What Is the Difference Between Accounts Payable and Accrued Expenses?

[amberbenton]

I’m trying to better understand liabilities in accounting. Both accounts payable and accrued expenses seem similar since they represent money a business owes. However, I’m confused about when to record each one and what makes them different in practice. Could someone explain the difference with a simple example?

 

[rajat]

Accounts payable can be defined as short term debts that are owed to suppliers of goods or services received and invoiced. Expenses that are due but have not been billed or paid, e.g. wages or utility expenses, are considered as liabilities. The major distinction is timing, accounts payable is a matter of received invoices whereas accrued expenses lack invoices.

 

[johnsmith]

Accounts Payable vs. Accrued Expenses:

• Accounts Payable (AP): Money you owe based on an invoice you’ve already received (e.g., supplier bill due next month).
• Accrued Expenses: Costs you’ve incurred but haven’t been billed for yet (e.g., utilities used this month but the invoice comes later).

So AP = bill received, not paid yet.
Accrued = expense happened, bill not received yet.

In practice, businesses track both to keep financials accurate. Many accountants and bookkeeping teams, including firms like Ledger Labs, help businesses set these up correctly so reports reflect real liabilities, not just paid bills.

 

[vitalik]

Both the accounts payable and accrued expenses are liabilities but they are different in terms of time and documentation. Accounts payable can be defined as bills that have been received by the company as suppliers have supplied goods or services which are already delivered, but not paid. Accrued expenses are expenses that are still incurred but not billed or paid i.e. wage or utilities.