A company received a utility bill for $2,300 and decided to pay it next month due to a shortage of cash.How does this transaction affect the accounting equation?
A)Add $2,300 to Utilities Expense and add $2,300 to Cash.
B)Subtract $2,300 from Cash and add $2,300 to Accounts Payable.
C)Add $2,300 to Accounts Receivable and subtract $2,300 from Retained Earnings.
D)Add $2,300 to Accounts Payable and subtract $2,300 from Retained Earnings.

Question

Quizplus · Accepted Answer

The transaction increases Accounts Payable because the bill is not paid immediately, creating a liability. It also increases Utilities Expense, which decreases Retained Earnings, reflecting the expense incurred by the company.

A Company Received a Utility Bill for $2,300 and Decided