Accrued liability

Accrued liability refers to an expense that a company has incurred but has not yet paid. It represents an obligation to pay for goods or services that have been received, but for which payment has not yet been made. This is a common concept in accrual accounting.

A company records an accrued liability through an adjusting journal entry. It involves debiting (increasing) an expense account and crediting (increasing) an accrued liabilities account.

Accrued liabilities are important for accurate financial reporting. They ensure that financial statements reflect all expenses incurred in a given period, even if payments haven’t occurred yet.

Accrued liabilities are crucial for reflecting the true financial obligations of a company. They help ensure that financial statements accurately represent the company’s financial position at any given point in time.