Accrued expenses are payments that a company is obligated to pay in the future for which goods and services have already been delivered. These types of expenses are realized on the balance sheet and are usually current liabilities. The accrued liabilities are adjusted and recognized on the balance sheet at the end of each accounting period; adjustments are used to document goods and services that have been delivered but not yet billed.
Examples of accrued expenses are:
- Utilities used for the month but an invoice has not yet been received before the end of the period,
- Wages that are incurred but payments have yet to be made to employees,
- Services and goods consumed but no invoice has been received yet.
Accounts payable are a company's ongoing expenses that are typically short-term debts that must be paid off in a specified period to avoid default. They are considered to be current liabilities because the payment is usually due within one year of the date of the transaction.
Accounts payable are recognized on the balance sheet when the company buys goods or services on credit. Accrued expenses are realized on the balance sheet at the end of a company's accounting period when they are recognized by adjusting journal entries in the company's ledger.
Accounts payable is the total amount of short-term obligations or debt a company has to pay to its creditors for goods or services bought on credit. On the other hand, accrued expenses are the total liability that is payable for goods and services that have been consumed by the company or received but not yet been billed.