Accrued Expense
Expenses incurred but not yet paid or recorded, requiring adjusting entries to recognize the liability in the proper accounting period under accrual basis accounting.
Accrued Expense
Expenses that have been incurred but not yet paid or recorded, requiring an adjusting entry to recognize the liability and expense in the appropriate period.
For example, if employees have earned $10,000 in wages during the last week of the month that will be paid in the following month, the company would record an accrued expense to recognize both the expense and liability in the current period.
Accrued expenses ensure that financial statements accurately reflect all costs incurred during the reporting period, regardless of payment timing. Common accruals include wages, interest, utilities, and taxes. Recording these liabilities follows the matching principle by recognizing expenses in the same period as the related revenues.