[et_pb_section fb_built=”1″ custom_padding_last_edited=”off|desktop” _builder_version=”4.27.2″ custom_margin=”0px||0px||false|false” custom_padding=”0px||0px||false|false” custom_padding_phone=”0px||||false|false” da_disable_devices=”off|off|off” locked=”off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row column_structure=”1_3,2_3″ _builder_version=”4.27.2″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” width=”100%” custom_margin=”0px||0px||false|false” custom_padding=”0px||0px||false|false” locked=”off” global_colors_info=”{}”][et_pb_column type=”1_3″ module_class=”table-contents” _builder_version=”4.23″ background_color=”#f3f2f6″ custom_padding=”25px||25px||true|false” sticky_position=”top” sticky_limit_bottom=”section” sticky_position_tablet=”top” sticky_position_phone=”none” sticky_position_last_edited=”on|desktop” border_radii=”on|24px|24px|24px|24px” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.23″ text_font=”||||||||” global_colors_info=”{}” background__hover_enabled=”on|desktop”][\/et_pb_text][\/et_pb_column][et_pb_column type=”2_3″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Definition description + related terms” _builder_version=”4.27.5″ header_2_font_size=”32px” header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}”]<\/p>\n
Running a small business? You already know how much timing matters. Bills don\u2019t always arrive in the same reporting period that you use the goods or services, and wages can be incurred before payday.<\/p>\n
Accrued expenses help you capture those costs as they happen so that your financial statements show a more accurate financial picture of your business\u2019s financial health \u2013 not just what\u2019s been paid.<\/p>\n
Accrued expenses (sometimes called accrued liabilities) are the costs that your company has incurred for services received or goods already delivered, but that haven\u2019t been paid yet. For accrual accounting, these expenses are recorded in the period the business incurs them \u2013 matching costs to the revenue they help generate. Think of them as short-term obligations you\u2019ll settle with future cash payments.<\/p>\n
Accounting-wise<\/a>, an accrual adds an expense account to your income statement and a matching liability account to your balance sheet. The result: accurate financial statements that show your real financial obligations, not just the movement of cash.<\/p>\n [\/et_pb_text][et_pb_image src=”https:\/\/www.reckon.com\/au\/wp-content\/uploads\/2025\/08\/Accrued-Expenses-Examples.png” alt=”Accrued Expenses Examples” title_text=”Accrued Expenses Examples” align=”center” _builder_version=”4.27.4″ _module_preset=”default” custom_margin=”-30px||||false|false” global_colors_info=”{}”][\/et_pb_image][et_pb_text _builder_version=”4.27.5″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n The major difference is timing. With accrual accounting, you recognise revenue and costs when they are earned or incurred. But for cash basis accounting, you record money when a payment is made or received.<\/p>\n Cash basis might feel simpler on the surface, but it can blur reality \u2013 especially if you sell on credit or have big end-of-month swings. Accruals give you the most accurate picture of profitability and all your cash flow needs coming up, because they surface current liabilities you\u2019ll soon have to fund.<\/p>\n All of the following are part of your accounting records for what actually happened in a specific period. The problem is that they\u2019re easy to mix up:<\/p>\n Recording an accrual uses double-entry accounting. First, you debit the relevant expense account (i.e. recognise the cost). Then you credit an accrued expenses liability account (i.e. acknowledge you owe it).<\/p>\n When you later receive the invoice and payment is made, you reverse the accrual (debit the l<\/a>iability) and post the supplier invoice as usual. Accounting software like Reckon can automate accrual journal entry reversals on the first day of the next month, which reduces duplicates and keeps the income statement neat and tidy.<\/p>\n You don\u2019t need to be a CPA to stay on top of accruals \u2013 just get into an end-of-month rhythm:<\/p>\n First of all, clarity. You get clearer financial statements that match your costs with your activities, not bank timing. You also get more control with accrued expenses because you can see a bird\u2019s eye view of your profitability, obligations, and more, which is helpful for cash flow planning.<\/p>\n With a disciplined end-of-month close, lenders and advisors should trust your figures because they accurately represent reality. Plus, if you move from cash basis accounting to accrual accounting, you\u2019re already in good shape for bank covenants or external reporting.<\/p>\n In short, accruals help your business tell the truth about your goings-on and keep you ahead of future cash payments.<\/p>\n Take advantage of your accounting software to standardise accruals, and lean on your bookkeeper for tricky estimates that can be refined over time. There are so many resources out there if you\u2019d like to go deeper \u2013 but start with a simple monthly checklist and you\u2019ll soon see the benefits on your income statement, balance sheet and bank balance.<\/p>\n [\/et_pb_text][et_pb_text admin_label=”Related terms” _builder_version=”4.27.5″ header_2_font_size=”32px” header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” locked=”off” global_colors_info=”{}”]<\/p>\n See related Terms:<\/strong><\/p>\n What is an expense?<\/a> [\/et_pb_text][ba_social_share icon_bg=”#03002e” icon_padding=”10px|12px|10px|12px|true|true” layout=”classic” show_text=”off” btn_padding=”0px|0px|0px|0px|false|false” btn_bg_color=”RGBA(255,255,255,0)” _builder_version=”4.23″ _module_preset=”default” custom_margin=”50px||||false|false” custom_padding=”25px||||false|false” custom_css_before=” content: %22SHARE THIS%22;|| font-size: 16px;|| font-weight: 700;|| line-height: 22px;|| letter-spacing: 0em;|| text-align: center;|| color: #ff5447;|| margin-bottom: 10px;|| display: inline-flex;|| position: absolute;|| margin-top: 10px;” border_width_top_main=”1px” border_color_top_main=”#e4e4e4″ border_radii_icon=”on|5px|5px|5px|5px” global_colors_info=”{}” custom_css_before_last_edited=”off|desktop”][ba_social_share_child _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”facebook” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”linkedin” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”email” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][\/ba_social_share][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":" Running a small business? You already know how much timing matters. Bills don\u2019t always arrive in the same reporting period that you use the goods or services, and wages can be incurred before payday. Accrued expenses help you capture those costs as they happen so that your financial statements show a more accurate financial picture […]<\/p>\n","protected":false},"author":28,"featured_media":0,"menu_order":0,"template":"","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"","footnotes":""},"class_list":["post-297022","glo","type-glo","status-publish","hentry"],"yoast_head":"\n\u00a0<\/h2>\n
Best examples of accrued expenses<\/h2>\n
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Accrual accounting vs cash basis accounting<\/h2>\n
Accrued expenses vs accounts payable vs prepaid expenses<\/h2>\n
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Where accrued expenses show up in your financial statements<\/h2>\n
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The journal entry (and reversal)<\/h2>\n
Tracking accrued expenses without the headache<\/h2>\n
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Why do accrued expenses matter?<\/h2>\n
What is an operating expense?<\/a><\/p>\n