What is Incurred?

Definition: Incurred, in accounting terms, means the moment in which an expenses has occurred or a transaction has taken place and must be recorded. In other words, it is the exact date in which a financial operation has happened and must be recognized in the accounting system.

What Does Incurred Mean?

What is the definition of incurred? The term incurred is particularly important concept in generally accepted accounting principles under the accrual basis of accounting. This concept states that all transactions, regardless of their nature, must be recognized (recorded) when they are incurred, regardless of the date in which they were paid for.

This means that, in order to keep accounting records adequately updated and truly reliable, accountants must record each financial transaction on the date of their occurrence and not the date in which they were actually paid for. On the other hand, in the case of revenues, they must be recorded when the invoice is issued.

To illustrate this let’s have a look at the following example.


Fast-n-cheap Cleaners LLC is a company that provides dry cleaning services. The company recently bought a new dryer for $5,000. The bookkeeper received the invoice for the purchase alone with the receipt of the equipment on August 18. The invoice was issued on August 16th, and Fast-n-cheap will pay it on September 15. The bookkeeper isn’t sure which date the transaction show be recorded.

The question is when did the company incur this expense?

In this scenario, the payment date is not the date in which the transaction occurred. The invoice issue date is not either. The expense was incurred when FNC took possession of the dryer. They incurred an expense because they now owe the dryer company for the piece of equipment. This means that, the transaction must be recorded on August 18.

Summary Definition

Define Incurred: Incur means to use a resource and record it in an accounting system.

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