Which description correctly defines accrued expenses?

Which description correctly defines accrued expenses?

• A. expenses incurred in one fiscal period but not paid until a later fiscal period
• B. expenses incurred but not yet paid in cash or recorded
• C. The net amount of cash provided from operating activities
• D. The idea of matching over time

Answer: (B)

Accrued expenses arise when costs have been incurred in the current period but have not yet been paid in cash and may not have been recorded yet. In accrual accounting, you recognize the expense to match it with the period’s revenues, creating a corresponding liability if payment will occur later. An adjusting entry typically records the expense and sets up a payable (liability) so the income statement shows the expense for the period and the balance sheet reflects the obligation. This description—incurred but not yet paid in cash or recorded—best fits what accrued expenses are. The other ideas are less precise: simply saying expenses aren’t paid until a later period describes timing but not the recognition; cash flow from operating activities is about cash movement, not the obligation; and the idea of matching over time is a principle, not a direct definition.

Accrued expenses arise when costs have been incurred in the current period but have not yet been paid in cash and may not have been recorded yet. In accrual accounting, you recognize the expense to match it with the period’s revenues, creating a corresponding liability if payment will occur later. An adjusting entry typically records the expense and sets up a payable (liability) so the income statement shows the expense for the period and the balance sheet reflects the obligation. This description—incurred but not yet paid in cash or recorded—best fits what accrued expenses are.

The other ideas are less precise: simply saying expenses aren’t paid until a later period describes timing but not the recognition; cash flow from operating activities is about cash movement, not the obligation; and the idea of matching over time is a principle, not a direct definition.