Accrued expense
An accrued expense is a cost incurred in the current period but not yet paid or invoiced by the period end; it is recognised as an expense immediately, with a matching current liability recorded on the balance sheet.
FrameworkAccrual accounting
See it move
An employee earns €3,000 in the last week of December, so on 31 December the firm debits wages expense €3,000 and credits accrued wages payable €3,000, recognising the cost before any cash moves. On 5 January, when wages are actually paid, the liability is debited and cash credited, clearing the accrual.
Check yourself
At 31 December, a firm's employees have earned wages of €4,000 for the final week of the year. Payment will not be made until 8 January. Which journal entry correctly records the accrual at 31 December?