Accrued Expenses is a Liability and is usually Current . Firms will typically incur periodic expenses such as wages, interest and taxes. Even though they are to be paid at some future date, they are indicated on the firm's balance sheet from when the firm can reasonably expect their payment, until the time they are paid .
Accrued Expenses are the opposite of Prepaid Expenses
when you record an expense owing, you do the following:
Debit ....................... expense
Credit.................. accrued expenses
When you make the payment you record :
Debit.................. accrued expense
Credit........................ bank
Accrued expenses are those expenses which we record to make our income statement accurately, we post expenses and stand payable.these expenses were the period of prior year or month but pay in another period.by this way we can easily know about our payables and this is the point where we can defined and differentiate the duties of an Manager Accounts and a finance Manager, because the accountant record the entries and finance manager plan how to pay these.
An accounting expense recognized in the books before it is paid for. It is a liability, and is usually current. These expenses are typically periodic and documented on a company's balance sheet due to the high probability that they will be collected.
by
MUHAMMAD JAMIL NAWAB VP ll MBA , MBA | Incharge Retail Commercial Credit Hub, (VP-II) Bank Al Habib Ltd Vehari, Pakistan , Bank Al Habib Ltd Pakistan
accrued expenses are current liabilities e.g.
expense recorded in books and liability created:
Expenses >to> Liability (accrued expense)
when paid, finish off liability:
Liability (accrued expense) >to> Bank / Cash / Payments
Accrued expense means expense incurred but not paid. So definitely it is a Liability for the standing expenses are the best example for such expenses. Example:-Outstanding Rent, Outstanding Interest, outstanding Salary etc. I think we can call it as overdue expenses.
If we consider Accrued Rent as example the Accounting treatment will be:-
Rent Account... Dr.
Rent Payable Account... Cr.
Rent is as usual Debit & Rent payable account should have Credit balance.
At the time of Rent Payment, entry should be:-
Rent Payable Account.... Dr.
Cash/Bank.... Cr.
same like payment entry. only difference is Rent (Payable) will debit instead of Rent(expense) account.
