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 Utilities Expense; Crediting Cash
B)Debiting Utilities Expense; Crediting Accounts Receivable
C)Debiting Utilities Expense; Crediting Accounts Payable
D)Debiting Accounts Payable; Crediting Utilities Expense

Question

Quizplus · Accepted Answer

The bill for utilities represents a liability because the business owes money to the utility company. Since the business intends to pay the bill at a later date, the credit should be to Accounts Payable. Meanwhile, the expense should be recognized when the utilities are being used, then recording should be done by debiting Utility Expense.

A Business Receives a Bill for Utilities but Decides to Pay