Accrued Liability


DEFINITION of 'Accrued Liability'

An accounting term for an expense that a business has incurred but has not yet paid. A company can accrue liability for any number of items, such as a pension account that will pay retirees in the future. Accrued liabilities can be recorded as either short or long-term liabilities on a company's balance sheet.

BREAKING DOWN 'Accrued Liability'

Payroll taxes are another common example of an accrued liability. For each day an employee works, an employer is responsible for paying Social Security, Medicare and Federal Unemployment taxes on that employee's wages. The employer sets this money aside until the date when the money must be turned over to the IRS. Until the taxes are actually paid, they are an accrued liability. Thus, an accrued liability does not necessarily indicate a payment that is past due.

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  1. Does working capital include inventory?

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  2. Does working capital include salaries?

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  4. What is a profit and loss (P&L) statement and why do companies publish them?

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