Accrued expenses explained

Accrued expenses are expenses which you have incurred, or used, but have not yet paid for.  They are a liability on your balance sheet.

For example, suppose that you have not yet received or paid your cell phone bill for last month.  As of the end of last month, that bill would be an accrued expense.  You used the cell phone, but you have not yet paid for it.

Accrued expenses follow the accrual accounting method.

You should pay careful attention to accrued expenses because (1) you have spent the money and (2) you owe it.  For tax purposes, unless your business uses the “cash method,” accrued expenses are usually deductible.

About Mark P. Holtzman

Chair of Accounting Department at Seton Hall University. PhD from The University of Texas at Austin. Worked at Deloitte's New York Office. BSBA from Hofstra University.

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