Accrued expenses are costs you've already incurred but haven't paid or been billed for yet, recorded as a liability so the expense lands in the period it belongs to.
Key takeaways
Accrued expenses are costs you've already incurred but haven't paid or been billed for yet, recorded as a liability so the expense lands in the period it belongs to. Common examples include wages earned before payday, utilities used before the bill arrives, and interest that's quietly building up. They keep expenses matched to activity.
A company owes $15,000 in wages earned during the last week of March but paid in April, so it books the $15,000 as a March expense and liability.
Without accruals, your P&L looks artificially profitable in months where you used something but the invoice hasn't hit yet, then it gets hammered when the bill finally lands. Accruing smooths this out so each month reflects what it actually cost to operate. It's core to accrual accounting and any reliable margin read.