It's the end of the accounting period and no electric bill has been received (but the expense has been incurred); you should record an entry that
A) increases the total assets and increases the total expenses.
B) decreases the total assets and increases the total expenses.
C) increases the total liabilities and increases the total expenses.
D) decreases the total liabilities and increases the total expenses.

Question

Quizplus · Accepted Answer

This situation requires an adjusting entry to record an expense that has been incurred but not yet paid, which increases liabilities (since you now owe money for the electricity) and increases expenses (reflecting the cost of electricity used). This is in line with the accrual basis of accounting, where expenses are recognized when incurred, not necessarily when paid.

It's the End of the Accounting Period and No Electric