Accrued Expense

Accounting

An accrued expense is a cost recognized in the income statement before cash is paid — recorded as a liability until payment. Examples: wages earned by employees but not yet paid by period-end, interest accrued on a loan but not yet paid, utilities consumed but not yet billed. Accrual accounting requires recognizing expenses in the period incurred, not when paid — accruals reconcile this. Common at period-end: accrued payroll, accrued bonuses, accrued vacation, accrued utilities, accrued interest. Reverse accruals when cash payments occur. Failure to accrue properly understates expenses and overstates profits in the period.