Outstanding liabilities are those liabilities which have not been paid at the date of the balance sheet.
Outstanding Liabilities refers to the incurred claims’ assessed future costs.
“Outstanding Liabilities mean, with respect to all Acquired Companies in the aggregate on the applicable measurement date, all liabilities that would be required under GAAP (Generally Accepted Accounting Principles) to be set forth on the face of an audited consolidated balance sheet of the Company;”
The outstanding liabilities and expenses can be divided into two groups:
- Unearned Income: These are income that may have been collected during the present year, but the whole or a part of it is not included in the present year and will be earned in the next year. For example, unearned rent (rent collected in advance), unearned interest (interest collected in advance), etc. An unearned income is not considered under the current year’s audit, so, the company should not credit it to the current year’s Profit and Loss Account, and should show it as a liability in the current period’s balance sheet.
- Unpaid Expenses: Unearned expenses are incurred through the present year but their payments have not been made under the present year’s audit and will be made in the coming year. In this case, the company should debit the Profit and Loss Account with this amount and credit the unpaid expenses and should show it in the balance sheet’s liability side.
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