Accounting entry for accrued expenses is Expense Account Debit and Accrued Expenses Account Credit. when will be paid Accrued expenses then entry will be passed Accrued Expenses Account Debit and Cash/Bank Account Credit. Accrued Expenses are expenses that have been incurred but not yet paid or shall be recorded at the end of an accounting period. These expenses need to be recognized in the period in which they are incurred for match the expense with the related revenue, adhering to the matching principle in accounting.
Example 1: Utility Expenses
Let’s assume a company owes ₹20,000 for utility services provided in June 2024, but the bill will be paid in July 2024.
Journal Entry to Record Accrued Utility Expenses
Date
Account Title
Debit (INR)
Credit (INR)
30-06-2024
Utility Expense
20,000
30-06-2024
To Accrued Expenses
20,000
Journal Entry to Pay Accrued Utility Expenses
Date
Account Title
Debit (INR)
Credit (INR)
31-07-2024
Accrued Expenses
20,000
31-07-2024
To Cash/Bank
20,000
Example 2: Salaries
Suppose employees earned ₹50,000 in salaries for December 2024, but these will be paid in January 2025.
Journal Entry to Record Accrued Salaries
Date
Account Title
Debit (INR)
Credit (INR)
31-12-2024
Salaries Expense
50,000
31-12-2024
To Accrued Salaries
50,000
Journal Entry to Pay Accrued Salaries
Date
Account Title
Debit (INR)
Credit (INR)
31-01-2025
Accrued Salaries
50,000
31-01-2025
To Cash/Bank
50,000
Example 3: Interest on Loan
Suppose a company owes ₹15,000 in interest for a loan, which is due at the end of December 2024 but will be paid in January 2025.
Journal Entry to Record Accrued Interest
Date
Account Title
Debit (INR)
Credit (INR)
31-12-2024
Interest Expense
15,000
31-12-2024
To Accrued Interest
15,000
Journal Entry to Pay Accrued Interest
Date
Account Title
Debit (INR)
Credit (INR)
31-01-2025
Accrued Interest
15,000
31-01-2025
To Cash/Bank
15,000
Example 4: Rent
Suppose a company owes ₹30,000 in rent for December 2024, which will be paid in January 2025.
Journal Entry to Record Accrued Rent
Date
Account Title
Debit (INR)
Credit (INR)
31-12-2024
Rent Expense
30,000
31-12-2024
To Accrued Rent
30,000
Journal Entry to Pay Accrued Rent
Date
Account Title
Debit (INR)
Credit (INR)
31-01-2025
Accrued Rent
30,000
31-01-2025
To Cash/Bank
30,000
Summary
Accrued Expenses: Recorded the liability for reflect expenses incurred but not yet paid.
Expense Recognition: Ensures expenses are recorded in the period they are incurred, and also matching them with related revenues.
Payment of Accrued Expenses: Reduces the liability and also records the outflow of cash when the expense is paid.
Recording accrued expenses accurately and ensures that the financial statements provide a true and fair view of the company’s financial position and performance, adhering to the accrual basis of accounting.
