Definition of Accrued Expenses

Accrued expenses are those expenses that are incurred in an accounting period but are not paid yet. Accrued expenses are recorded as a liability until the date they are paid. Some common examples are accrued wages and salaries that represent an expense and a liability until they are paid to employees. Interest payable is another example of an accrued expense that is charged as an expense in the current period’s income statement and also as a liability until it has been paid actually in cash.

Assume that monthly plant repair and maintenance work has been performed by a vendor for $15,000 but the business has still not paid. The company will record the expense as it has been incurred in the current period and also record a liability in the name of the vendor.