Whether you are the lender or the borrower you must record accrued interest in your books. An accrued expense refers to when a company makes purchases on credit and enters liabilities in its general ledger acknowledging its obligations to its creditors.
At the end of period accountants should make sure that they are properly recorded in the books of the company as an expense with a corresponding payable account.
Income or expenses which have accumulated but not yet recorded in the books. Interest expense accruals interest expenses that are owed but unpaid. Accrued interest is interest that s accumulated but not yet been paid. Accrued expenses refer to expenses that are already incurred but have not yet been paid.
Examples include unrecorded bills and unpaid wages interest and taxes. Accrued expense is expense which has been incurred but not yet paid. Some adjusting entries involve expenses that have not yet been paid for nor has the obligation been recorded.
Expense must be recorded in the accounting period in which it is incurred. Common accrued expenses include. This is not an exhaustive list but it does cover most of the transactions you will see.
However in these cases an expense has been generated. In accounting it is an expense incurred but not yet paid. Because it s accrued and not yet paid it can be a payable if you re the borrower or receivable if you re the lender.
Adjusting entry for accrued expenses. Therefore accrued expense must be recognized in the accounting period in which it occurs rather than in the following period in which it will be paid.