Accrued Expenses
Expenses that have been incurred but not yet paid.
Accrued expenses are costs incurred during an accounting period but not yet paid or invoiced—wages earned but not disbursed, utilities consumed but not billed, and loan interest accumulated between payments. They are recorded as current liabilities through adjusting entries, following the matching principle of accrual accounting.
Example
Employees earn $15,000 in wages during the last week of December but payday is January 3—the company records a $15,000 accrued wage expense in December.
Why It Matters for Your Business
Ignoring accrued expenses understates what you owe and overstates profits, so proper accruals ensure your books reflect economic reality.
Related Terms
More Accounting Terms
Accounts Payable
Money owed by a business to its suppliers or creditors for goods or services received but not yet paid for.
Accounts Receivable
Money owed to a business by its customers for goods or services delivered but not yet paid for.
Accrual Accounting
An accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.
Asset
Any resource owned by a business that has economic value and can provide future benefits.
Balance Sheet
A financial statement showing assets, liabilities, and equity at a specific point in time.
Related Financial Guides & Resources
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