Accrued expense
In one sentenceAn expense the business benefited from during the period but has not paid or received an invoice for yet; it is recorded as a liability at the end of the period.
Simply put
You used electricity in December, but the bill arrives in January. For December's profit to be correct, you record the expense in December with a liability against it.
Examples: end-of-month salaries not yet paid, electricity and water, and loan interest. Reversing entries make it easier to record the invoice when it arrives.
Worked example
A car workshop estimates its December electricity bill at 4,000 SAR, which arrives in January.
Dr: Electricity expense (debit)4,000
Cr: Accrued expenses (credit)4,000
December expense recorded before the bill arrives4,000 SAR
Don't confuse it with
Prepaid expenseYou paid before you benefited, so it is an asset.
Accounts payableAmounts owed to suppliers under invoices received, while an accrued expense may not have its invoice yet.