On September 30,Forester Inc.receives its electric bill for the month of September in the amount of $300.The accountant sets the bill aside since it is not due until October 25.How would Forester record this transaction?

Question

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Forester Inc. has received its electric bill for the month of September but the payment is not due until October 25. Therefore, it should record this transaction by debiting Utilities Expense for $300 and crediting Accounts Payable for $300. This is because the company owes the amount to its utility provider and has not paid it yet. Recording it as a credit to cash or a debit to accounts payable would be incorrect since the cash has not been paid yet and the amount does not need to be immediately debited to accounts payable as it is not yet due.