An accrued expense is a cost that an organization recognizes before it pays the invoice.

These expenses arise when a company receives goods or services but has not yet paid for them. The organization records the amount as a liability on the balance sheet.

Accrued expenses usually occur on a recurring basis, such as for utilities, salaries, or interest. The company recognizes the expense in the period in which it occurs, not when payment is made.

Accrued expenses are the opposite of prepaid expenses, where the company pays in advance and recognizes the expense later.