What is the difference between accrued expenses and deferred expenses

What is the difference between accrued expenses and deferred expenses Introduction: The World of Financial Terminology Hello everyone! Welcome to our video on the intriguing world of financial terminology. Today, we'll delve into the distinctions between two commonly used terms: accrued expenses and deferred expenses. While they may sound similar, they have distinct meanings and implications. So, let's dive in! Accrued Expenses: The Present Obligations Accrued expenses refer to the costs that a company has incurred but not yet paid for. These expenses are recognized in the financial statements, even though the actual payment may happen in the future. They typically arise from services received or goods consumed during a particular accounting period. Examples of accrued expenses include salaries payable, interest payable, and taxes payable. Deferred Expenses: The Future Investments On the other hand, deferred expenses are costs that have been paid in advance but are yet to be recognized as expenses. These expenses are initially recorded as assets on the balance sheet and are gradually expensed over time as the related benefits are realized. Common examples of deferred expenses are prepaid insurance, prepaid rent, and prepaid subscriptions.