Final answer:
When a business receives a utility bill and decides to pay later, the 'Utilities Expense' is debited and 'Accounts Payable' is credited.
Step-by-step explanation:
When a business receives a bill for utilities expense but decides to pay it later, the two accounts that are affected are Utilities Expense and Accounts Payable. The Utilities Expense account is a temporary account that will eventually be closed to Retained Earnings at the end of the period and is debited to record the incurrence of the utility expense. The Accounts Payable account is a liability account that is credited to represent the obligation to pay the bill at a later date.
The journal entry to record this transaction would look something like this:
- Utilities Expense (Debit)
- Accounts Payable (Credit)
This journal entry will increase the utility expense on the income statement and the liability on the balance sheet.