The-definition.com

Definition

Accrued expenses

Expenses incurred but not yet paid or recorded at the statement date are accrued expenses. Interest, rent, taxes, and salaries are typical accrued expenses. Accrued expenses result from the same causes as accrued revenues. In fact, an accrued expense on the books of one company is an accrued revenue to other company. For example, Pioneer’s $200 accrual of revenue is an accrued expense to the client that received the service.

An adjusting entry for accrued expenses serves two purpose: (1) It records the obligations that exist at the balance sheet date, and (2) it recognizes the expenses of the current accounting period. Prior to adjustment, both liabilities and expenses are understated.

An adjusting entry for accrued expenses increases (debits) an expense account and increases (credits) a liability account.

Share it:  Cite

More from this Section

  • Direct materials
    Raw materials that can be physically and directly associated with the finished product ...
  • Short Put
    A Short Put option is simply the special offer of an option contract. Whenever investors ...
  • Carrying (or book) value method
    Carrying or book value method is the method of recording the bond conversion that the ...
  • Direct labor price standard
    The direct labor price standard is the rate per hour that should be incurred for direct ...
  • Income taxes
    Under the U.S. pay-as-you-go system of federal income taxes, employers are required to ...