![]() In fact, they are representative personal accounts since they don’t represent natural persons. Nature of accrued expense account:Īccrued expenses or outstanding expenses are treated as personal accounts. They are recorded to increase the accuracy of the financial statements. They accrue in the accounts payable account which is shown on the balance sheet. They are generally recorded as current liabilities since they generally get paid within a year from the date of incurring. Typical accrued expenses include salaries, wages, goods, and services consumed but prices not paid for them. What is Accrued Expense?Īn accrued expense is a concept in accrual accounting where expenses are recorded in the books of accounts irrespective of payments being made. Having a grasp on the firm’s accrued liabilities helps in maintaining a healthy cash flow to the company. Hence, they may be also called accrued or outstanding liabilities. They are recorded as the liabilities of the company. ![]() Such expenses are accounted for when they occur. When the expenses are made by customers, they don’t make cash payments every time.ĭespite payments being not made, the company records such expenses as accrued expenses in their books of accounts. As such accrued liabilities mean that the unpaid bills issued to the company are increasing. This prepaid membership fee will be expensed out proportionately in next 5 years.The term “accrued” means “accumulate” or “increase”.
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