Offsetting Meaning In Accounting

Offsetting means to adjust the balances of two or more opposite heads to each other. For Example, we may offset the balances of Income & Expenses. If we have Income for the year for Rs.50000 and we know that the nature of Incomes Or Revenues is Credit. And Expenses (Debit in Nature) for the same year is Rs.30000, then the remaining balance is Rs.20000 and that is the result of offsetting the sides of two different natures of accounts or Kinds of Accounts. These are Offset Accounts.

Income For the Year = Rs.50000

- Expenses for the Year = Rs.20000

Offsetting Amount = Rs.30000

Similarly, we can offset the balances of Assets and Liabilities. For Example, if we have Assets of Rs.150000 and Liabilities of Rs.60000, then the balance amount is Rs.90000.

Assets = Rs.150000

Liabilities = Rs.60000

Offsetting Amount = Rs.90000

It should be noted that Assets and Liabilities should not be offset when it is required and allowed by any other International Accounting Standard.

You can also Read International Accounting Standard – IAS – 1

Similarly, items of Income and Expense should be offset if and only if:

ü  It is required and permitted by an International Accounting Standard.

ü Any Gain, Loss, and relevant expense must be created from the similar Transactions and such Transactions or Events are not Material.

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