Thursday, July 2, 2009

Accrued liabilities

Accrued liabilities arise from the recognition of expenses for which payment will be made in future period. Thus accrued liabilities also are called accrued expenses. The need to record accrued liabilities arises from the fact that certain expenses are incurred by the business before they are actually paid. Examples of accrued liabilities include interest payable, income taxes payable, and amount related to payrolls. As accrued liabilities stem from the recording of expenses, the matching principle governs the timing of their recognition.
All the companies incur accrued liabilities. In most cases, however, these liabilities are paid at frequent intervals. Therefore, they usually do not accumulate to large amounts. In a balance sheet, accrued liabilities frequently are included in the amount
Shown as "accounts Payable".

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