Q.Explain, with the double effect on Final Accounts, the adjustment for 'Outstanding Expenses' and 'Prepaid Expenses'.

Both adjustments correct an expense figure for timing, but in opposite directions, and both then leave a matching trace in the Balance Sheet.

Outstanding (Unpaid) Expenses are expenses that belong to the current accounting year but have not yet been paid (e.g., wages for March remaining unpaid as on 31st March). Double effect: (i) the amount is added to the relevant expense on the debit side of the Trading/Profit and Loss Account, because the expense has genuinely been incurred this year and must reduce this year's profit fully; and (ii) the same amount is shown as a Current Liability in the Balance Sheet, because the business genuinely still owes it. …

Reversing the two — adding a prepaid amount instead of deducting it, or showing outstanding expenses as an asset instead of a liability; …