What are accrued expenses?

Accrued expenses represent liabilities that a business has incurred for services it has received or goods delivered but has not yet paid for. This means that the company has a legal obligation to make a payment in the future, reflecting an expense that has already been recognized in the financial statements, even though the cash has not yet been disbursed.

This accounting treatment ensures that expenses are matched to the revenues they help generate, adhering to the accrual basis of accounting. By recording accrued expenses, a business accurately reflects its financial position, acknowledging expenses on the income statement when they occur, not when cash is actually paid.

The other options describe different financial concepts, such as assets pending payment or upcoming fund allocations, which do not align with the definition of accrued expenses.