Business glossary
Accrued expense
A cost recognized before the related supplier invoice or payment is recorded.
Example
A subcontractor completes $600 of work in September but sends the invoice in October. Under accrual accounting, the September cost can be recorded as an accrued expense before the bill arrives.
How it differs from related terms
An accrued expense has been incurred but not yet billed or settled. A prepaid expense is paid before the benefit is consumed. Reconcile the accrual when the supplier invoice arrives so the same cost is not recorded twice.
Frequently asked questions
What is an example of accrued expense?
A subcontractor completes $600 of work in September but sends the invoice in October. Under accrual accounting, the September cost can be recorded as an accrued expense before the bill arrives.
How should accrued expense be interpreted?
An accrued expense has been incurred but not yet billed or settled. A prepaid expense is paid before the benefit is consumed. Reconcile the accrual when the supplier invoice arrives so the same cost is not recorded twice.