--- title: "What is accrued expense?" description: "Accrued Expense explained in plain English: definition, how it works, an example, and how it appears in QuickBooks and Xero." url: https://ledgerbpo.com/glossary/accrued-expense/ updated: 2026-09-11 publisher: LedgerBPO (SS Support Network LLC) language: en-US --- # What is accrued expense? Glossary An accrued expense is a cost a business has incurred but not yet paid or recorded through a vendor invoice, such as wages earned but not yet paid out. It is recorded as a liability until the bill or payroll is actually paid. Updated September 2026 ## How accrued expense works Some costs build up before a bill ever arrives, like utilities used during the last days of a month or employee wages earned before the next payday. Rather than wait for the invoice, accrual accounting records an estimate of the cost in the period it happened, then adjusts it once the actual bill comes in. Accrued interest on a business loan is another common example, since interest accumulates daily even though it is only paid periodically. Accrued expenses are recorded through an adjusting entry at period end and typically reversed once the real invoice or payment is processed, to avoid recording the cost twice. Common examples include accrued payroll, accrued interest on a loan, and accrued utilities. Leaving these out understates a company's true expenses for the period. Skipping accrued expenses at close can make a business look more profitable than it really was for that specific period. ## Example Employees work the last week of March but are not paid until April 3. The company estimates $8,500 in wages earned during that week and records it as accrued payroll expense in March. When the actual payroll of $8,600 is processed in April, the accrual is reversed and the real $8,600 expense is recorded in April instead. ## Accrued expense in QuickBooks Online vs Xero QuickBooks Online and Xero both let you post accrued expenses through a manual journal entry to a liability account, then reverse it in the following period once the real bill is entered. Neither tool creates these accruals automatically, since they depend on judgment about costs incurred but not yet billed. Getting the reversal timing right matters, since forgetting to reverse an accrual can cause an expense to be counted twice. ## Related terms - [Accrual](https://ledgerbpo.com/glossary/accrual/) - [Deferred revenue](https://ledgerbpo.com/glossary/deferred-revenue/) - [Adjusting entry](https://ledgerbpo.com/glossary/adjusting-entry/) - [All terms](https://ledgerbpo.com/glossary/) ## How LedgerBPO handles accrued expense We identify and record accrued expenses like payroll and utilities during month-end close, so your income statement reflects costs incurred, not just bills received. A dedicated accountant reviews vendor activity and payroll timing before closing each period. You get expense totals that match what the month actually cost to run. We track reversing entries carefully so an accrued cost is never accidentally counted twice in your reports. [Close the books in days, not weeks](https://ledgerbpo.com/services/month-end-close/) Next step ## Books closed. Invoices paid. Every month. Tell us what is going on with your books or billing. You will hear from a named person within 1 business day, with a custom quote and a plan for the first close. - Reply from a named person within 1 business day - No setup fee, month-to-month - Your software, your data, no lock-in Start with a custom quote [Get a custom quote](https://ledgerbpo.com/get-a-quote/) [Book a 20-minute call](https://ledgerbpo.com/book-a-call/) Or call [+1-657-777-0006](tel:+16577770006) during US, UK or Australian business hours. --- Source: https://ledgerbpo.com/glossary/accrued-expense/ · Contact: https://ledgerbpo.com/contact/ · Full site map for agents: https://ledgerbpo.com/llms.txt