Accrued Expenses

Accrued expenses are costs a business has incurred but has not yet paid by the end of an accounting period.
Common examples include unpaid salaries, interest payable, and taxes.
Consider Senz Corporation, a small manufacturing company that runs its machinery throughout the month. 
Although electricity is used daily, the utility bill is only received and paid after the month ends.
By the time the accounting period closes, the factory has consumed a significant amount of power. 
However, the bill has not yet arrived, and the payment is still pending.
If this cost is not recorded, the company’s expenses and liabilities will be understated, and its profits appear to be higher than they are.
To ensure the expense is reflected accurately in the financial records, the accountant records an adjusting journal entry by debiting Utilities Expense and crediting Utilities Payable. 
This process follows the accrual accounting principle, which matches expenses to the period in which they were incurred, even if they have not been paid, and ensures more accurate financial reporting.