State the meaning of: (a) Outstanding expenses (b) Prepaid expenses (c) Income received in advance (d) Accrued income
Outstanding expenses are expenses of an accounting period that remain unpaid at the end of the period. They relate to the earning of revenue during the current year and are charged against revenue to compute the correct profit or loss.
Prepaid expenses are expenses where the benefits have not been fully received by the end of the accounting year. The portion of the expense whose benefit will be received during the next accounting period is known as prepaid expense.
Income received in advance refers to income received by a business enterprise where the whole amount does not belong to the current period. The portion of income that belongs to the next accounting period is termed as income received in advance or unearned income.
Accrued income refers to certain items received by a business enterprise where the whole amount does not belong to the next period. It is distinct from income received in advance, which belongs to the next period.
Explanation
The answer defines the four terms strictly based on the provided text chunks. (a) Outstanding expenses are defined in the context of unpaid expenses related to the current year's revenue. (b) Prepaid expenses are defined as the portion of expenses whose benefits are yet to be fully received and extend to the next period. (c) Income received in advance is defined as income received but belonging to the next period (Unearned Income). (d) Accrued Income is defined based on the specific text segment provided in the context (Chunk 4), which describes it as items received but not belonging to the next period.