Question

On December 31, 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:
1. Debit Utilities Expense $215; credit Accounts Payable $215.
2. Debit Accounts Payable $215; credit Utilities Expense $215.
3. Debit Prepaid Utilities $215; credit Cash $215.
4. Debit Utilities Expense $215; credit Prepaid Utilities $215.
5. Debit Prepaid Utilities $215; credit Accounts Payable $215.

Answer 1

Answer:

1. Debit Utilities Expense $215; credit Accounts Payable $215.

Explanation:

The adjusting entry is as follows

On December 31

Utilities Expense A/c Dr $215

       To Accounts Payable A/c $215

(Being the accrued utilities expense is recorded)

Since the utility is an expense so it would be debited to the utility expense and the payment is not made till yet that would become a liability so we credited the account payable