Accounts Payable Vs. Accrued Expense

Account payable and accrued expenses are both are the part of current liabilities. Both are shown in liabilities side of balance sheet. But still there is need to understand the difference between accounts payable and accrued  expenses. Here, we are trying to show the existence of difference between account payable and accrued expense.

1. Meaning 

Account Payable: It is the total of the amount we have to pay our creditor for bought goods on credit or taken debt. For example, we have bought goods from A, B, C and D of Rs. 50,000, Rs. 60,000, Rs. 70,000 and Rs. 80,000. Total accounts payable Rs. 260000.

 Accrued  Expenses: It is total of the amount which is payable to those who has given us the services but on the due date, we did not pay to them. So, all these unpaid expenses will become our current liabilities. For example, salary outstanding Rs. 6000 and rent outstanding Rs. 7000. Total outstanding or accrued expenses Rs. 13000.

2. Time of Recognize 

Account Payable : We recognize account payable everyday when we buy goods on credit or get debt. We pass the normal entry and it be shown in our ledger account.

Accrued Expenses : We recognize accrued expenses at the end of accounting period. At the end of accounting period, we recognize it and through adjusting journal entries, we show it in our accounts and also show its effect on our profit and loss account and balance sheet.