Accrued Expenses vs. Accounts Payable: Where an Unbilled Cost Belongs at Month-End

Accrued expenses and accounts payable are both current liabilities for costs a business has already incurred. The difference is the invoice. Accounts payable holds amounts billed by a vendor, while accrued expenses hold costs incurred before any invoice arrives.

That distinction usually comes up at a specific moment. The goods arrived last week, or the contractor worked all month, there's no invoice yet, and the books close Friday. You need to know where the cost goes now and how to keep it from being booked twice when the invoice finally shows up.

Key Takeaways

• Accounts payable records costs a vendor has invoiced. Accrued expenses record costs incurred but not yet invoiced, such as wages earned, interest owed, or services delivered.

• Both are current liabilities, but balance sheet rules keep trade payables on their own line, while accrued items sit in other current liabilities.

• Some accruals are estimates, but others, like payroll for days worked, are exact. The missing invoice is what defines an accrual.

• The goods received but not invoiced (GRNI) accrual is the one AP owns, and it should reverse on the first day of the next period.

• Most month-end accruals exist because invoices weren't captured in time, so faster invoice capture shrinks the accrual list.

What is the difference between accrued expenses and accounts payable?

Accounts payable is a liability for goods or services a vendor has billed. Accrued expenses are liabilities for costs the business has incurred but hasn't been billed for yet. Both are current liabilities, and the trigger that separates them is whether the invoice has arrived.

Both belong in current liabilities because both will be settled within the year, usually within weeks. Under the accrual method, the expense belongs in the period the cost was incurred, whichever liability holds it. IRS Publication 538 describes the test as all events having occurred that fix the fact of the liability, the amount being determinable with reasonable accuracy, and economic performance having occurred. The invoice is paperwork that arrives afterward. If you're still settling the basic framework, the differences between accrual and cash accounting explain why the timing works this way.

What counts as an accrued expense?

An accrued expense is any cost the business has incurred in the period without receiving an invoice. Common examples include wages earned but not yet paid, utilities used, interest on a note, and services delivered but not yet billed.

Some of these are estimates and some aren't. Accrued payroll for the last four days of the month is exact, because you know who worked and what they earn. Accrued interest on a fixed-rate note is exact too. A month of electricity before the bill arrives, or a consultant's hours before they submit a timesheet, may need an estimate. Treating every accrual as a guess is a common mistake, and it leads teams to skip exact accruals that should be booked.

When does a cost belong in accounts payable instead?

A cost belongs in accounts payable once the vendor's invoice has been received and approved. At that point the obligation is documented and the amount is known, so it posts to AP against the vendor.

For purchased goods, that usually means the invoice has been matched to a purchase order and receipt through three-way matching. The PO shows what was ordered. The receipt shows what arrived, and the invoice shows what the vendor is charging for it. Once all three agree, the invoice posts as a bill and becomes part of the accounts payable process. The distinction between a purchase order and an invoice matters here, because a PO alone creates no liability.

How do you decide whether to accrue or book to AP at month-end?

Book a cost to accounts payable if you have the vendor's invoice by close. Accrue it if the cost was incurred in the period and the invoice hasn't arrived. A few rules make the call consistent from month to month:

• Book to AP when the invoice is in hand, approved, and dated in the period.

• Accrue when goods were received or services delivered in the period and no invoice exists yet.

• Accrue at the PO and receipt value when both exist, and estimate only when they don't.

• Reverse every accrual on the first day of the next period, without exception.

• Skip accruals below a written materiality threshold.

That last rule deserves care. A $150 courier bill that arrives on the 3rd of the next month isn't worth an accrual, a reversal, and a review at most mid-market companies. Set the threshold in writing with your auditors, apply it every month, and resist deciding it item by item during close week, when the pressure always pushes toward skipping more than you should.

What is a received-not-invoiced (GRNI) accrual?

A GRNI accrual records goods received against a purchase order before the vendor's invoice arrives. It's the accrual AP owns, because the receiving record and the PO price drive the amount, and the AP subledger clears it when the invoice posts.

Most ERPs, including NetSuite, Sage Intacct, Business Central, and Acumatica, can generate a GRNI report from open receipts. The accrual sits in accrued liabilities, or in a dedicated GRNI account close to AP. It's still an accrued liability, and it shouldn't be treated as a separate class. An AP accrual of this kind is the most mechanical accrual on the close checklist, which also makes it the easiest one to automate. Corpay's ERP integrations include NetSuite and Sage Intacct, so invoices approved before cutoff reach the ledger as payables instead of estimates.

What happens when the invoice arrives after the close?

When the invoice arrives after the close, the accrual is reversed on the first day of the new period, and the invoice posts to AP as normal. The reversal cancels the estimate, so the expense isn't counted twice.

Take $18,000 of consulting work delivered in March, with the invoice arriving April 9:

When the invoice posts on April 9, it debits consulting expense and credits accounts payable. April's net expense is zero, because the reversal offset the invoice, and March carries the cost where it belongs. If the invoice comes in at a different amount, the difference lands in April, which is why accruing at PO value beats a rough guess. The journal entries for invoices, payments, and card payments follow the same double-entry logic.

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How do accrued expenses and accounts payable show up on the financial statements?

Accounts payable appears on the balance sheet as its own current liability line, and accrued expenses sit in accrued or other current liabilities. The income statement shows the expense in the period incurred either way. On the cash flow statement, increases in both add back to cash from operating activities.

U.S. public companies follow SEC Regulation S-X, Rule 5-02. Caption 19, "Accounts and notes payable," separates amounts owed to trade creditors from amounts owed to banks. Caption 20, "Other current liabilities," is where accrued items such as accrued payrolls and accrued interest go. FASB's Liabilities topic, ASC 405, governs recognition itself.

The scale of both lines is large. According to the U.S. Census Bureau's Quarterly Financial Report for the second quarter of 2026, U.S. manufacturing corporations carried $952.6 billion in trade accounts and trade notes payable at the end of the quarter, against $1.455 trillion in all other current liabilities, a line that includes accrued expenses, and $2.991 trillion in total current liabilities. By our calculation, trade payables were about 32% of current liabilities. The trade-payables line rose from $844.1 billion a year earlier, about 12.8% by our calculation.

Follow the consulting example across the three statements. March's income statement carries the $18,000 expense. March's balance sheet shows it as an accrued liability, and the cash flow statement adds the increase back to operating cash because no cash left. In April the liability moves to AP, and in May, when the vendor is paid, cash finally drops.

That movement through AP is where working capital lives. According to The Hackett Group's 2026 North American Working Capital Survey, the 1,000 largest North American nonfinancial public companies carry a record $1.94 trillion working capital opportunity, $548 billion of it in payables. Days payable outstanding improved 2.9 days, and the cash conversion cycle fell 0.2 days to 38.4 days. Accruals don't count toward DPO in most calculations, so a liability stuck in accruals instead of AP can quietly distort the number.

Why do auditors look hard at accruals?

Auditors look hard at accruals because unrecorded liabilities understate expenses and flatter results. They test cutoff, search for unrecorded liabilities, and review payments made after period end to find costs that belonged in the prior period.

The subsequent-disbursements review is the one that catches most teams. An auditor pulls the first few weeks of payments after year-end, opens each invoice, and checks the service or delivery date. An invoice for December work, paid in January, with no December accrual, is a finding. A clean accounts payable reconciliation and a documented GRNI report make that review short.

What goes wrong with accruals, and how do teams fix it?

Accruals go wrong in three common ways:

• A reversal gets missed, and the expense doubles when the invoice posts.

• Stale accruals linger for months because nobody owns clearing them.

• Accruals get booked for invoices that were already sitting in someone's inbox.

The last one is the most frustrating, and the most common. I've watched a close team spend a full afternoon estimating a dozen accruals, only to find on day three that eight of those invoices had arrived before month-end and were waiting in a shared mailbox nobody checked during close. Every one of those estimates then had to be reversed and replaced with the real invoice. The accrual list was mostly a record of invoices nobody had opened.

Document hunting makes this worse. According to Yooz's 2025 Leaders vs. Ledger survey of 600 U.S. finance professionals, 69% of finance leaders say their teams spend at least four hours a week tracking down documents and approvals. Missing reversals show up later in the accounts payable aging report as balances that won't tie, and stale accruals surface when nobody can say what an old balance is for.

How does faster invoice capture shrink the accrual list?

Faster invoice capture shrinks the accrual list because every invoice captured, coded, and approved before close posts to AP as a real liability instead of an estimate. Fewer missing invoices mean fewer accruals, fewer reversals, and fewer true-ups the following month.

The gains from automated capture are measurable. In The Hackett Group's Digital World Class Matrix for Accounts Payable, which evaluated 15 AP software providers against 17 criteria, AP solutions averaged 60% touchless invoice processing. Companies at 30% or more touchless averaged 3.5 times higher AP productivity, and average AP cycle times fell 59%. Those figures come from vendor evaluations, so treat them as directional, but the mechanism is sound. An invoice that never waits in an inbox never needs an accrual. Comparing balances through vendor statement reconciliation catches the invoices that still slip through. Corpay's fully managed AP captures invoices and routes them for approval, so fewer arrive too late to book.

Which accruals should never be automated away?

Judgment accruals should stay with the controller, because each needs someone who understands the facts to set the number. Typical examples include:

• Legal fees for a matter in progress

• Bonus accruals

• Disputed vendor amounts

• Estimates for services with no PO

How far to push automation into the gray area is an open question. A recurring monthly service accrual based on a contract looks automatable until the contract changes mid-quarter and the system keeps booking the old amount. My rule is to automate accruals that come from documents, like receipts and POs, and keep accruals that come from conversations with a person.

How Corpay helps cut month-end accruals

The biggest accrual problem is the one from the shared mailbox, where invoices that arrived on time still turn into estimates because nobody captured them before close. That's an AP process problem, and it's the one Corpay addresses directly.

Corpay AP automation captures and routes invoices through approval with invoice automation, so more liabilities land in AP as real invoices before the books close. As a fully managed AP service, Corpay then pays each vendor by virtual card, ACH, or check from one workflow, using single-use virtual cards for card payments. Corpay connects through 100+ ERP integrations, including NetSuite, Sage Intacct, Business Central, and Acumatica, and AP teams save about 40% of the time they spend on processing. Most Corpay customers are live in weeks.

Frequently Asked Questions

Is accrued expense the same as accounts payable?

No. Both are current liabilities for costs already incurred, but accounts payable covers amounts a vendor has invoiced, while accrued expenses cover costs incurred before an invoice arrives. When the invoice posts, the accrual reverses and the liability moves to AP.

What are examples of accrued expenses?

Common accrued expenses include wages earned but not yet paid, interest owed on a loan, utilities used before the bill arrives, and goods or services received before the vendor invoices. Bonuses, taxes, and legal fees in progress are often accrued at period end as well.

Are accrued expenses a current liability?

Yes. Accrued expenses are current liabilities because they're usually settled within weeks or months. On a public company's balance sheet they appear in accrued or other current liabilities, separate from trade accounts payable.

Do accrued expenses reverse automatically?

Only if you set them up that way. Most ERPs let you mark a journal entry as auto-reversing on the first day of the next period. Manual accruals without that setting must be reversed by hand, and a missed reversal doubles the expense when the invoice posts.

What is the difference between accounts payable and expenses?

Accounts payable is a liability, the amount owed to vendors. An expense is a cost recorded on the income statement. Recording a vendor invoice usually creates both at once, debiting an expense and crediting accounts payable, but paying the invoice reduces AP without creating a new expense. The broader vocabulary appears in this accounts payable glossary.

David Luther

Product Marketing Program Manager

David Luther, MBA is a product marketing program manager with years of experience in commercial banking, finance, and technology sectors, with research and writing appearing in financial publications.

AP Automation

Procure-to-Pay