Accrued Expenses

Accrued Expenses (Definition)

Accrued expenses are costs that a company has incurred but has not yet paid. These expenses are recognized on the books before they are paid for, following the accrual basis of accounting.

Key aspects of accrued expenses include:

1. Recorded when incurred, not when paid
2. Represent a liability on the balance sheet
3. Help match expenses to the period in which they were incurred
4. Common examples include accrued wages, accrued interest, and accrued taxes
5. Reversed when the actual payment is made
6. Important for accurate financial reporting and analysis Accrued expenses ensure that a companys financial statements reflect all costs associated with generating revenue for a specific period, providing a more accurate picture of the companys financial health.