Accrued Expense

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Costs that have been incurred but not paid during an accounting period.


Example: Various types of accrued expenses will appear on the books until they have been paid. These include accrued interest , accrued rent, and accrued income taxes.

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Incurred at the end of the reporting period but not yet paid; also called accrued liabilities. The accrued liability is shown under current liabilities in the balance sheet. For example, assume the last payroll date was January 28. The next payroll date is February 11. For the last few days of the month (January 29-January 31) the company owes its employees $500 in salaries. The appropriate journal entry on January 31 is to debit salaries expense and credit salaries payable for $500.

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An accounting expense recognized in the books before it is paid for. It is a liability, and is usually current. These expenses are typically periodic and documented on a company's balance sheet due to the high probability that they will be collected.

Investopedia Says:
Accrued expenses are the opposite of prepaid expenses. Firms will typically incur periodic expenses such as wages, interest and taxes. Even though they are to be paid at some future date, they are indicated on the firm's balance sheet from when the firm can reasonably expect their payment, until the time they are paid.

An example would be accruing interest that is building up on a bank loan.

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