What do accrued expenses typically include?

Accrued expenses refer to costs that a business has incurred during a given accounting period but has not yet paid for by the end of that period. This accounting practice ensures that expenses are recognized in the period in which they are incurred, regardless of when the actual cash outflow occurs. Among various accrued expenses, unpaid salaries are a common example. Employees perform their work and earn wages, but the actual payment is often made later, creating an obligation that must be recorded as an accrued expense on the balance sheet.

The other options do not fit the definition of accrued expenses. Investments in stocks relate to the purchase of assets rather than incurred obligations, cash reserves involve available funds rather than unpaid liabilities, and the cost of goods sold encompasses expenses related to producing or selling products, which are typically recognized when sales occur rather than as accrued liabilities. This helps clarify why unpaid salaries are considered accrued expenses, as they represent a real liability owed by the business at the end of an accounting period.