Accrued Expense

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. After-Tax Payable Period

    The average period that a company has between receiving goods ...
  2. Accrue

    The ability for something to accumulate over time. In finance, ...
  3. Accrual Accounting

    An accounting method that measures the performance and position ...
  4. Trade Date Accounting

    A method company accountants and bookkeepers use to record transactions ...
  5. Accrued Income

    Income that is earned in a fund or by company by providing a ...
  6. Accrued Interest

    1. A term used to describe an accrual accounting method when ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
Related Articles
  1. Insurance

    Municipal Bond Tips For The Series 7 Exam

    Learn to distinguish between general obligation and revenue bonds to ace this test.
  2. Options & Futures

    Permanent Life Policies: Whole Vs. Universal

    If you're looking for life-long security, choosing between these two is the key.
  3. Bonds & Fixed Income

    Retail Notes: A Simpler Alternative To Bond Funds

    These securities are meant to be held until maturity, removing the burden of complex pricing that sometimes plagues bonds.
  4. Options & Futures

    Live Longer, Retire Younger: Can You Do It?

    Use this vehicle to make sure your payout lasts as long as you do.
  5. Bonds & Fixed Income

    Accounting and Valuing Employee Stock Options

    Learn the different accounting and valuation treatments of ESOs, and discover the best ways to incorporate these techniques into your analysis of stock.
  6. Investing

    What's a Run Rate?

    Run rate is a term used to denote annualized earnings extrapolated from a shorter time frame. Management uses the run rate to estimate future revenues.
  7. Professionals

    Financial Accounting

    Financial accounting is the process of gathering, recording, summarizing and reporting financial data relating to a business. The ultimate goal is to accurately report the financial picture and ...
  8. Investing

    What are Direct Costs?

    Direct costs for finished goods refer to the items and services directly used in production. Other costs such as rent and insurance for the production site are indirect costs. These costs may ...
  9. Investing

    What is Contingent Liability?

    A contingent liability is an amount that might have to be paid in the future, but there are still unresolved matters that make it only a possibility. Lawsuits and the threat of lawsuits are the ...
  10. Investing

    What's Accrued Interest?

    Accrued interest has two meanings. In accounting, it is interest that has been earned, but the time for payment has not yet occurred.

You May Also Like

Hot Definitions
  1. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  2. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  3. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  4. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  5. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  6. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
Trading Center