Quick answer: An accrued expense is a cost you’ve incurred but haven’t been billed for or paid yet. At period-end, you typically debit the expense and credit an accrued liabilities (accrued expenses) account. When the invoice arrives or cash is paid, you reverse/clear the accrual so the expense is not recorded twice.
Accrued expenses — journal entries (quick examples)
1) Accrue expense at period-end
| Account | Debit | Credit |
|---|---|---|
| Expense | XX | |
| Accrued expenses (accrued liabilities) | XX |
2) Optional: reverse the accrual next period (reversing entry)
| Account | Debit | Credit |
|---|---|---|
| Accrued expenses | XX | |
| Expense | XX |
3) Record vendor invoice against the accrual
| Account | Debit | Credit |
|---|---|---|
| Accrued expenses | XX | |
| Accounts payable | XX |
4) Pay the vendor invoice
| Account | Debit | Credit |
|---|---|---|
| Accounts payable | XX | |
| Cash / bank | XX |
5) True-up when the actual invoice differs from the estimate
If the invoice is higher than the accrual, record the difference as additional expense. If it’s lower, reverse the excess accrual (reducing expense).
Table of Contents
What are accrued expenses?
Accrued expenses are liabilities for costs incurred in the current period that haven’t yet been paid (and often haven’t yet been invoiced). Common examples include professional fees, utilities, repairs, and services received near period-end.
Accrue at period-end
Example: At month-end, you estimate $2,000 of professional services were received but not yet billed.
| Account | ||
|---|---|---|
| Professional fees expense | $2,000 | |
| Accrued expenses | $2,000 |
Reversing entries
Some teams post reversing entries on day 1 of the next period to simplify invoice processing. If you reverse the accrual, the subsequent invoice is recorded normally (debit expense, credit A/P) without having to remember the accrual.
Invoice received after accrual
If you do not reverse the accrual, you typically clear the accrual when the invoice arrives and move the balance to A/P (or clear directly to cash if you pay immediately).
Payment
Payment clears accounts payable and reduces cash. The expense should already be recognized via the accrual and/or invoice entry.
Accrued payroll vs accrued expenses
Accrued payroll is a specific type of accrual for wages earned but unpaid (often tracked in a dedicated wages payable / accrued payroll account). Accrued expenses is a broader bucket for non-payroll items.
Accrued expenses journal entry FAQ
What is the journal entry for accrued expenses?
Debit the related expense and credit accrued expenses (accrued liabilities).
Are accrued expenses the same as accounts payable?
Not exactly. Accounts payable typically relates to vendor invoices received; accrued expenses are often estimated liabilities where the invoice has not yet arrived.
Do accrued expenses reverse automatically?
Only if you set them up as reversing entries in your close process. Reversal is optional and depends on your workflow.
How do you record an invoice after you accrued it?
Either (a) reverse the accrual and record the invoice normally, or (b) clear the accrual to accounts payable.
What happens if your estimate is wrong?
You record a true-up for the difference—either additional expense or a reversal of excess accrual.
Does an accrual affect cash?
No. Accruals record expenses and liabilities without cash movement.
