Accrued Expense

Accrued Expense

An accrued expense is an accounting term that refers to an expense that has been incurred but not yet paid or recorded in the accounts payable. These expenses are recognized in the financial statements during the period in which they occur, aligning with the accrual basis of accounting.

For example, if a company receives utility services in December but does not pay the bill until January, the expense for those services is recorded as an accrued expense in December’s financial statements. This ensures that the company’s expenses reflect the actual costs incurred during the reporting period, providing a more accurate picture of its financial position.