Definition
Accrued expenses are costs that a business has already incurred but has not yet paid. These expenses are recorded in the company's accounts before the actual payment is made to reflect the business's true financial position.
Example
Employees work throughout the month, but their salaries are paid at the beginning of the next month. Even though the payment has not yet been made, the salary for that month is recorded as an accrued expense.
Caution
Accrued expenses represent money that the business will need to pay in the future. If these expenses are not properly tracked or recorded, it can affect the accuracy of the company's financial statements.