Why would you use Accrued Expense and Accounts payable at same time?

Question

They are same thing, Liability but why would you use it at same time? I don't see the logic behind it...Can someone explain with specific situation one would use both in balance sheet

Answer 1

Sure, a liability is a liability...........and with the two you mention they are both current liabilities.

Accruals are frequently used for estimating liabilities. For example, self insured insurance, contingencies for lawsuits and others.

Part of it has to do with enhanced reporting. Why would you want to lump something clearly defined (accounts payable) with an estimate?

Answer 2

Accounts payable is for things your company has received but not written the check like maybe an electric bill you got the 1st of December for November's bill you post it as a payable before you close November and will pay it later.
On the other hand you have expenses like profit sharing that you can tell you are going to have an expense but you don't have it set up to pay in accounts payable so you make a liability named profit sharing payable and might not pay it until Feburary.

Answer 3

First of all, you would never see either one on a balance sheet. They would only appear on an income statement.

Accounts Payable represents money owed to vendors, usually after they have billed you. For example, office supplies, phone bill, consultants.

Accrued Expense represents money owed for other reasons, but still connected to an expense. For example, employee wages, employee vacation leave.