- The definition
- Common examples
Accrued expenses are costs your business has already incurred in a period but hasn't yet paid or recorded, such as wages employees have earned but won't be paid until next month. Under accrual accounting, you record them at the end of the period: you debit the expense and credit a liability, so the cost lands in the period it belongs to. When you pay, you clear the liability instead of recording the expense a second time.
The definition
OpenStax's Principles of Accounting, Volume 1 (section 4.2, opened October 29, 2026) defines them this way:
"Accrued expenses are expenses incurred in a period but have yet to be recorded, and no money has been paid. Some examples include interest, tax, and salary expenses."
On interest, it adds: "This creates a liability that the company must pay at a future date."
Accrued expenses are one of the two kinds of accrual adjusting entry. The other is accrued revenue. Both belong to accrual accounting, which records revenue when it's earned and expenses when they're incurred, rather than when cash moves.
Common examples
- Wages: employees work the last days of a month, but payday falls in the next month.
- Interest: a loan's interest builds up during the month, but you pay it later.
- Utilities: you use electricity through month-end, but the bill arrives next month.
- Professional services: an accountant or lawyer finishes work this month and invoices next month.
- Taxes: taxes relating to this period that you'll pay later.
Accrued expenses vs. accounts payable
Both are liabilities for costs you owe. The difference is timing and paperwork:
- Accounts payable: you've received the supplier's invoice and recorded it.
- Accrued expenses: you've incurred the cost, but you haven't recorded it yet, for example because no invoice or payday has arrived by the end of the period. The amount may need to be estimated.
How to record one
- At the end of the period: debit the expense account (for example, Salaries Expense) and credit a liability account (for example, Salaries Payable). OpenStax's salaries example records it the same way: "Salaries Expense increases (debit) and Salaries Payable increases (credit)."
- When you pay: debit the liability for the accrued amount, debit the expense for any part that belongs to the new period, and credit cash. Don't debit the expense again for the part you already accrued.
Worked example: wages that cross month-end
The figures here are a sample. A small studio pays its two employees a combined $500 a day. Payday for the 10 working days from March 25 to April 7 is April 8. Five of those working days fall in March.
Step 1: the March 31 accrual. March's share of wages is 5 days × $500 = $2,500.
| Account | Debit | Credit |
|---|---|---|
| Salaries Expense | $2,500 | |
| Salaries Payable | $2,500 |
Debits $2,500 = credits $2,500. March now shows $2,500 of wage expense and a $2,500 liability.
Step 2: the April 8 payment. The full payroll is 10 days × $500 = $5,000. Of that, $2,500 clears the March liability, and $5,000 − $2,500 = $2,500 is April's expense.
| Account | Debit | Credit |
|---|---|---|
| Salaries Payable | $2,500 | |
| Salaries Expense | $2,500 | |
| Cash | $5,000 |
Debits $2,500 + $2,500 = $5,000 = credits $5,000.
Result: March shows $2,500 of wages and April shows $2,500, matching the days worked in each month. The liability is back to zero after payday. If the studio had recorded the whole $5,000 as April's expense, March would look $2,500 more profitable than it was.
US tax: when an accrual-method business deducts an expense
This is US federal information, not tax advice. IRS Publication 538 (the January 2022 edition, opened October 29, 2026) says "The purpose of an accrual method of accounting is to match income and expenses in the correct year." It describes two tests for when an accrual-method business deducts or capitalizes an expense:
- The all-events test: "All events have occurred that fix the fact of liability, and The liability can be determined with reasonable accuracy."
- Economic performance: for property or services provided to you, "economic performance occurs as the property or services are provided or the property is used."
Pub 538 has exceptions, for example for recurring items. Your books and your tax return can treat timing differently, so ask your accountant how these rules apply to you.
Month-end checklist
- List the costs that recur across period ends: wages, interest, utilities, rent paid in arrears and professional fees.
- For each one, note how you'll work out the amount: days worked, a meter reading, a loan statement or the supplier's quote.
- Keep the support for each estimate: timesheets, usage reports, emails.
- When the invoice or payday arrives, clear the accrual so the expense isn't counted twice.
- Review the accrued expenses balance each quarter, and clear anything that should already have been paid.
Where Billed fits
Billed's expense and receipt tracking page says "An expense in Billed records who you paid, when, how much and which category it belongs to, with the receipt attached to the same entry," and describes exporting expense reports for your accountant or bookkeeper. That page doesn't describe journal entries or accruals. Make the accrual entry in your accounting records, or ask your accountant to.
Related Articles
- What Is Accrual Accounting?
- What Is Accounts Payable?
- What Is a Journal Entry?
- What Are Liabilities in Accounting?
- What Is a Balance Sheet?
Frequently Asked Questions
What is the difference between accrued expenses and accounts payable?
Accounts payable are costs you've been invoiced for and have recorded. Accrued expenses are costs you've incurred but haven't recorded yet by the end of the period, for example because the invoice or payday hasn't arrived, so the amount may be estimated. Both are liabilities.
What are examples of accrued expenses?
Wages earned before payday, interest that builds up on a loan, utilities used before the bill arrives, professional services completed but not yet invoiced, and taxes relating to the period. OpenStax lists "interest, tax, and salary expenses" as examples.
What is the journal entry for an accrued expense?
At the end of the period, debit the expense account and credit a liability account, such as Salaries Payable. When you pay, debit the liability for the accrued amount, debit the expense for any part that belongs to the new period, and credit cash.
Are accrued expenses a liability?
Yes. An accrued expense is a cost you owe but haven't paid, so you record it as a liability until you pay it. OpenStax defines accrued expenses as "expenses incurred in a period but have yet to be recorded, and no money has been paid," and its salaries example records them with a credit to Salaries Payable, a liability.
Do cash-basis businesses record accrued expenses?
No. Under the cash method, you record expenses when you pay them, so there's no accrual. Accrued expenses belong to accrual accounting. Ask your accountant which method your books and tax return use.