---
title: "Accrued expense"
description: "What an accrued expense is, why it is recorded before the invoice arrives, the adjusting journal entry, how it reverses next month, and common examples."
canonical: https://ledgeriano.com/glossary/accrued-expense
language: en
publisher: "Ledgeriano"
updated: 2026-11-06
---

# Accrued expense

> What an accrued expense is, why it is recorded before the invoice arrives, the adjusting journal entry, how it reverses next month, and common examples.

An accrued expense is a cost the business has incurred in a period but has not yet been invoiced for or paid, such as wages earned at month end, interest on a loan or utilities used. It is recorded with an adjusting entry that debits the expense and credits an accrued liability, so the period shows its full cost under the accrual basis.

Accruals are part of every [month-end close](https://ledgeriano.com/templates/month-end-close-checklist). Without them, expenses land in the month the invoice arrives, profit swings from month to month and the balance sheet understates liabilities.

When the invoice arrives the accrual is cleared. Many teams post a [reversal entry](https://ledgeriano.com/glossary/reversal-entry) on the first day of the next period and then book the invoice normally, which avoids double counting. Accruals are estimates, so use the best information available and adjust when the actual amount is known.

## Example: accruing December electricity

A workshop uses about 1,800 of electricity in December, but the bill arrives on 10 January. On 31 December it records the accrual below. In January, when the bill of 1,850 is posted, the accrual is cleared and the 50 difference goes to January's expense.

| Account | Debit | Credit |
| --- | --- | --- |
| Utilities expense | 1,800 |  |
| Accrued expenses |  | 1,800 |

### Is an accrued expense a liability?

Yes. It is a current liability until the supplier invoice is recorded or the amount is paid.

### What is the difference between an accrued expense and accounts payable?

Accounts payable are backed by a received invoice; accrued expenses are recorded before the invoice exists, often based on an estimate.

Guide: https://ledgeriano.com/guides/year-end-closing