Accounting
ERP
Financial Management
Accrued Expenses Journal Entry: Examples, Reversals and Supporting Schedules
Last updated: October 10, 2026 · Independent guide · We do not sell rankings or coverage.
An accrued expenses journal entry records a cost you have incurred in the period but have not yet been billed for or paid. You debit the expense account and credit an accrued liabilities account at month end, then reverse or clear the entry when the vendor’s invoice is posted.
The accrued expense entry and its reversal
Most invoice-driven accruals follow the same four-step cycle.
| Account | Debit | Credit | Note |
|---|---|---|---|
| 1. Expense (e.g. Utilities) | Estimate | Last day of the period in which the cost was incurred | |
| Accrued liabilities | Estimate | Current liability, kept separate from accounts payable | |
| 2. Accrued liabilities | Estimate | Reversal on the first day of the next period | |
| Expense | Estimate | Leaves a temporary credit balance in the expense account | |
| 3. Expense | Invoice amount | Vendor bill posted in the normal way through AP | |
| Accounts payable | Invoice amount | Net effect on the new period is the estimate variance only | |
| 4. Accounts payable | Invoice amount | Payment | |
| Cash | Invoice amount |
Not every accrual is reversed. Interest and bonuses usually build up in their own liability accounts until they are paid, so you post only the monthly increment and true up the balance against a calculation.
| Accrual | Debit | Credit | Usual treatment |
|---|---|---|---|
| Utilities | Utilities expense | Accrued liabilities | Auto-reversing |
| Legal, audit and consulting fees | Professional fees | Accrued liabilities | Auto-reversing |
| Goods received, not invoiced | Inventory or expense | Received-not-invoiced (GRNI) clearing | Cleared when the invoice is matched to the receipt |
| Interest on debt | Interest expense | Accrued interest payable | Builds until the payment date, then cleared by the payment |
| Bonuses | Bonus expense | Accrued bonuses | Builds monthly, trued up to the expected payout |
Worked example: closing September 2026
Illustration: a distributor closes September 2026 before five vendor invoices arrive. All company figures in this example are illustrative.
Step 1: utilities. The electricity bill for September normally arrives around October 12. The last three bills were $4,050, $4,240 and $4,250, so you accrue the average of $4,180.
Step 2: legal fees. Outside counsel confirms by email that it worked 18 hours in September at $415 an hour. You accrue $7,470 and save the email as support.
Step 3: received-not-invoiced goods. A shipment of packaging was received against a purchase order on September 29 at a PO value of $12,600. If your system posts receipts to a GRNI account, this entry is created automatically and you only review it. If it does not, you book it manually.
Step 4: interest. A $500,000 term loan carries 7.5% interest calculated on an actual/360 basis and paid quarterly. September has 30 days, so interest is $500,000 × 7.5% × 30 / 360 = $3,125.
Step 5: bonuses. The annual bonus pool is $240,000 at target, and management expects a 90% payout, or $216,000. One month’s share is $18,000.
| Account | Debit | Credit | Note |
|---|---|---|---|
| Utilities expense | $4,180 | Reverses October 1 | |
| Professional fees | $7,470 | Reverses October 1 | |
| Accrued liabilities | $11,650 | One reversing entry | |
| Inventory | $12,600 | Posted by the receipt | |
| GRNI clearing | $12,600 | Cleared by the matched bill | |
| Interest expense | $3,125 | Not reversed | |
| Accrued interest payable | $3,125 | Cleared by the quarterly payment | |
| Bonus expense | $18,000 | Not reversed | |
| Accrued bonuses | $18,000 | Balance after nine months: $162,000 |
Total September accruals are $45,375. On October 1 the reversing entry debits accrued liabilities $11,650 and credits utilities and professional fees. When the bills arrive at $4,312 and $7,900, October shows only the variances of $132 and $430.
Auto-reversing or manual reversal?
An auto-reversing entry is the better choice for accruals that a single vendor bill will replace, such as utilities, professional fees and freight. AP posts the bill normally to the expense account, and nobody has to remember to clear the liability. The cost is a temporary credit balance in expense early in the month.
Manual or balance-based treatment fits accruals with a running balance and their own payment schedule. Interest, bonuses, commissions and payroll taxes belong here. Each month you calculate the correct ending balance and post the difference, which avoids reversing $162,000 of bonus accrual just to rebook $180,000.
Whichever you use, never mix the two for the same vendor. If AP codes the bill against the accrued liabilities account while the accrual also reverses automatically, the expense is understated by the full amount. The guide to accounting close automation covers how close tools enforce this kind of rule.
How to estimate when the invoice has not arrived
Use the most specific evidence you have, in this order of reliability:
- Contract or purchase order price. Retainers, subscriptions and PO receipts accrue at the agreed amount.
- Vendor confirmation. Ask law firms and contractors for unbilled hours at month end. An email reply is good audit evidence.
- Usage times rate. Meter reads, freight weights, hours from timesheets or units shipped, multiplied by the contract rate.
- Run-rate average. The average of the last three bills, adjusted for seasonality or rate changes.
- Budget or management estimate. Use only when nothing better exists, and record who provided it.
Review the prior month’s accruals against the actual bills each close.
Accrual support schedule template
Every accrual should tie to one line on a support schedule that the reviewer signs off. Copy the layout below into a spreadsheet, one row per accrual, and reconcile its total to the accrued liabilities balance in the general ledger.
| Column | What to enter | Example row |
|---|---|---|
| Vendor and description | Who will bill you and for what | City Power, September electricity |
| GL account and department | Expense account and any dimension | 6410 Utilities, Warehouse |
| Service period | Dates the cost covers | September 1 to 30, 2026 |
| Basis of estimate | Contract, confirmation, usage or average | Three-bill average |
| Calculation and evidence | Formula and a link to the file | (4,050 + 4,240 + 4,250) / 3 |
| Amount accrued | Amount posted | $4,180 |
| Reversal method | Auto-reverse, balance true-up or GRNI match | Auto-reverse October 1 |
| Actual invoice and variance | Filled in next month | $4,312, variance $132 |
| Prepared and reviewed by | Initials and dates | JL 10/2, MK 10/3 |
Keep separate tabs for the non-reversing balances. The interest tab should show principal, rate, day count and payment dates, and the bonus tab should show the plan, the expected payout percentage and who approved it.
The rules behind accrued expenses
US GAAP. FASB Concepts Statement No. 8, Chapter 4 (December 2021) defines a liability as “a present obligation of an entity to transfer an economic benefit” (FASB, via PwC Viewpoint). Services already received in September create that obligation in September, even without a bill.
SEC registrants. Regulation S-X Rule 5-02, item 20, requires public companies to state separately, in the balance sheet or a note, any other current liability that exceeds 5 percent of total current liabilities, and names accrued payrolls and accrued interest as examples (17 CFR 210.5-02, Cornell LII, checked October 10, 2026).
Federal income tax. An accrual-method taxpayer deducts a liability when all events have occurred that establish it, the amount can be determined with reasonable accuracy, and economic performance has occurred (26 CFR 1.461-1(a)(2)). The recurring item exception lets some year-end accruals be deducted if economic performance occurs by the earlier of the filing date or about 8.5 months after year end, but it excludes interest, among other items (26 CFR 1.461-5). Bonuses paid after the 15th day of the third month following year end are presumed to be deferred compensation (26 CFR 1.404(b)-1T, Q&A-2). For a calendar-year company, that means paying accrued bonuses by March 15. Confirm your position with your tax adviser.
Common mistakes
- Double counting GRNI. Booking a manual accrual for goods your ERP has already posted to a received-not-invoiced account.
- Reversal without an invoice. An auto-reversed accrual whose bill never arrives leaves a credit in expense. Re-accrue it each month until the bill comes.
- Coding the bill to the liability. AP codes the invoice to accrued liabilities while the accrual also reverses, so the expense disappears.
- Stale balances. Age the schedule and release, with approval, anything no longer owed.
- Confusing accruals with prepaids. An accrual is a cost incurred before payment. A cost paid before it is incurred is a prepaid asset; see our guide to prepaid expense amortization.
How to report accrued expenses
Present accrued expenses as current liabilities, usually as “Accrued expenses” or “Accrued liabilities” on a separate line from accounts payable. Interest, payroll and bonus accruals can be shown separately or described in a note, and SEC registrants must break out items above the 5 percent threshold.
On an indirect-method cash flow statement, the increase or decrease in accrued liabilities appears as an adjustment in operating activities.
How accounting systems automate accruals
QuickBooks Online. You can reverse a posted journal entry from the register, and QuickBooks dates the reversal on the first day of the following month. Intuit’s help article describes no option to schedule the reversal when you create the entry, so you reverse each one by hand.
Oracle NetSuite. A journal entry has a Reversal Date field. With Defer Entry checked, the reversal is created automatically on that date as a memorized transaction, and the reversal stays linked to the original entry. With Advanced Receiving turned on, you receive and bill purchase orders as separate transactions, so receipts awaiting a bill are visible at month end.
Sage Intacct. Recurring journal entries can be set to “Automatically reverse this journal entry,” either tied to the original entry’s date or on a separate schedule. A one-off entry can be reversed from the posted entry; the default reversal date is the next day, and a reversal cannot be undone.
Microsoft Dynamics 365 Business Central. Recurring general journals offer reversing methods (RF, RV and RB) that post a balancing entry on the next day. With Expected Cost Posting to G/L turned on, receipts that are not yet invoiced post to interim accounts, which act as the GRNI accrual. For a broader view of what these systems handle, see our article on accrual accounting automation.
How we researched this
We reviewed the pages ranking for “accrued expenses journal entry,” several of them published by spend-management vendors, and noted that few covered reversal choices, support schedules or system settings. We then read the federal regulations and FASB text cited here and each product’s own documentation on October 10, 2026. We did not test the products hands-on, and no vendor paid for or reviewed this article.
Related guides
- Accruals vs Deferrals: Journal Entries for Each Type
- Vacation Accrual Accounting: PTO Liability and Entries
- General Ledger Reconciliation: Steps, Frequency and Review
Frequently asked questions
What is the journal entry for accrued expenses?
Debit the relevant expense account and credit accrued liabilities (or a specific account such as accrued interest payable) on the last day of the period. When the invoice arrives, either reverse the accrual and post the bill normally, or clear the liability against the payment.
Do accrued expenses need to be reversed?
Not always. Reversing entries suit accruals that one vendor bill will replace, such as utilities and legal fees. Running balances such as interest and bonuses are usually adjusted to a calculated ending balance each month instead.
How do you accrue an expense when you do not have the invoice?
Estimate it from the best evidence available: the contract or PO price, a vendor confirmation of unbilled work, usage times rate, or an average of recent bills. Document the basis on your support schedule and compare it with the actual bill the following month.
Are accrued expenses the same as accounts payable?
No. Accounts payable holds amounts you have been invoiced for. Accrued expenses are costs you have incurred but not yet been billed for, and they are usually shown on a separate line in current liabilities.
When do accrued bonuses have to be paid to be deducted?
Under 26 CFR 1.404(b)-1T, bonuses paid after the 15th day of the third month following the employer’s year end are presumed to be deferred compensation. For a calendar-year company that date is March 15. Check your specific situation with a tax adviser.
Sources
Every rule and product capability in this article traces to one of these. Pages were checked on October 10, 2026. Vendor sources describe their own products.
- FASB, Concepts Statement No. 8, Chapter 4, Elements of Financial Statements, December 2021 (hosted by PwC Viewpoint). viewpoint.pwc.com
- 17 CFR 210.5-02, Regulation S-X balance sheet captions, no date shown, checked October 10, 2026. law.cornell.edu
- 26 CFR 1.461-1, General rule for taxable year of deduction, no date shown, checked October 10, 2026. law.cornell.edu
- 26 CFR 1.461-5, Recurring item exception, no date shown, checked October 10, 2026. law.cornell.edu
- 26 CFR 1.404(b)-1T, Deferred compensation plans, Q&A-2, no date shown, checked October 10, 2026. law.cornell.edu
- Intuit, Reverse or delete a journal entry in QuickBooks Online, updated August 5, 2026. quickbooks.intuit.com
- Oracle NetSuite, Reversing Journal Entries, no date shown. docs.oracle.com
- Oracle NetSuite, Receiving Orders, no date shown. docs.oracle.com
- Sage Intacct, Recurring journal entries, last modified October 8, 2026. intacct.com
- Sage Intacct, Reverse journal entries, last modified October 8, 2026. intacct.com
- Microsoft, Work with general journals (Business Central documentation source), dated April 12, 2024. github.com/MicrosoftDocs
- Microsoft, Design Details: Expected Cost Posting, last updated March 17, 2026. learn.microsoft.com
- Microsoft, Post inventory costs to the general ledger, last updated August 29, 2024. learn.microsoft.com
Sherman Hsieh
Independent analysis of enterprise software — ERP, CRM and more
