Accrued expense / Accrued liability
An accrued expense is an accounting term referring to an unpaid expense (also known as an accrued liability).
At the end of an accounting period, for instance:
- A company may have incurred tax liabilities for earnings made during the period, but not yet paid.
- The company may owe its own employees salaries and wages for work performed, but not yet paid.
- The company may be repaying a loan and be mid way between payment due dates, meaning it already owes the lender more interest (for the part of the payment period already past), which will not be paid until the next loan payment is made.
These are all accrued expenses, or equivalently, accrued liabilities. Considering the as-yet unpaid employee salaries and wages, for instance, the bookkeeper's journal entries might appear like this at the end of the year (account names and numbers refer to the example chart of accounts used throughout this encyclopedia):
Grande Corporation Date Account Debit Credit__ |
"Salary and wage expense" is an expense category account, so a debit entry increases this account balance by the debit amount. "Payroll payable" is a liability category account, so its account balance is increased by a credit entry (see Account or Double-entry system for more explanation).
On the company's income statement for the period, the Salary and wage expense will contribute to the rest of the salary and wage expenses for the period. All of these salary and wage expenses (including the expense incurred but not yet actually paid to employees) will be subtracted from the period's sales revenues, as part of the calculations for margins and profits.
On the company's balance sheet, however, the "Payroll Payable" entry will contribute to current liabilities. It might be added in under a higher level more general listing for "Accrued liabilities" or, on a balance sheet with substantial detail, it might appear as a current liability item of its own, 'Payroll payable.'
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