Accrued Expenses vs Accounts Payable

The primary difference between accrued expense and accounts payable is that accrued expense is the company's expenses incurred over one accounting period but not paid in the same accounting period. In contrast, accounts payable is the amount owed by the company to its supplier when any goods are purchased, or services are availed.

Accrued expenses and accounts payable are two essential terms recorded in the balance sheet of organizations. The critical difference between these terms is that accrued expense is recognized in the accounting books for the period it is incurred, whether cash is paid or not. On the other hand, accounts payable is the payment to creditors who have made sales to the company on credit.

The term accrued means to accumulate. When a company accrued expenses, the portion of the unpaid bills is increasing. The Accrual concept of accounting states that all the inflows and outflows should be recorded when they occur. It is done irrespective of whether actual cash is paid or not.

It is the expense recognized in the books before actual payment is made. Accrued expenses include utilities used for an entire month but when the bill is received at the end of the month. Workers who work for the whole period but payment is made to the employees at the end. Services and goods consumed, but no invoice received.

Accounts payable include all expenses from credit purchases of goods or services from suppliers/vendors. Accounts payable are current liabilities and are due within twelve months of the date of the transaction. In balance sheets, nonfinancial expenses that are incurred very frequently are salaries, wages, interest, royalties are included in the classification.

The primary differences between accrued expenses and accounts payable are the parties to whom it is paid.

• Accrued Expenses is a term used in accounting where the expense is recorded in the books before it is paid for; accounts payable is the amount the company has to pay in the short term to the creditors.
• Expenses are periodic and are listed on the balance sheet as Accrued Expenses as a current liability in the balance sheet. Whereas accounts payable are a part of the everyday process as a current liability on the balance sheet.
• All companies include accrued expenses. Accounts payable arises only when purchases are made on credit.
• Accrued expenses are payable to employees and banks. Accounts payable only have records when payment is due to creditors.
• Accrued expenses are things you owe but do not have invoices for a while. Accounts payable are the invoices the business has received.
• Accrued expenses are realized on the Balance sheet at the end of the accounting year and are recognized by adjusting journal entries. Accounts payable are realized on the balance sheet when a company buys products or services on credit.

• Accrued expenses are expenses already incurred in the past and will be due in the future period. As discussed above, accrual accounting is a method of tracking these payments.
• On the other hand, accounts payable are liabilities that will be paid soon. Payables are still to be paid, while expenses are those that have already been paid.
• Examples of payables are electric and telephone bills and those purchased using credit cards or notes, while examples or expenses are payments for suppliers and rent.

This article is a guide to the Accrued Expenses vs. Accounts Payable. Here we discuss the top differences between accrued expenses and accounts payable along with infographics and a comparison table. You may also have a look at the following articles –

• Trust Account
• Accounts Payable (AP) Cycle
• Accounting Books for Beginners
• What is Accrued Income?