Accrued Expenses Journal Entry:
Debit or Credit?

by Anonymous
(Unknown)

Question:

Q: If the amount has been debited into accrued expenses, do we need to credit it after making the payment (so that the balance would be zero in accrued expenses)?

Answer:

The debits and credits mentioned in the question above are a bit confusing. So before answering, let's make sure we really understand what accrued expenses are.

Accrued expenses are not expenses.

Accrued means "owed" or "owing."

Accrued expenses is a liability account. It means expenses that are owing or payable.

Accrued expenses are similar to accounts payable. But with accrued expenses we're talking more about expenses like interest or salaries, expenses that have been incurred at a certain point in time even though we didn't receive an invoice or bill to pay (which we would receive with accounts payable - we'd receive a bill from a creditor).

Recording Accrued Expenses

When you have an accrued expense, you record the following:

Dr Expense
Cr Accrued Expenses (liability account)

When you make the payment you record:

Dr Accrued Expenses
Cr Bank

The entries above are the standard, usual entries for an accrued expense and then paying off the debt.

Debit Entry for the Accrued Expenses Account

Apart from when you're making the payment, a debit to the accrued expense account is highly unusual as it means you owe less. In this case you would need to do a correction.

For example, let's say that at the end of the month you had salaries payable $40,000 and you originally recorded this (incorrect) entry:

Dr Salaries payable (liability) .................... $40,000
Cr Salaries (expense) ........................................ $40,000

In this situation you would pass a journal entry to correct this, which is the exact opposite of the above:

Dr Salaries (expense) ................................. $40,000
Cr Salaries payable (liability) ........................... $40,000


That's it! Hope that gives you a better understanding of the journal entries for accrued expenses and when to debit or credit this account!

Add a comment further below to let us know what you thought of this explanation (or if you have questions on this topic).

Best,
Michael Celender
Founder of Accounting Basics for Students


Related Questions and Tutorials:

• Accrued Expenses and Revenue: Closed or Not?
• What is an Outstanding Salary?
• Accounts Payable Journal Entries (Full Tutorial)

Return from Debit or Credit Accrued Expenses? to Basic Accounting Questions

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