What is outstanding income?

Outstanding Income is the income that is due and is being earned but not yet received. The person/ firm has the legal rights to receive that part of the income which it has earned.

Outstanding Income is an Asset Account for the business/ the person.

According to the modern approach, for Asset Account:

• When there is an increase in the Asset, it is Debited.
• When there is a decrease in Asset, it is Credited.

So the journal entry  will be-

For Example, Mr. Rashid works as a laborer in a factory and he earns wages @Rs 500/day.

So by the end of the week, he receives a payment of Rs 3000 of Rs 3500 i.e. he receives payment of 6 days instead of 7 days. So here Rs 500 would be an outstanding income of Mr. Rashid as he has earned that income but has not received it yet.

Journal Entry –

Another example, Yes Bank gave a loan of Rs 10,00,000 to company Ford @ 10% as interest payable monthly. The interest for one month i.e. Rs 1,00,000 has not been received by Yes Bank which is being due. So it will be outstanding income for Yes Bank since it is due but not yet received.

Journal entry-

Accounting Treatment for Outstanding Income-

• Treatment in Income Statement

The Outstanding Income is shown on the credit side of the income statement as the income is earned for the current year but not yet received.

• Treatment in Balance Sheet

Outstanding Income is an Asset for the business and hence shown on the Assets side of the balance sheet.