The original question is how to depict if there is Rent Outstanding of Rs.500. 'RENT OUTSTANDING' means rent has not been paid till date. since we are recording this fact only and not making payment of rent which is outstanding. This is the reason we are not reducing 500 from cash. Rs.500 will be reduced from Cash only if we will make cash. Since we owe Rs.500 to the landlord on account of rent, that is why it is added to Liability and secondly we have made an expenditure on account of rent (this means we have used the premises) though we have not paid for it, we are reducing Rs.500 from capital also.
I hope it is clear now. In case any doubt persists, please don't hesitate to ask again.