A business receives a bill for utilities but decides to pay it next month.The business would record the receipt of the bill by:
A) Debiting Accounts Payable;Crediting Utilities Expense
B) Debiting Utilities Expense;Crediting Accounts Receivable
C) Debiting Utilities Expense;Crediting Accounts Payable
D) Debiting Utilities Expense;Crediting Cash

Question

Quizplus · Accepted Answer

When a business receives a bill for utilities but decides to pay it next month, the bill should be recorded as a liability, which means crediting Accounts Payable. At the same time, the expense should also be recognized, which means debiting Utilities Expense. Therefore, the best choice is to debit Utilities Expense and credit Accounts Payable. Option D (debiting Utilities Expense and crediting Cash) is not appropriate because the payment has not been made yet. Option A (debiting Accounts Payable and crediting Utilities Expense) is incorrect because it reverses the debit and credit accounts.

A Business Receives a Bill for Utilities but Decides to Pay