An accrued liability represents goods or services received but not yet billed by the vendor. The expense is recorded in the month incurred and assigned to a liability account until the bill is received.
An example of an accrued liability is an electricity bill. At the end of the current accounting period, electricity has been consumed but the vendor has not yet sent a bill. The expense belongs in the month the expense was incurred–when the electricity was consumed, but the bill for that expense has not yet been sent by the vendor.
Are Accounts Payable and Accrued Liabilities the Same?
Accounts Payable represents goods or services that have been received or consumed for which the company has received a bill (invoice). Accrued Liabilities represent goods or services that have been received or consumed for which the company has not received a bill (invoice.)
What are Some Examples of Accrued Liabilities?
Some companies combine various accrued liabilities into one account called Accrued Liabilities, but generally accrued liabilities are separated into specific accounts depending on what the company needs to track. These accounts may be called “Accrued ______ ” or they may be called “______ Payable.”
Examples of accrued liabilities:
Accrued Payroll or Wages Payable: Wages and Salaries incurred during one month and paid in the next when the next payroll is done.
Accrued Interest or Interest Payable: Interest incurred in one month and paid in a future month.
Accrued Utilities or Utilities Payable: Utility costs incurred during one month and paid in the next when the bill is received.
What is the Journal Entry to Record an Accrued Liability?
Like Accounts Payable, the journal entry to record an accrued liability will be either an expense or an asset. Accrued Liabilities are liability accounts. Liability accounts have a normal credit balance. Liabilities increase on the credit side and decrease on the debit side.
A journal entry to record Accrued Wages or Wages Payable is:
|Accrued Wages (or Wages Payable)||xx|
A journal entry to record Accrued Interest or Interest Payable is:
|Accrued Interest (or Interest Payable)||xx|
A journal entry to record Accrued Utilities or Utilities Payable is:
|Accrued Utilities (or Utilities Payable)||xx|
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