Accrued Expenses

Costs incurred in a period that are both unpaid and unrecorded; adjusting entries for recording accrued expenses involve increasing (debiting) expenses and increasing (crediting) liabilities. Accrued expenses are incurred at the end of the reporting period but not yet paid; also called accrued liabilities. The accrued liability is shown under current liabilities in the balance sheet.

For example, assume the last paycheck date was December 31st while the next payroll date is January 15th. For the December 31st year end, the company owes $50,000 in salaries that are expected to be paid on January 15th of the following year. The entry to record this 'accrued expense' would be:

Dr. Salaries Expense $50,000
Cr. Salaries Payable $50,000

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