What is Accrued Liabilities?
Accrued liabilities are expenses that a business has incurred but has not yet paid or received an invoice for at the end of the accounting period. They are recognised under the accrual basis so the income statement reflects the period’s true cost.
How It Works
- Identify expenses incurred in the period but not yet invoiced — utilities, salaries, audit fees, professional services.
- Estimate the amount based on contracts, prior invoices, or service usage.
- Debit the relevant expense account and credit the accrued liabilities account.
- Reverse the entry in the next period or settle it when the invoice arrives.
- Reconcile the accrual balance monthly and write off stale accruals.
Saudi Context
Saudi entities reporting under IFRS as adopted by SOCPA must recognise accrued liabilities to comply with the accrual basis required by IAS 1. ZATCA accepts well-documented accrued expenses as deductible for tax and zakat purposes when the underlying obligation is real.
Example
Year-end electricity for SAR 18,000 is consumed in December but invoiced in January. Journal entry: debit utilities expense SAR 18,000, credit accrued liabilities SAR 18,000.