Legal Definitions - accrue

The term "accrue" has two primary meanings in legal and financial contexts:

• 1. To come into existence as an enforceable claim or right.

  In a legal sense, a claim or right "accrues" when it officially begins or becomes legally actionable. This is often a critical point for determining deadlines, such as the start of a statute of limitations (the time limit for filing a lawsuit).

  • Example 1: Product Liability

    Imagine a consumer purchases a new appliance that malfunctions and causes property damage. The consumer's right to sue the manufacturer for the damage might not accrue immediately upon purchase, but rather when the malfunction occurs and the damage is discovered. This is the point at which their legal claim "comes into existence," starting the clock for any legal deadlines.

  • Example 2: Breach of Contract

    Consider a construction company that fails to complete a building project by the agreed-upon deadline. The client's legal claim for breach of contract would typically accrue on the day the deadline passed without the work being finished. At that moment, the client has a complete and present cause of action, meaning their right to pursue legal remedies has arisen.

• 2. To accumulate periodically.

  In a financial or administrative sense, something "accrues" when it builds up or is added over a period of time, even if it hasn't been paid out or formally recorded yet.

  • Example 1: Employee Benefits

    Many employees accrue paid sick leave or vacation time. This means that for every week or month they work, they gradually accumulate a certain number of hours or days of leave. These benefits are earned and build up over time, even if the employee hasn't used them yet.

  • Example 2: Financial Interest

    When you have a loan, interest accrues on the outstanding balance. This means that interest charges are continuously added to the amount you owe over time, typically calculated daily or monthly, even if you only make payments once a month.

  • Example 3: Business Expenses

    A business might accrue utility expenses throughout the month. Even though the electricity bill isn't received until the end of the billing cycle, the cost of electricity consumption is continuously building up as the business uses power. Accountants will often record these as accrued expenses to reflect the true financial picture.