What are accrued liabilities?

Accrued liabilities refer specifically to expenses that have been incurred but not yet paid by the organization. This concept is crucial in accrual accounting, where the aim is to match expenses to the revenues they help generate, regardless of when the cash transactions occur. For instance, if a company has received services or goods but hasn't settled the payment at the end of the accounting period, it must recognize that liability on the balance sheet. This practice provides a more accurate financial picture of the company's obligations and its overall financial position.

In contrast, options indicating immediate payment, long-term debts, or short-term loans do not align with the definition of accrued liabilities. Immediate payments denote current expenses settled at once, while long-term debts pertain to obligations due over several years, and short-term loans represent borrowed funds that also require repayment but do not specifically include unpaid incurred expenses. Understanding the nature of accrued liabilities helps in recognizing the timing of expenses and liabilities in financial reporting.