Accrued expenses are costs a business has already incurred but has not been invoiced for yet, so the amount is often estimated and recorded with an adjusting entry. Accounts payable is money owed to vendors for invoices the business has received and recorded. Both are generally current liabilities when they are due within one year or the normal operating cycle. The invoice is the practical point that separates them.
If you have read our guide to accounts payable vs accounts receivable, you already know AP sits under current liabilities. What trips up many teams is the line right next to it on the balance sheet: accrued expenses. Both are unpaid bills. They just sit at different points in the same process.
This guide explains the difference in plain terms, with journal entries, a month-end example, and the mistakes that lead to double-counted expenses.
Accrued Expenses vs Accounts Payable: Quick Comparison
Accrued Expenses
Costs incurred, not yet billed or recorded
Accounts Payable
Vendor invoices received, not yet paid
| Factor | Accrued Expenses | Accounts Payable |
|---|---|---|
| Invoice received? | Usually no | Yes |
| Amount | Often estimated | Known from the invoice |
| What creates it | The expense has been incurred | The invoice has been received and recorded |
| Common examples | Unpaid wages, utilities, interest, taxes, unbilled services | Supplier invoices, contractor bills, invoices for goods on credit |
| How it's recorded | Adjusting journal entry, usually at period end | Entered when the invoice is processed |
| Who usually owns it | Accounting / controller during close | AP team |
| Balance sheet line | Accrued liabilities or accrued expenses | Accounts payable |
| What happens next | Reversed or cleared when the invoice arrives | Approved, paid, and cleared from AP |
What Are Accrued Expenses?
An accrued expense is a cost your business has already taken on but has not paid or been billed for yet.
Say your company uses electricity all through September. The utility sends the bill in October. You still used the power in September, so under accrual accounting the cost belongs in September. You record it then, even though no bill exists yet.
- Wages: Employees earned pay in the last days of the month, but payday falls next month.
- Utilities: Power, water, or gas used but not yet billed.
- Interest: Interest that has built up on a loan but is not due yet.
- Taxes: Payroll or other taxes owed for the period but not yet paid.
- Professional services: Legal, audit, or consulting work done before the invoice arrives.
- Goods received: Inventory or supplies delivered before the supplier's invoice.
Because there is no invoice, the amount is often an estimate. Good accruals are built from real evidence: contracts, purchase orders, receiving records, timesheets, usage data, or past invoices from the same vendor.
Simple Accrued Expense Example
A consultant does $5,000 of work in September and will invoice in October. At the end of September:
The cost lands in September, the month the work was done.
Accrued Expenses vs Accrued Liabilities
You will see both terms, and most people use them to mean the same thing. Strictly speaking, the accrued expense is the cost you recognize, and the accrued liability is the balance sheet account that holds what you owe. Public company filings usually show the line as "accrued liabilities" or "accrued expenses and other current liabilities."
One more note: accruals only exist under accrual accounting. A business on cash-basis accounting records expenses when it pays them, so it does not book accrued expenses at all.
What Is Accounts Payable?
Accounts payable is money your business owes vendors for goods or services that have been invoiced but not yet paid. The invoice gives you a known amount, a due date, and a vendor to pay.
Say a supplier delivers $10,000 of office equipment with an invoice due in 30 days:
When you pay the invoice:
AP tracks each unpaid vendor invoice from the day it is recorded until the day it is paid.
The Invoice Test: The Main Difference
When you are not sure which account to use, ask one question:
That is why it helps to think of them as two stages of the same bill, not two unrelated accounts. An accrual does not turn into AP just because time passes. It changes when the invoice arrives and is processed. The diagram below shows the full path.
Stage 1: Accrued Expense
You got the benefit, so the cost is recorded in this period even without a bill.
Stages 2 and 3: Accounts Payable
The invoice gives you an exact amount. It moves through matching and approval.
Stage 4: Settled
Cash goes out, AP goes down, and the obligation is gone from the balance sheet.
Accrued Expenses vs Accounts Payable Journal Entries
The tricky part is not booking the accrual. It is what you do when the real invoice shows up. Teams usually handle it one of two ways. Both work, as long as you pick one and use it every time.
Method 1: Reversing Entry
You accrue at month-end, then reverse the accrual on the first day of the next month. When the invoice arrives, you record it in AP as normal.
The reversal and the invoice cancel out in the new month. The expense stays in the month it belongs to. Many accounting systems can post reversing entries automatically, which makes this the more common choice.
Method 2: Reclassify the Accrual
Instead of reversing, you move the balance straight from the accrual into AP when the invoice arrives:
When the Invoice Doesn't Match the Estimate
Estimates are rarely perfect. If the consultant bills $5,300 instead of $5,000, the extra $300 is usually recorded as expense in the period the invoice arrives. It is treated as a change in estimate, not a restatement of last month. Big or repeated gaps are a sign your accrual method needs better data.
Paying the Invoice
Both accounts follow the normal rules for liabilities: they go up with a credit and down with a debit. If that still feels backward, our explainer on whether accounts payable is a debit or credit walks through why.
These entries show the basic pattern. The exact treatment depends on your accounting policies, your system, and the transaction, so follow your own close procedures and standards.
Are Accrued Expenses and Accounts Payable Both Liabilities?
Yes. Both represent amounts the business owes and expects to settle in the future. They are generally reported as current liabilities when they are due within one year or the normal operating cycle, whichever is longer.
What differs is how they are shown. Many companies list accounts payable on its own line and group accruals under "accrued liabilities." Larger companies often break accruals into pieces, such as accrued payroll, accrued interest, and accrued taxes. For a deeper look at why AP is classed this way, see our guide on whether accounts payable is an asset or a liability.
How They Affect Financial Statements
Both raise current liabilities
AP increases when an invoice is recorded. Accrued liabilities increase when an accrual is booked. Both go down when paid or cleared.
Expense follows the work, not the bill
Accruals put costs in the period you got the goods or services. Without them, the month looks cheaper than it really was.
No cash moves until you pay
Under the indirect method, an increase in AP or accrued liabilities is added back to net income in operating cash flow. A decrease is subtracted.
Both reduce it
Working capital is current assets minus current liabilities. Missing accruals make working capital look stronger than it is.
That last point is where accruals connect to cash planning. If you are only watching AP, you are missing bills you already owe. Our article on how AP affects cash flow covers the payment timing side in more detail.
Why Accrued Expenses Matter During Month-End Close
Month-end is where accruals do most of their work. Picture a company closing its September books. During the month it may have:
- ✓Received legal or consulting work that has not been billed
- ✓Used utilities that will be billed in October
- ✓Owed employees for days worked after the last payday
- ✓Received goods from a supplier whose invoice has not arrived
- ✓Used software or services billed in arrears
If the team ignores these, September expenses come in too low and October's come in too high. Finance teams review unbilled costs, book accruals, and then check them against open POs and receiving records. That cross-check is part of reconciling accounts payable before the books close.
Goods Received, Not Invoiced (GRNI)
Many ERP systems handle part of this for you. When a warehouse records a goods receipt against a purchase order, the system can post a "received not invoiced" liability automatically. When the invoice arrives and is matched to the PO and receipt, that balance clears and the amount moves into AP.
GRNI is really an accrual for goods. It is also a useful report. Old items sitting in GRNI often mean a missing invoice, a pricing dispute, or a receipt that was booked twice.
Accrued Expenses vs Accounts Payable: Real-World Example
A manufacturer gets $20,000 of equipment maintenance on March 28. The vendor's invoice arrives April 4, and the company pays it April 30. It uses reversing entries. Here is how the balances move.
Why March Shows the Cost
The maintenance happened in March. The accrual keeps March's results accurate.
Why April Isn't Double Counted
The April 1 reversal cancels out the invoice, so the cost is only counted once.
What Cash Tells You
Cash only moves on April 30. Everything before that is timing, not spending.
Now imagine the team forgot the April 1 reversal. The invoice would add another $20,000 of expense in April, and the $20,000 accrual would sit on the balance sheet with nothing to clear it. That is the most common way accruals go wrong.
Common Mistakes With Accrued Expenses and Accounts Payable
Recording costs only when the invoice arrives.
Expenses land in the wrong month. Results swing up and down for reasons that have nothing to do with the business.
Forgetting to reverse or clear the accrual.
The same cost gets counted twice: once as the accrual and again as the invoice.
Treating every unpaid amount as accounts payable.
An unpaid obligation is not an AP invoice until the invoice exists and is recorded. Wages, interest, and taxes are usually accruals, not AP.
Estimating accruals without support.
Auditors will ask how you got the number. Tie each estimate to a contract, PO, receipt, timesheet, or past invoice, and write down your assumptions.
Losing the link between the accrual and the invoice.
When the invoice finally shows up, the AP team needs to know an accrual already exists. Without a PO number or clear reference, it is easy to book the cost twice.
Running high-volume AP on spreadsheets.
Spreadsheets work for a handful of invoices. At higher volume, approval records, duplicate checks, and invoice status get hard to trust. If you want to see what manual handling costs your team, try our accounts payable calculator.
Where AP Automation Helps (and Where It Doesn't)
Let's be clear about the split. Deciding what to accrue, and how much, is an accounting task. Software does not remove the need for that judgment at month-end.
Where automation helps is everything after the invoice arrives. That is also where the accrual gets cleared, so a clean invoice process makes accruals easier to close out. Once an invoice lands, the AP team has to:
- Capture it: Pull the invoice from email, uploads, or paper.
- Extract the data: Vendor, invoice number, amounts, dates, and line items.
- Validate it: Check for missing fields, wrong totals, and duplicates.
- Match it: Compare it to the purchase order and receiving records when there is one.
- Approve it: Route it to the right people and chase the ones who have not signed off.
- Post and pay: Record it in the accounting system and schedule payment.
Done by hand, each step is a chance for delay or error. Automation handles the repetitive parts. For example, AI OCR invoice processing reads PDFs, scans, photos, and email attachments and turns them into structured records. Validation then flags duplicates and mismatched totals before anyone approves a payment.
How Quick Payable Fits Into the Process
Quick Payable is a Salesforce-native AP automation platform. Invoice capture, validation, approvals, vendor records, and AP reporting all stay inside Salesforce, so teams already working there do not need a separate AP system. The typical flow looks like this:
Approved invoices move into your books through accounting and ERP integration, so the AP balance your controller sees at close reflects what has actually been approved. Every approval and change is logged, which helps when auditors ask how an invoice was handled.
To be plain about limits: Quick Payable manages the invoice side of AP. Your accounting team still decides which costs to accrue at month-end and books those entries under your close process.
Accrued Expenses vs Accounts Payable: When Does Each Apply?
An Accrued Expense Usually Applies When
- You already received the goods or services
- The cost belongs to the current period
- The invoice has not arrived or been recorded
- You need the cost on the books before closing
Accounts Payable Usually Applies When
- The vendor has sent an invoice
- The invoice has been received and recorded
- You know the exact amount owed
- The invoice is moving through approval and payment
Final treatment should always follow your company's accounting policies and the standards that apply to you, such as U.S. GAAP.
Conclusion
Accrued expenses are costs you have incurred but have not yet been billed for. Accounts payable represents invoices you have received and recorded but have not yet paid. Both are liabilities, and many obligations can move through both stages.
The hard part is keeping the handoff clean: booking the accrual on time, clearing it when the invoice arrives, and moving that invoice through approval and payment without losing track of it. Get that right and your month-end numbers will hold up.
See how Quick Payable automates invoice capture, validation, and approvals inside Salesforce. Book a free demo and start a 15-day free trial. No credit card required.
Frequently Asked Questions
Are accrued expenses the same as accounts payable?
No. Both are liabilities, but accounts payable is for invoices you have received and recorded. Accrued expenses are costs you have already incurred that have not been invoiced or recorded in AP yet.
When does an accrued expense become accounts payable?
When the vendor's invoice arrives and is processed. At that point the accrual is either reversed or reclassified, and the invoice is recorded in AP. Time passing alone does not change it.
Is accounts payable an accrued expense?
Not in the usual accounting sense. Both come from accrual accounting and both are unpaid obligations, but they are tracked in separate liability accounts and reported on separate lines.
Are accrued expenses current liabilities?
Usually, yes. Accrued expenses expected to be paid within one year or the normal operating cycle, whichever is longer, are classified as current liabilities.
What is the difference between accrued expenses and prepaid expenses?
They are opposites. An accrued expense means you received the benefit before paying, so it is a liability. A prepaid expense means you paid before receiving the benefit, such as annual insurance paid upfront, so it is an asset.
Why reverse an accrual instead of reclassifying it?
Reversing entries let the AP team record the invoice the normal way without hunting for the matching accrual. Many systems post reversals automatically, which lowers the risk of double-counting.
What happens if an accrual estimate is wrong?
The difference between the estimate and the actual invoice is usually recorded in the period the invoice arrives, as a change in estimate. Large or repeated gaps mean the estimating method should be improved.
Can AP automation manage accrued expenses?
AP automation manages the invoice side: capture, validation, matching, approval, and tracking. Deciding what to accrue at month-end is still an accounting task. Once the related invoice arrives, automation helps process it and keeps a clear record.