What type of expense is recognized before payment is made?

Accrued expenses represent liabilities that are recognized in the accounting period in which they are incurred, regardless of whether the cash payment has been made. This aligns with the accrual basis of accounting, which dictates that expenses should be recognized when they are incurred—not when they are paid. Common examples of accrued expenses include wages payable and interest payable. By recognizing these expenses, a company ensures that its financial statements accurately reflect its financial position and performance for a specific period, even if the actual cash outflow occurs at a later date.

In contrast, prepaid expenses involve payments made in advance for goods or services to be received in the future, and deferred expenses are typically recorded as assets until they are utilized. Unearned revenue, on the other hand, pertains to funds received before the services are rendered or goods are delivered, representing a liability rather than an expense. Hence, understanding accrued expenses is vital as it directly impacts the measurement of expenses in financial reporting.