When are accrued expenses recorded in relation to cash payment?

Accrued expenses are recorded before the cash payment is made. This accounting practice arises from the accrual basis of accounting, which dictates that expenses should be recognized in the period they are incurred, regardless of when the cash payment occurs.

For example, if a company owes wages to employees for work performed in one accounting period but does not pay them until the following period, the company must record the wages as an accrued expense in the first period. This entry ensures that the financial statements reflect the true expenses incurred during that period, matching the expenses with the related revenues, which is a key principle of accrual accounting.

This approach helps maintain accurate financial reporting and provides a clearer picture of a company's financial obligations at a given time. Thus, recording accrued expenses before payment aligns with the time period when the services were rendered or the liabilities were incurred, showcasing the true financial status of the business.