Accrued liability is a debt that has not yet been recorded in the accounts payable ledger. Liabilities refer to debts and obligations that a company has, and are subtracted from assets to determine the company’s value. Accrued liabilities can be recurring or non-recurring costs, and can remain on a balance sheet until they are paid in full.
Accrued liability is a debt that a person or business has incurred that is not yet listed in the accounts payable ledger. A liability simply refers to a debt or an obligation. Liabilities are generally, but not always, financial in nature.
When a company does a balance sheet in accounting, the company lists both its assets and its liabilities. Assets refer to things that the business owns that have value, such as inventories and funds owed to the business. Liabilities refer to the debts and obligations that a company has, such as accounts payable. To determine the value of a company, liabilities are subtracted from assets.
The balance sheet is updated periodically. Most companies update the balance sheet once a month. Some update that balance quarterly, or once every four months. Before updating the balance sheet, the company may incur liabilities. For example, a company may buy something on credit from a supplier. This purchase and the resulting debt is a liability the company has, but has not yet been recorded on the balance sheet.
Accumulated liability is the term used to refer to all purchases that occur between the time the balance sheet is updated. Liabilities are considered accrued because the money is owed, but has not yet been accounted for. Any liabilities accrued over the course of the time period—month or quarter, for example—will typically be added to the balance sheet at the same time.
An accrued liability can happen regularly, such as every month or every quarter. Recurring debts and obligations are classified as recurring accrued liabilities. These are generally budgeted and anticipated.
A business or individual may also incur irregular, non-recurring, or unexpected costs. If the company pays these costs on credit, then each is also considered an accrued liability. These are generally called non-routine accrued liabilities or infrequent accrued liabilities.
Liabilities continue to appear in accounts payable until the debt is paid in full or the liability is met. This can take a long period of time, depending on the terms of the credit agreement. Thus, an accrued liability can remain listed on a company’s balance sheet for a long period of time after the initial purchase has been made, until it is paid in full.
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