 2018. So, Accountant has given advice, please show it in your liability side of balance sheet because you have to pay same amount to us and you have to given use truthful commitment to pay us next year 2019.

Vijay has followed his truthful duty and show $ 1 Lakh in his balance sheet liability side as outstanding expenses of abc company

In 2019, vijay has transferred $ 60000 in the account of abc and told accountant of abc company.

Accountant of abc has given the thanks for this kindness and told to show now it as asset in your balance sheet and it will automatically decrease your outstanding expenses liability with $ 60,000.

Again Vijay followed his truthful duty and showed $ 60,000 in his balance sheet asset side as paid of previous year outstanding expenses of abc. Vijay can see that net given liability of outstanding expenses is just $ 40000. Vijay was very happy. He gave thanks to abc company team and forgive for not paying all and requested time for next year.

Lesson from this

1. There is big power in following of truthful commitment. It will increased your asset.
2. Always thanks
3. Always forgive your own mistakes from others.

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Accounting Education: Is Previous Year Outstanding Expenses Paid Current Asset in Our Balance Sheet
Is Previous Year Outstanding Expenses Paid Current Asset in Our Balance Sheet
Accounting Education
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