By Leanna Kelly Thanks to accrual basis accounting, many expenses appear on the balance sheet before money changes hands. The company records these expenses, called accrued expenses, in the period they occur. They represent future liabilities, and appear as such on the company’s balance sheet. They’re instrumental in representing not only a company’s current financial health, but its future financial prospects, as well.
Here’s a look at accrued expenses and how they’re defined, as well as their purpose in establishing a company’s finances during a specific reporting period.
The Matching Principle
To understand accrued expenses, it’s important to be familiar with the matching principle …read more
