Accrued Expense Journal Entry at Month-End
Record expenses incurred but not yet invoiced or paid to keep period reporting accurate.
Scenario
At month-end, utilities of $1,800 were incurred but the invoice has not yet arrived. The company records an accrual and reverses/clears once billed.
Journal Entries
Month-end — Accrue utilities expense incurred but unpaid.
| Account | Debit | Credit |
|---|---|---|
| Utilities Expense | $1,800 | |
| Accrued Liabilities | $1,800 |
When invoice is received and paid (assume exact amount).
| Account | Debit | Credit |
|---|---|---|
| Accrued Liabilities | $1,800 | |
| Cash | $1,800 |
Explanation
Accrual accounting requires recording expenses in the period incurred, not when paid. This improves margin and period comparability.
Variations
If actual invoice differs, book difference to expense in next period.
Some teams reverse accruals on day 1 of next month to simplify invoice posting.
Common Mistakes to Avoid
- ✗Skipping accruals for known-but-unbilled costs.
- ✗Double-counting expense after accrual if reversal logic is inconsistent.
- ✗Posting accrual without support schedule.
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Common questions about this journal entry
Because expense was incurred in the current reporting period.
Often yes, depending on close process design and control preferences.