What is the cost of accrued liabilities? If accruals have such a low cost, why don’tfirms use them even more?
What is the cost of accrued liabilities? If accruals have such a low cost, why don’t
firms use them even more?
An accrued liability refers to an expense a business has incurred during a specific period but has yet to be billed for. Accrued liabilities are just reported under accrual accounting to label the performance of a company regardless of their cash position.
Accrued liabilities are costs that have yet to be paid for by a company. These are recorded for a better representation of the financial position of the company regardless if a cash transaction has occurred.
Recording accrued liabilities is an important part of the matching accounting principle. Under the matching principle, all costs need to be recorded in the time frame they are incurred to accurately reflect financial performance.
Step by step
Solved in 2 steps
