Which of the following is true about accrued expenses?

Accrued expenses represent liabilities that have been incurred but not yet paid or recorded through the normal accounting process. These expenses reflect obligations to pay for goods or services that have been received or used in the current period, even though the cash payment will occur in a future period.

For example, if a company receives services in December but doesn’t pay until January, it needs to recognize that expense in December's financial statements to accurately reflect the company's financial position and performance during that period. This ensures that the expenses are matched with the revenues they help generate, adhering to the matching principle in accounting.

This function of accrued expenses is crucial for transparency and accuracy in financial reporting, allowing users of financial statements to understand the company's obligations at the end of the accounting period.