How are accrued expenses classified in financial statements?

Accrued expenses are classified as liabilities on the Statement of Financial Position (Balance Sheet). This reflects obligations that a company owes to others for services or goods that have been consumed but not yet paid for by the end of the accounting period. By recognizing these expenses, a company ensures that its financial statements accurately reflect its financial position, highlighting current liabilities that will need to be settled in the future.

While accrued expenses do affect the Statement of Profit and Loss (or Income Statement) since they are reflected as an expense when incurred, the most specific classification regarding the balance sheet is that they are liabilities. Hence, they are primarily associated with the Statement of Financial Position, reinforcing the importance of presenting a complete picture of the company's financial obligations at any point in time.

Other options suggest that accrued expenses are only reflected in the profit and loss aspect of the financial statements, which does not capture the entirety of their classification on the balance sheet where they exist as a current liability.