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Accrued Expense: Definition and Meaning
Definition
An accrued expense is a cost a business has incurred but has not yet paid or recorded through a vendor invoice.
Why It Matters
Recording accrued expenses helps financial statements reflect costs related to the correct reporting period. Without appropriate accruals, expenses and liabilities may be understated, and profit may appear higher than it should for that period.
Common accrued expenses include unpaid wages, payroll taxes, interest, professional fees, utilities, and expenses related to services received near period end. The appropriate treatment depends on the facts and the accounting framework being used.
Example
Employees work during the final week of December but are paid in January. The related wages may be accrued as a December expense and liability.
Related Terms
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