Which statement correctly distinguishes accrued expenses from accounts payable?

• A. Accrued expenses are recorded only when paid.
• B. Accounts payable arise from accruals that are not yet billed.
• C. Accrued expenses are incurred but not yet paid; accounts payable arise from purchases on credit and are recorded when invoiced.
• D. They are the same thing.

Answer: (C)

Accrued expenses arise when services or goods have been used in the period but haven’t yet been billed or paid, so the liability is recognized to match the expense with the period’s activity. Think of wages earned by employees that won’t be paid until the next period or utilities used this month but billed later. These are recorded as accruals even though no invoice has arrived yet.

Accounts payable come from purchases made on credit where an invoice is received for the goods or services, creating a liability at the time the invoice is recorded (often when the goods/services are received). It reflects amounts billed by suppliers that you owe.

So, accrued expenses are incurred but not yet paid, while accounts payable arise from invoiced purchases on credit.