Accrued Expense

An accrued expense is an expense that has already been incurred but has not yet been paid or fully recorded by the reporting date.

It is a core accrual-accounting concept because the business has already consumed labor, services, financing, or tax exposure even if the cash payment happens later.

How it is recorded

At period end, the usual adjustment is:

1Dr Expense
2  Cr Accrued Liability / Payable

That entry recognizes the cost in the correct period and creates a short-term obligation until payment is made.

Common examples

• wages earned by employees but paid after month-end
• utilities consumed before the supplier invoice arrives
• interest incurred on debt before the payment date
• taxes owed for the current period but not yet remitted

Accrued expense vs nearby terms

• Accrued liability: the broader obligation created by the accrual entry.
• Accounts Payable: usually invoice-based trade payables rather than estimation-based period-end accruals.
• Prepaid Expense: the opposite timing pattern, where cash is paid before expense recognition.

Why it matters

If accrued expenses are omitted, profit is overstated and liabilities are understated. That makes period-end adjustments one of the basic controls for credible financial statements.