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Accrued expenses are expenses already incurred but are yet to be settled as at month-end or year-end. There are not recorded through the normal processing of transactions hence adjusting entry has to be done before closing the month-end or year-end books. Accruals are usually done for expenses such as interest, rental, and electricity.
Accrued expenses means expenses due but not paid. It is the expenses due but not paid at the end of the financial year. It considered as current liability towards the organisation. Accrued expenses are not recorded as normal transaction entries in the books of accounts and recorded as adjusting entries.
Which has been incurred but not yet paid. Expense must be recorded in the accounting period in which it is incurred. Therefore, accrued expense must be recognized in the accounting period in which it occurs rather than in the following period in which it will be paid
Accrued expenses are expenses that have occurred but are not yet recorded through the normal processing of transactions. Since these expenses are not yet in the accountant's general ledger, they will not appear on the financial statements unless an adjusting entry is entered prior to the preparation of the financial statements.Here is an example. A company borrowed $200,000 on December 1. The agreement requires that the $200,000 be repaid on February 28 along with $6,000 of interest for the three months of December through February. As of December 31 the company will not have an invoice or payment for the interest that the company is incurring. (The reason is that all of the interest will be due on February 28.)Without an adjusting entry to accrue the interest expense that the company has incurred in December, the company's financial statements as of December 31 will not be reporting the $2,000 of interest (one-third of the $6,000) that the company has incurred in December. In order for the financial statements to be correct on the accrual basis of accounting, the accountant needs to record an adjusting entry dated as of December 31. The adjusting entry will consist of a debit of $2,000 to Interest Expense (an income statement account) and a credit of $2,000 to Interest Payable (a balance sheet account)
Accrued expense is an expense which is incurred but not yet paid and will be recorded when it has occurred
Deferred expense: The value of services received by the company that have not yet been repaid and are considered current liabilities such as due rent and due fees
