Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 36 - No. 27)
If a company receives a utility bill at the end of the month but does not pay it until the next month, how should this be recorded under accrual accounting?
Debit Utilities Expense, Credit Cash.
Debit Utilities Expense, Credit Accounts Payable.
Debit Prepaid Utilities, Credit Cash.
Debit Accounts Payable, Credit Utilities Expense.
Explanation
Under accrual accounting, the expense is recorded when incurred, even before payment.
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