What are accrued liabilities?

Accrued liabilities represent amounts that a company owes for goods or services that have been received but not yet paid for. This accounting concept is critical because it follows the accrual basis of accounting, which recognizes expenses when they are incurred, rather than when they are paid.

In this context, accrued liabilities might include salaries that employees have earned but have not yet been paid, interest that has accrued on loans but has not been disbursed, and taxes that are owed but have not yet been remitted. Recognizing these liabilities ensures that the financial statements provide an accurate picture of the company's current obligations and financial position.

This understanding distinguishes accrued liabilities from other options, such as fully paid-off liabilities, which do not exist on the balance sheet, long-term financial obligations that have different characteristics in terms of time frame and accounting treatment, and advance payments made by customers, which are considered liabilities as well but represent amounts received before services are rendered or goods delivered, rather than expenses incurred.