Able Graphics received a $400 utility bill for the current month's electricity. It is not due until the end of the next month which is when they intend to pay it. Which of the following general journal entries will Able Graphics make to record this transaction?
A) $\begin{array} { | l | r | r | }
\hline \text { Utilities Experise } & 400 & \
\hline \text { Cash } & & 400 \
\hline
\end{array}$
B) $\begin{array} { | l | r | r | }
\hline \text { Cash } & 400 & \
\hline \text { Utilities Expense } & & 400 \
\hline
\end{array}$
C) $\begin{array} { | l | r | r | }
\hline \text { Utilities Experise } & 400 & \
\hline \text { Accounts Payable } & & 400 \
\hline
\end{array}$
D) $\begin{array} { | l | r | r | }
\hline \text { Accounts Payable } & 400 & \
\hline \text { Utilities Expense } & & 400 \
\hline
\end{array}$
E) $\begin{array} { | l | r | r | }
\hline \text { No jourial entry is required } & \quad\quad\quad\quad\quad& \
\hline \text { } & & \quad\quad\quad\quad\quad\
\hline
\end{array}$

Question

Able Graphics received a $400 utility bill for the current month's electricity. It is not due until the end of the next month which is when they intend to pay it. Which of the following general journal entries will Able Graphics make to record this transaction?
A) $\begin{array} { | l | r | r | } 
\hline \text { Utilities Experise } & 400 & \
\hline \text { Cash } & & 400 \
\hline
\end{array}$
B) $\begin{array} { | l | r | r | } 
\hline \text { Cash } & 400 & \
\hline \text { Utilities Expense } & & 400 \
\hline
\end{array}$
C) $\begin{array} { | l | r | r | } 
\hline \text { Utilities Experise } & 400 & \
\hline \text { Accounts Payable } & & 400 \
\hline
\end{array}$
D) $\begin{array} { | l | r | r | } 
\hline \text { Accounts Payable } & 400 & \
\hline \text { Utilities Expense } & & 400 \
\hline
\end{array}$
E) $\begin{array} { | l | r | r | } 
\hline \text { No jourial entry is required } & \quad\quad\quad\quad\quad& \
\hline \text {  } & &  \quad\quad\quad\quad\quad\
\hline
\end{array}$

Quizplus · Accepted Answer

Since the bill is not due until the end of the next month, Able Graphics has not yet paid for the electricity they used. Therefore, the appropriate journal entry is to debit Utilities Expense and credit Accounts Payable. This recognizes the expense in the current period and creates a liability to pay for it in the next period when the bill is due. Choice A is incorrect because it credits cash, but Able Graphics has not yet paid for the utility bill. Choice B is incorrect because it debits cash, but Able Graphics has not yet paid for the utility bill. Choice D is incorrect because it credits the wrong account - Utilities Expense should be debited, not credited. Choice E is incorrect because Able Graphics still owes the money for the utility bill, so a journal entry is required to record the liability.

Able Graphics Received a $400 Utility Bill for the Current Utilities Experise 400 Cash 400\begin{array} { | l | r | r | } \hline \text { Utilities Experise } & 400 & \\\hline \text { Cash } & & 400 \\\hline\end{array} Utilities Experise Cash ​400​400​​

Able Graphics Received a $400 Utility Bill for the Current $\begin{array} { | l | r | r | } \hline \text { Utilities Experise } & 400 & \\\hline \text { Cash } & & 400 \\\hline\end{array}$