Accrued Expense vs. Accrued Interest: An Overview
An accrual is something that has occurred but has not yet been paid for. Such as work that has been done but not yet paid for, which leads to an accrued expense. Then there is interest that has been charged, but not yet paid, also known as accrued interest.
Accrued expenses generally are taxes, utilities, wages, salaries, rent, commissions, and interest expenses that are owed but not yet paid for. Accrued interest is an accrued expense, or an accrued liability if the company is a borrower of debt. It is an asset if the company is a lender of debt.
- Accruals are things—usually expenses—that have been incurred but not yet paid for.
- Accrued expenses generally include taxes, wages, and utilities.
- Accrued interest is an example of an accrued expense (or accrued liability) that is owed but not yet paid for (or received).
An accrued expense, or accrued liability, is an accounting expense that has occurred but is not yet paid for. The expense is usually not yet entered into the company's general ledger; it does not appear on its financial statements unless the company makes an adjusting entry.
Accrued interest is the amount of interest that is incurred but not yet paid for or received. If the company is a borrower, the interest is a current liability and an expense on its balance sheet and income statement, respectively. If the company is a lender, it is shown as revenue and a current asset on its income statement and balance sheet, respectively. Generally, on short-term debt, which lasts one year or less, the accrued interest is paid alongside the principal on the due date.