What are expenses incurred in one fiscal period but not yet paid until a later fiscal period called?

The term that refers to expenses incurred in one fiscal period but not yet paid until a later fiscal period is "Accrued expenses." This concept is central to the accrual basis of accounting, which recognizes expenses when they are incurred, regardless of when the cash payment occurs.

Accrued expenses represent obligations that a company has incurred but has not yet settled with cash. For example, if a business receives a service, such as utilities or wages, in December but does not pay the invoice or payroll until January, those expenses are accrued in December. This accounting treatment ensures that financial statements accurately reflect the company's financial position and performance within the appropriate reporting period.

On the other hand, deferred expenses are costs that have been paid in advance for expenses that will be recognized as expenses in a future period. Prepaid expenses are also similar in that they represent future expenses that have been paid in advance, leading to confusion. Current liabilities, while they include accrued expenses, also encompass other financial obligations due within a year, making it a broader category not limited to just expenses incurred but unpaid.