What type of account is used for expenses that have been incurred but not yet paid?

Accrued expenses are liabilities that represent expenses that are recognized in the financial statements before they have been paid. This means that a company has incurred costs for services or goods received but has not yet disbursed cash for those costs. Accrued expenses are recorded at the end of an accounting period to ensure that the financial statements accurately reflect the company's obligations and expenses.

For example, if a company receives a utility bill for services used in December but doesn't pay the bill until January, the expense needs to be recognized in December's financial records as an accrued expense. This aligns with the accrual basis of accounting, which dictates that expenses should be matched with the revenues they help generate, regardless of when cash is exchanged.

Other options do not fit this concept as accurately: Accounts Receivable refers to amounts owed to a business by customers for goods or services delivered, while Accounts Payable refers to amounts a business owes to its suppliers for credit purchases, generally accounting for immediate or upcoming cash payments, not those incurred and unpaid. Prepaid Expenses are payments made in advance for goods or services to be received in the future, which also does not represent expenses that have been incurred.