Is an 'accrued expense' the same as an 'account payable'?

They are closely related but not identical. An account payable is typically backed by a received invoice, while an accrued expense is an estimated or known obligation for which an invoice may not yet exist.

On which financial statement does an accrued expense appear?

It appears on the Balance Sheet as a current liability. The corresponding expense appears on the Income Statement.

What's the journal entry to record an accrued expense?

Debit the relevant Expense account (increasing expense on the Income Statement) and Credit an Accrued Expenses/Liabilities account (increasing liability on the Balance Sheet).

When is an accrued expense reversed?

It is typically reversed in the next accounting period when the actual invoice is received and paid, to avoid double-counting the expense.

accrued expense

UK/əˌkruːd ɪkˈspens/US/əˌkrud ɪkˈspɛns/

Formal / Professional / Academic (Business & Finance)

My Flashcards

Definition

Meaning

An expense that has been incurred by a business within an accounting period but has not yet been paid or invoiced.

A liability on the balance sheet representing costs for goods or services received, recognized under the matching principle before cash is disbursed; e.g., wages, utilities, or interest owed for the period.

Linguistics

Semantic Notes

Specifically a term from accrual-based accounting, distinct from a 'prepaid expense' or an 'outstanding invoice'. It represents an obligation to pay in the future for a benefit already received, matching the expense to the period it was incurred.

Dialectal Variation

British vs American Usage

Differences

The term is identical in spelling and professional usage. Minor differences may exist in surrounding jargon (e.g., UK 'creditors' vs. US 'accounts payable', but 'accrued expense' is standard in both).

Connotations

Neutral technical term. No significant difference in connotation.

Frequency

High frequency in professional accounting and finance contexts in both regions. Extremely low frequency in general usage.

Vocabulary

Collocations

strong

record an accrued expenseaccrued expense payableaccrued expense liabilityaccrued expense accountrecognize an accrued expense

medium

calculate accrued expensesmonth-end accrued expensesaccrued expenses for wagesaccrued expenses increaseestimate the accrued expense

weak

accrued expense adjustmentjournal entry for accrued expensesignificant accrued expenseaccrued expense balance

Grammar

Valency Patterns

[Company] accrued an expense for [service/period]The [expense] must be accrued at the period end.[Amount] was recorded as an accrued expense.

Vocabulary

Synonyms

Strong

accrual

Neutral

accrued liabilityaccrued cost

Weak

unpaid expenseoutstanding expenseexpense payable

Vocabulary

Antonyms

prepaid expensecash expensepaid liabilitydeferred expense

Phrases

Idioms & Phrases

“On the books (as an accrual)”

Usage

Context Usage

Business

Core term used in financial reporting, auditing, and management accounting to ensure accurate profit measurement.

Academic

Used in economics, finance, and accounting textbooks and research papers on financial statement analysis.

Everyday

Virtually never used. An everyday paraphrase would be 'a bill we owe but haven't got yet'.

Technical

Precise term in accounting standards (e.g., IFRS, US GAAP) denoting a specific class of current liabilities.

Examples

By Part of Speech

verb

British English

The company must accrue the expense for the consultancy received in March.
Have you accrued for the quarterly business rates yet?

American English

We need to accrue expenses for the utilities used this month.
The accountant accrued the year-end bonus expense in December.

adverb

British English

The costs were accounted for accrually, not on a cash basis.

American English

Revenue is recognized accrually, matching related expenses.

adjective

British English

The accrued expense figure appears under current liabilities.
An audit of the accrued expense account was completed.

American English

The accrued expense balance was adjusted after the invoice arrived.
Review the schedule of accrued expenses for accuracy.

Examples

By CEFR Level

The company has a bill it must pay later. (Simplified concept)

At the end of the month, the accountant lists all the unpaid bills as accrued expenses.

To reflect the true financial position, the firm recorded an accrued expense for employee salaries earned but not yet paid.

Despite a positive cash flow, the firm's profitability was diminished by significant accrued expenses related to the long-term lease agreement.

Learning

Memory Aids

Mnemonic

Think: ACCRUED = AC-CREW-ED. Imagine a crew of workers who have done the work (expense incurred) but the captain hasn't paid them yet (expense not paid). The cost for the crew's work has 'accrued'.

Conceptual Metaphor

ACCOUNTING IS TIME-MATCHING (Expenses are matched to the time period of benefit, not the time of payment).

Watch out

Common Pitfalls

Translation Traps (for Russian speakers)

Do not translate as 'накопленный расход' (implies a saved-up or accumulated expenditure).
The closest conceptual equivalents are 'начисленные расходы' or 'отсроченный расход/обязательство'.
Avoid confusion with 'предоплаченный расход' (prepaid expense).

Common Mistakes

Confusing 'accrued expense' (incurred, not paid) with 'prepaid expense' (paid, not incurred).
Using it as a verb phrase incorrectly: 'We will accrued the expense' (correct: 'We will ACCRUE the expense').
Misspelling as 'accured expense' or 'acrued expense'.

Practice

Quiz

Fill in the gap

Under the accrual basis of accounting, a business must recognise an for the electricity used in December, even if the bill is paid in January.

Multiple Choice

What is the primary purpose of recording an accrued expense?

FAQ

Frequently Asked Questions

: They are closely related but not identical. An account payable is typically backed by a received invoice, while an accrued expense is an estimated or known obligation for which an invoice may not yet exist.
: It appears on the Balance Sheet as a current liability. The corresponding expense appears on the Income Statement.
: Debit the relevant Expense account (increasing expense on the Income Statement) and Credit an Accrued Expenses/Liabilities account (increasing liability on the Balance Sheet).
: It is typically reversed in the next accounting period when the actual invoice is received and paid, to avoid double-counting the expense.