Question

The accounting transaction to record payment of the heating bill would include a:

a) Debit to Accounts Receivable
b) Debit to Cash
c) Credit to Accounts Payable
d) Debit to Utilities Expense

Answer 1

The accounting transaction for paying a heating bill involves debiting Utilities Expense and crediting either Cash or Accounts Payable, depending on the method of payment.

Step-by-step explanation:

The accounting transaction to record the payment of the heating bill would include a debit to Utilities Expense to recognize the expense incurred. This is because when an expense increases, we debit that account following the rules of double-entry bookkeeping. On the other side of the transaction, we would have a credit to Cash or Accounts Payable, depending on whether the payment is made in cash at the moment or on credit. If the bill is paid immediately with cash, the Cash account decreases and hence is credited. If the bill is payable, it means the company previously recorded the expense when it was incurred and created a liability (Accounts Payable); when paying it off, the credit reduces this liability.

Example:

• If paid in cash: Debit Utilities Expense, Credit Cash.
• If paying on an account (payable): Debit Utilities Expense, Credit Accounts Payable.