On December 31,2015 Carmack Company received a $215 utility bill for December that it will not pay until January 15.The adjusting entry needed on December 31 to accrue this expense is:
A)Debit Utilities Expense $215;credit Accounts Payable $215.
B)Debit Accounts Payable $215;credit Utilities Expense $215.
C)Debit Prepaid Utilities $215;credit Cash $215.
D)Debit Utilities Expense $215;credit Prepaid Utilities $215.
E)Debit Prepaid Utilities $215;credit Accounts Payable $215.

Question

Quizplus · Accepted Answer

The adjusting entry needed to accrue the utility expense is to debit the Utilities Expense account and credit the Accounts Payable account. This will recognize the expense in the current period and record the obligation to pay in the following period when the bill is paid. Option A is the correct choice as it debits the expense account and credits the liability account.

On December 31,2015 Carmack Company Received a $215 Utility Bill