Accounts Payable vs Accrued Expenses: Differences & Examples

A business can receive goods or services before the vendor sends an invoice.

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For example, a contractor might finish work in January but send the invoice in February. Because the work was completed in January, the cost still needs to be recorded in January. Finance records an accrued expense for that amount.

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When the invoice arrives in February, it is recorded in accounts payable and the accrual is cleared. That timing is the main difference between accounts payable and accrued expenses.

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This guide explains that difference, shows how one cost can move from an accrual to accounts payable, and walks through how finance teams identify and record AP accruals at month-end.

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[tldr]

What is accounts payable?

Accounts payable is the amount a company owes suppliers and vendors for goods or services bought on credit, usually already received, that it has recorded but not yet paid [1].

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For example, a vendor delivers $8,000 of equipment and sends an invoice with net-30 terms. Once the invoice is recorded, the company has an $8,000 payable until the invoice is paid.

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AP is usually managed through the vendor subledger, where finance can see individual invoices, due dates, payment terms, approvals, and outstanding balances.

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That is why AP is closely connected to invoice processing, purchase orders, three-way matching, approvals, and payment workflows.

What are accrued expenses?

An accrued expense is a cost the company has already incurred even though it has not yet been fully captured through the normal invoice or payment process [2].

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Suppose a cloud provider bills in arrears. The company uses approximately $40,000 of infrastructure during January but does not receive the January invoice until February. The cost still belongs in January, so finance records an accrual at month-end.

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The same principle applies to employee wages earned but not yet paid, interest accumulated between payment dates, professional services completed before billing, and bonuses earned during the period.

Accounts payable vs. accrued expenses

Accounts payable and accrued expenses both represent obligations the company has not yet paid. The main operational difference is whether the obligation has already been captured through the normal payable process.

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Difference	Accounts payable	Accrued expenses
Has the cost been incurred?	Usually yes	Yes
Vendor invoice recorded?	Usually yes	Usually no, or not yet captured in AP
Amount	Normally supported by the invoice	May be estimated or exactly known
Typical support	Vendor invoice, PO, receipt	Contract, PO, receipt, payroll data, usage records, estimate
Where it is tracked	AP subledger and GL	Accrual schedule, GL, or a goods received not invoiced (GRNI) clearing account
When it is recorded	When the payable is recognized	When the cost is incurred before AP captures it, often during close
Does it reverse?	Normally no	May reverse automatically or be cleared directly
AP aging	Normally included	Usually outside the invoice-based AP aging

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For vendor goods and services, the simplest rule is this: if the company has received the benefit but the related invoice has not yet been captured in AP, finance may need an accrual. Once the invoice is recorded, the unpaid vendor balance generally belongs in accounts payable.

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That rule does not cover every accrued expense. Employee wages, interest, bonuses, and other accrued liabilities may never become vendor payables at all.

Accrued expenses, accrued liabilities, and accrued payables

These terms overlap, but they are not always identical.

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An accrued expense refers to a cost recognized before it has been paid or fully processed. The corresponding balance-sheet amount is an accrued liability.

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Accrued liabilities can be broader than operating expenses. The term may also include other obligations that have accumulated but remain unpaid.

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"Accrued payables" is sometimes used for vendor-related accruals, particularly goods or services received before the invoice arrives. In those cases, the balance may eventually move into accounts payable once the supplier invoice is recorded.

How a cost moves from accrued expenses to accounts payable

The easiest way to understand the distinction is to follow one cost through the books.

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Assume a contractor completes work during January. Finance estimates the January cost at $6,000, but the contractor does not send the invoice before the books close.

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The actual invoice arrives on February 10 for $6,200 and is paid on March 10.

1. January 31: record the accrued expense

At January month-end:

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Account	Debit	Credit
Contractor expense	$6,000
Accrued liabilities		$6,000

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January recognizes the cost because the contractor performed the work during January.

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This is an adjusting journal entry because finance is bringing an incurred cost into the period before the normal invoice process has captured it.

2. February 1: reverse the accrual

If the company uses automatic reversing entries:

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Account	Debit	Credit
Accrued liabilities	$6,000
Contractor expense		$6,000

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The reversal clears the January liability and creates a temporary credit to contractor expense in February.

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Reversing entries are an optional step in the accounting cycle. Teams that use them do so to reduce the risk of counting the same expense twice [3]. An accrual can also remain open until the invoice arrives and then be cleared directly.

3. February 10: record the invoice in accounts payable

The contractor's actual invoice is $6,200:

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Account	Debit	Credit
Contractor expense	$6,200
Accounts payable		$6,200

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Because February already contains the $6,000 reversal, the net February expense from the reversal and invoice is $200.

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If January is already closed, that $200 is the true-up between the January estimate and the final invoice. The obligation is now supported by a vendor invoice and sits in accounts payable.

4. March 10: pay the invoice

Account	Debit	Credit
Accounts payable	$6,200
Cash		$6,200

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Payment clears the payable.

What if the company does not reverse the accrual?

Finance can instead clear the existing accrual when the invoice arrives:

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Account	Debit	Credit
Accrued liabilities	$6,000
Contractor expense	$200
Accounts payable		$6,200

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The original $6,000 liability is removed, the $200 difference is recognized, and the full vendor invoice moves into AP.

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Both workflows can produce the same accounting result. The control that matters is making sure the original cost is neither missed nor recognized twice.

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This transition applies to vendor-related accruals. An accrued payroll or interest liability does not need to become accounts payable simply because it is eventually settled.

Which one should you record?

Start with whether the company has actually received the goods or services.

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Situation	Typical treatment
PO created, but nothing has been received	Usually neither AP nor an accrued expense yet
Goods or services received and vendor invoice recorded	Accounts payable
Goods or services received but invoice not yet recorded	Accrued liability or GRNI/AP accrual
Invoice exists but has not made it through AP by cutoff	Capture it in AP if possible; otherwise an accrual may be needed so the cost reaches the correct period
Employee wages earned but unpaid	Accrued payroll liability
Interest accumulated but not yet paid	Accrued interest liability
Cash paid before the related service is received	Usually a prepaid expense

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The presence of a purchase order alone does not normally create an expense or payable. The company generally needs to have received the goods or services, or otherwise incurred an obligation, before recognizing the liability.

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Likewise, whether an amount is exact or estimated does not determine whether something is AP or an accrual. Some accruals can be calculated exactly, while others require estimates.

Where accounts payable and accrued expenses appear in the financial statements

Both accounts payable and routine accrued expenses normally appear among current liabilities when they are expected to be settled within one year or the operating cycle, whichever is longer [4].

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Companies may present them separately or combine them within a broader caption such as "accounts payable and accrued liabilities," depending on materiality and financial-statement presentation. For commercial and industrial SEC registrants, Regulation S-X Rule 5-02 requires amounts payable to trade creditors to be stated separately, and any other current liability above 5% of total current liabilities, such as accrued payrolls or accrued interest, to be stated separately in the balance sheet or a note [5].

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On the income statement, the related cost is recognized when the goods or services are received, regardless of whether the liability initially enters through AP or an accrual.

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Recording either liability does not itself move cash. Under the indirect cash-flow method, increases in operating payables and accrued liabilities are added back to net income, and decreases are subtracted, as part of the working-capital adjustments to operating cash flow [6].

What happens to AP aging and DPO?

An AP aging report is built around open vendor transactions and due dates. Accruals recorded as GL journals generally do not have an invoice or payment schedule to age in the same way.

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That makes the AP subledger-to-GL reconciliation important. Posting manual accruals directly to an AP control account without creating the corresponding vendor-level record can leave the GL balance different from the invoices shown in AP reporting.

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The distinction can also affect days payable outstanding. DPO divides accounts payable by cost of goods sold and multiplies by the days in the period (some teams use ending AP, others an average) [7], so moving unrelated accrual balances into AP can change the metric without changing how quickly the company actually pays vendor invoices.

How AP accruals work at month-end close

At month-end, the objective is to capture goods and services received before the cutoff even when the related vendor invoice has not made it into AP.

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That makes AP accruals part of the broader month-end close process.

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A practical process looks like this:

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Set the cutoff. Define which goods, services, invoices, and receipts belong in the period being closed.
Process invoices already available. An invoice that can be recorded through AP does not need a separate accrual simply because the team is close to period-end.
Identify goods received but not invoiced. Review receiving records, open POs, and three-way-match data for goods that arrived before cutoff without a corresponding invoice.
Look for services already consumed. Check recurring vendors such as cloud providers, contractors, utilities, consultants, and other suppliers that bill in arrears.
Estimate and document the accrual. Use the strongest available support, including PO prices, receiving records, contract rates, approved hours, usage data, or vendor estimates.
Post the entry. Debit the relevant expense, inventory, or other account and credit the appropriate accrued liability. Decide whether the entry will reverse automatically or remain until the invoice clears it.
Match the later invoice and true up the difference. When the bill arrives, compare the actual amount with the estimate and clear the original accrual without recognizing the same cost twice.
Reconcile the balances. Tie the AP subledger or aging report to the AP control account, and separately tie the accrual schedule to the accrued-liability account as part of the account reconciliation.

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For quarter-end, year-end, or other higher-risk closes, finance may also review material invoices and payments recorded shortly after period-end to check whether any costs belonged to the period that just closed.

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One important GRNI nuance is that the debit is not always an expense. If inventory was received before the invoice arrived and remains on hand, the debit may be inventory while the credit records the accrued liability.

Common accounts payable and accrual mistakes

Mistake	What happens	Typical fix
Accrual posted directly to the AP control account without a corresponding vendor record	AP aging or subledger may no longer agree with the GL	Reclassify the amount to the appropriate accrued-liability account unless the system intentionally supports the subledger posting
Invoice is recorded while the original accrual remains open	Liability and potentially expense are double-counted	Reverse or clear the accrual and record only the true-up
PO is treated as a liability before goods or services are received	Liability may be recognized too early	Wait until the company has received the benefit or otherwise incurred the obligation
Accrual reverses but the invoice is delayed	Expense can be temporarily understated in the following period	Monitor open reversals and re-accrue where appropriate
Every accrual is assumed to become AP	Payroll, interest, bonus, and similar liabilities may be routed incorrectly	Keep non-vendor accruals in the relevant accrued-liability accounts

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The common thread is that AP and accruals need to be reviewed together. One captures invoiced vendor obligations, while the other helps finance capture costs that the normal payable process has not yet picked up.

Keep AP and accruals aligned with DualEntry

As transaction volume grows, keeping AP and accruals aligned becomes more important.

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Finance needs to know which vendor obligations are already in AP, which goods or services still require accruals, and whether later invoices have cleared the estimates recorded during close.

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DualEntry's AP automation software keeps invoice processing, approvals, and accounting records inside the ERP, while close management connects account reconciliations, the month-end close checklist, and period locking.

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In DualEntry, a month-end accrual is an ordinary journal entry with a reversal date: set that date to the first day of the next period, and DualEntry immediately creates the paired reversing entry, dated that day, with every debit and credit flipped. Keeping those workflows close to the ledger makes it easier to trace a cost from receipt or service period through accrual, invoice, reconciliation, and eventual payment.

Frequently asked questions

What is the difference between accrued expenses and accounts payable?

Accounts payable generally represents vendor invoices that have been recorded but not yet paid. Accrued expenses recognize costs the business has already incurred before the related invoice or normal payable process has captured them.

Are accrued expenses part of accounts payable?

Not necessarily. Vendor-related accrued expenses may later move into accounts payable when an invoice arrives, but other accruals such as payroll, bonuses, and interest may never pass through AP.

What are examples of accrued expenses?

Common examples include wages earned but unpaid, interest that has accumulated between payment dates, utilities or cloud services consumed before billing, contractor work completed before invoicing, and professional services received before the bill arrives.

What is an AP accrual?

An AP accrual is typically a liability recorded for vendor goods or services received before the related invoice has been recorded in accounts payable. It allows the cost to be recognized in the correct accounting period.

Is an accrued expense a current liability?

Most routine accrued expenses are current liabilities because the company expects to settle them within one year or its operating cycle, whichever is longer [4]. Accrued obligations that fall due beyond that window are classified as noncurrent.

What is the difference between accounts payable and expenses?

Accounts payable is a balance-sheet liability representing unpaid vendor obligations. An expense appears on the income statement and represents a cost recognized during the period. AP is not itself an expense: an invoice can create an expense, or it can debit inventory, equipment, a prepaid asset, or another balance-sheet account.