Accrued expense
Also called: accrued expenses, accrued liabilities
A cost that has been incurred but not yet paid, such as this month's electricity bill. It is recorded as an expense and a liability.
Accrual accounting records costs in the period they belong to. If the bill has not been paid by the end of the period, the amount owed appears as a liability until it is paid.
Many accrued expenses, such as bonuses or estimated legal costs, are estimates made by management.
Example
Electricity used in June but paid in July is an accrued expense at the end of June.
Learn more in these lessons
- Accrual accounting and cash accountingWhat is the difference between accrual and cash accounting?
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