Accrued Expenses Definition with Example
Accrued Expenses Definition – “Expenses which are already incurred but not yet paid”
It is a type of expense which the company has incurred, however the payment is not made. Such expenses records in the books of account when company actually incurs not when cash is paid. Therefore, accountant records these expenses in the books of accounts when they occur not when the actual payment is received.
The journal entry of the following expense is given below –
|Expense A/c Dr.|
|To Accrued Expense A/c|
Accrued Expenses Example
XYZ Ltd pays off the salaries of employee for the month of March 2017 of Rs 1,00,000 on 10 April. The accounting period of the company ends on March 31, 2017.
This salary expense will be realizable in the month of March. However the payment is made in the next year. Because the expense belong to the previous year that is March.
|Salaries A/c Dr.||1,00,000|
|To Accrued Salaries A/c||1,00,000|
Treatment of Accrued Expenses in Balance Sheet and Income Statement
As per the above example the expense account is appears in the Income Statement under selling and administrative expenses. On the other hand, accrued expenses account appears under the current liabilities head in Balance Sheet.