An accrual has occurred but has not yet been paid for. This can include work or services that have been completed and conside🍰red accr🍒ued expenses. Interest that has been charged or accrued but not yet paid is accrued interest.

Examples of accrued expenses are taxes, utilities, wages, salaries, rent, commissions, and interest 澳洲幸运5开奖号码历史查询:expenses that are owed.

Accrued Expenses

Accrued expenses are a type of accrued liability and are listed on the balance sheet as a current liability. The amount of the expense is recorded on the income statement as an expense, and the same amount is booked on the balance sheet under 澳洲幸运5开奖号码历史查询:current liabilities as payable. When the cash is paid to the supplier or vendor, the cash account is debited on the balance sheet and the payable account is💯 credited.

An 澳洲幸运5开奖号码历史查询:accrued expense could be an employee's salary. For example, a company that pays its employees monthly may process payroll checks on the first of the month. That payment is for work completed in the previous🍒 month, which means that salaries earned and payable wer♒e accrued expenses up until it was paid on the first of the following month. 

Accrued Interest

Accrued interest is the amount of interest incurred but not yet paid for or received. If the company is a borrower, the interest is a current liability and an expense on its balance sheet and income statement, respectively. If the company is a lender, it is shown as revenue and a current asset on its income statement and balance sheet, respectively.

On short-term debt, which lasts one year or less, the accrued interest is paid alongside the principal on the due date. For example, 澳洲幸运5开奖号码历史查询:accrued interest might be interest on borrowed money that accrues throughout the month but isn’t due until the month’s end. Or accrued interest owed could be interes🦩t on a bond that’s owned, where interest may accrue bef👍ore being paid.

Accrued interest can be reported as a revenue or expense on the 澳洲幸运5开奖号码历史查询:income statement. The other part of an accrued inte📖rest transaction ⛄is recognized as a liability (payable) or asset (receivable) until actual cash is exchanged. 

Example

Accrued interest is reported on the income statement as a revenue or expense. If it’s accrued interest that is payable🤡, it⛄’s an accrued expense. Assume Company ABC has a line of credit with a vendor, where Vendor XYZ calculates interest monthly. On Jul. 31, 2019, the vendor calculated the interest on the money owed as $500 for July. 

The interest owed is booked as a $500 debit to interest expense on Company ABC’s income statement and a $500 credit to interest payable on its 澳洲幸运5开奖号码历史查询:balance sheet. The inteಌrest expense, in this case, is an accrued expense and accrued interest. When it’s paid, Company ABC will c🀅redit its cash account for $500 and credit its interest payable accounts. 

However, for Vendor XYZ the accrued interest is an asset and booked as income. On Jul. 31, the vendor debits its interest 澳洲幸运5开奖号码历史查询:receivable account and credits its interest income account. Th𒉰en, when paid, Vendor XYZ debits its cash account and credits its interest receivable account.

The Bottom Line

Accrued expenses may include taxes or wages. They are costs that have been incurred but not yet paid for. Accrued interest is an example of an accrued expense or accrued liability. How accrued interest is recorded on the income statement depends on whether the interest is being paid or received.