Question

A bill is received for electric service; the charge for the electricity is recorded, but payment will be made later. For this transaction, identify the effect on the accounting equation. (cash method)

Answer 1

Under the cash method of accounting, the transaction of receiving an electric bill and recording the charge without immediate payment does not affect the accounting equation until actual payment is made.

Step-by-step explanation:

When a bill for electric service is received and the charge for the electricity is recorded, but payment will be made later, this will affect the accounting equation.

Specifically, under the cash method of accounting, the transaction would not be recorded until the payment is actually made. However, if this question implies using the accrual basis, an accounts payable would be recorded, increasing liabilities and expenses, but not affecting cash until the payment is made.