What is the difference between accrued expenses and accounts payable?

• A. Accrued expenses are obligations incurred but not yet billed; accounts payable are amounts due to suppliers with invoices
• B. Accrued expenses require cash immediately
• C. Accounts payable are non-current
• D. Accrued expenses are tax obligations

Answer: (A)

In accrual accounting, expenses are recognized when they are incurred, not when cash changes hands. An accrued expense happens when you’ve incurred a cost but haven’t yet received or paid an invoice for it. You record a liability for that estimated amount (for example, utilities used this month but billed next month, or wages earned but not yet paid). These appear on the balance sheet as accrued liabilities until the supplier invoice arrives and you pay.

Accounts payable, by contrast, are obligations you owe to vendors for goods or services after you’ve received an invoice. Once the bill is received, you record it as accounts payable, a current liability representing amounts due to suppliers by their due dates. When you pay, you reduce accounts payable.

So the difference is: accrued expenses are incurred costs not yet billed, while accounts payable are invoiced amounts you owe to suppliers. The other statements don’t fit because accrued expenses don’t require cash immediately, accounts payable are typically current (not non-current), and accrued expenses are not specifically tax obligations.