Accrued Expense

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DEFINITION of 'Accrued Expense'

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.

BREAKING DOWN 'Accrued Expense'

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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RELATED FAQS
  1. How are prepaid expenses recorded on an income statement?

    Prepaid expenses are not recorded on an income statement. When the prepaid expense becomes due, the expense is recognized ... Read Full Answer >>
  2. What is the difference between deferred revenue and accrued expense?

    Deferred revenue is the portion of a company's revenue that has not been earned, but cash has been collected from customers ... Read Full Answer >>
  3. What's the difference between accrued expenses and accounts payable?

    Accrued expenses are payments that a company is obligated to pay in the future for which goods and services have already ... Read Full Answer >>
  4. What is the advantage of calculating accrued expenses over prepaid expenses?

    An accrued expense, or an accrued liability, is an expense that has not yet been paid for. It is paid for after it is recorded ... Read Full Answer >>
  5. What is the difference between accrued expense and accrued interest?

    An accrued expense, or accrued liability, is an accounting expense that has occurred but is not yet paid for. The expense ... Read Full Answer >>
  6. What's the difference between accrued expenses and provisions?

    In accounting, accrued expenses and provisions are separated by their respective degrees of certainty. All accrued expenses ... Read Full Answer >>

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