There are two classes of outstanding assets the adjustment where of has to be examined; first, items accruing but not recorded in books and second, expenditure already incurred, a part or whole of which relates to a period subsequent to the date of the Balance Sheet. The following are some of the accounts in which adjustment of outstanding assets could be made:
(1) Rent receivable : All rents receivable due or accrued to the date of the Balance Sheet should be calculated and brought into account, after a provision has been made for doubtful or irrecoverable arrears of rent, allowance for repairs, etc.
(2) Interest and dividend : Interest receivable on loans accrued to the date of the Balance Sheet should be brought into accounts in all cases where the interest is being regularly received on the dates. If the interest is in arrears, the amount accrued should either be omitted or brought into account and a corresponding provision made against it. Interest on debentures and other securities, receivable on fixed dates accrued and payable before the close of the year should be brought into account and adjustment on account of dividend on shares should be made with reference to the dividend accounting policy followed the management. This would be in order if the same is accounted for on the basis of declarations during the audit year. It is also possible to account for dividends declared after the close of the year, provided the period in respect of which the same was declared fell within the accounting period of the client. However, accounting of dividend purely on receipt basis would not always be in order for companies. Finally, it should be ensured that the methods in this regard have been consistently followed.
(3) Insurance charges paid in advance : Insurance premiums are always paid in advance; and, in case of a large business, the amount paid, the benefit of which will arise in the succeeding period, may be considerable. The proportion thereof applicable to the period subsequent to the date of the Balance Sheet should be calculated and included as an outstanding asset.
(4) Advertisement : Sometimes payments under advertising contracts are made in advance. In such a case, the proportion thereof relating to any period subsequent to the date of the Balance Sheet should be adjusted as an outstanding asset.