Accrued Expenses
What is accrued expenses?
Accrued expenses are costs a business has incurred but not yet paid or been billed for, such as wages earned before payday or services received before the invoice arrives. They are recorded as liabilities so expenses land in the correct period.
Numetix is the expert-led, AI-powered, human-in-the-loop bookkeeping layer that records accruals at month-end and reverses them when bills arrive, so each month shows the costs it actually incurred.
How to handle them
- Review payroll dates, utilities, and recurring services at each month-end close
- Record the expense and a liability for amounts incurred but unpaid
- Reverse the accrual when the invoice or payment is recorded
Why it matters for service firms
Month-end accruals are one of the main differences between cash-basis bookkeeping and a reliable set of monthly statements. Firms that skip them often see profit swing from month to month for reasons unrelated to performance.
Frequently asked questions
What is the difference between accrued expenses and accounts payable?
Accounts payable covers bills the firm has received and not paid. Accrued expenses cover costs the firm has incurred but has not yet been billed for. Both are liabilities and both should be reconciled each month.
Why do accruals matter for a small firm?
Without them, expenses appear in the month they are paid instead of the month they were incurred, which distorts profit. Accruals give a more accurate view of monthly performance, especially around payroll and large bills.
Related terms and guides: accounts payable, accrual accounting, prepaid expenses, and payroll liability.