A business received the utility bill for $525,and immediately paid it.What journal entry is prepared?
A)Debit Accounts Payable for $525 and credit Cash for $525.
B)Debit Utilities Payable for $525 and credit Cash for $525.
C)Debit Utilities Expense for $525 and credit Cash for $525.
D)Debit Operating Expense for $525 and credit Accounts Payable for $525.

Question

Quizplus · Accepted Answer

When a utility bill is received and immediately paid, the journal entry should include a debit to Utilities Expense for the amount of the bill ($525) and a credit to Cash for the same amount. The expense account is debited to recognize the cost of using utilities, and cash is credited to reflect the outflow of cash from the business. Choice A is incorrect because there is no balance in Accounts Payable since the bill was paid immediately. Choice B is incorrect because Utilities Payable is a liability account used to track amounts owed for utility bills, which does not apply in this scenario. Choice D is incorrect because Operating Expense is a general ledger account that is not specific enough to reflect the cost of using utilities.

A Business Received the Utility Bill for $525,and Immediately Paid