An accrual has occurred but has not yet been ജpaid for. This can include work or services that have been completed and considered accrued 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官方开奖结果体彩网: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官方开奖结果体彩网:current liabilities as payable. When the cash is paid to the supplieꦚr or vendor, the cash account is debited on the balance sheet and the payable account is credited.

An 澳洲幸运5官方开奖结果体彩网: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 ea♊rned and payable were accrued expe🃏nses 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官方开奖结果体彩网:accrued interest might be interest on borrowed money that accrues throughout the month but i𝓰sn’t due until the month’s end. Or accrued interest owed could be interest on a bond that’s owned, where interest may 💞accrue before being paid.

Accrued interest can be reported as a revenue or expense on the 澳洲幸运5官方开奖结果体彩网:income statement. The other part of an accrue📖d interest 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 monthlꦐy. 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官方开奖结果体彩网:balance sheet. The interest expense, in♊ this case, is an accrued expense and accrued interest. When it’s paid, Company ABC will credit 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官方开奖结果体彩网:receivable account and credits its interest income ac♚count. Then, 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.