Under the accrual accounting method, when a company incurs an expense, the transaction is recorded as an accounts payable liability on the balance sheet and as an expense on the income statement.

Accountants record these expenses as a current liability on the balance sheet as they are accrued. As the company pays for them, they are reported as expense items on the income statement.

An accrual has occurred but has not yet been paid for. This can include work or services that have been completed and ...