accrued liabilities
Picture an employee who works the last week of December but is not paid until early January. The work is done, the company benefited, the wages are genuinely owed — yet no paycheck has been written and no invoice has arrived. Accounting refuses to pretend that obligation does not exist just because the cash has not moved. It records an accrued liability.
Accrued liabilities are expenses a company has incurred but not yet paid or been billed for at the end of an accounting period. They arise from the accrual basis of accounting, which records costs when they happen rather than when cash leaves. Common examples are accrued wages, accrued interest, accrued utilities, and accrued taxes. The accountant makes an adjusting entry: increase an expense (which reduces profit) and increase a liability. If 5,000 of wages were earned by employees but unpaid at year-end, the books show 5,000 of wage expense and 5,000 of wages payable. When the cash is later paid, the liability is removed and cash falls.
Accrued liabilities matter because they make the financial statements honest about timing. Without them, a company could look more profitable than it really is by ignoring costs it has already run up. They are a core piece of period-end adjusting entries and a frequent topic in audits, since a firm tempted to flatter its results might 'forget' to accrue expenses it would rather not show.
A company's December electricity bill of 1,200 arrives on January 9. At December 31 the power has been used but not billed, so the accountant accrues 1,200 of utilities expense and 1,200 of accrued liabilities. When the bill is paid in January, the liability disappears.
The expense belongs to the period the resource was used, even though the cash and the invoice arrive later.
Accrued liabilities (expense incurred, cash not yet paid) are the opposite of prepaid expenses (cash paid, benefit not yet used) — both exist to put costs in the right period.