Unpaid operating expenses at year-end are classified as:

Unpaid operating expenses at year-end are considered accrued expenses in current liabilities. This classification is grounded in the accrual accounting principle, which dictates that expenses should be recognized in the period they are incurred, regardless of when the cash payment is made. When a company incurs operating expenses but has not yet paid them by the end of the accounting period, those expenses create a liability on the balance sheet because the company has an obligation to pay those amounts in the future.

By recognizing unpaid operating expenses as accrued expenses, businesses accurately reflect their financial position. This provides stakeholders with a clearer picture of the company’s obligations and cash flows. Current liabilities are made up of obligations that are due within one year, aligning well with the nature of unpaid operating expenses.

Other classifications, such as accounts receivable or short-term investments, do not apply since those relate to assets, while unpaid expenses do not represent future economic benefits in the same manner. Operating expenses when paid would only recognize those expenses at the point of cash outflow, which would not align with the principle of accrual accounting that is relevant here. Thus, classifying unpaid operating expenses as accrued expenses in current liabilities is the correct and logical approach.