What type of account are 'Accrued Expenses' classified as?

Accrued expenses are classified as a current liability because they represent expenses that have been incurred but not yet paid by the end of the accounting period. This means the company has a legal obligation to settle these expenses in the near future, typically within a year.

Current liabilities are obligations that are expected to be satisfied through the payment of cash or other current assets. Since accrued expenses will be settled within the operating cycle or one year, they fit this definition. Examples include wages payable or interest payable, which are common accrued expenses that a company must pay soon after they are incurred.

This classification helps users of financial statements to understand the company’s short-term financial obligations and assess its liquidity. Other types of accounts, such as current assets or equity, do not represent this obligation, making the classification of accrued expenses as a current liability essential for accurate financial reporting.