Answer:
(1) Paid Interest:
In this transaction, the account that should be debited would typically be the "Interest Expense" account. This is because interest expense represents the cost incurred by a business for borrowing money or utilizing credit. By debiting the Interest Expense account, you are increasing the expense, reflecting the outflow of funds for paying the interest.
The account that should be credited would typically be the "Cash" or "Bank" account. This reflects the reduction in cash or bank balance due to the payment made towards the interest.
(2) Electric Charge Paid:
In this transaction, the account that should be debited would typically be the "Utility Expense" or "Electricity Expense" account. This account represents the cost incurred by a business for using electricity. By debiting the Utility Expense account, you are increasing the expense, reflecting the outflow of funds for paying the electric charge.
The account that should be credited would typically be the "Cash" or "Bank" account. This reflects the reduction in cash or bank balance due to the payment made for the electric charge.
It's important to note that the specific accounts to be debited or credited may vary depending on the organization's chart of accounts or specific accounting practices. Consulting with an accountant or referring to the organization's accounting policies can provide the most accurate information for these transactions.
Step-by-step explanation:
In accounting, every transaction involves at least two accounts: one account is debited (increased) and another account is credited (decreased) to ensure that the accounting equation (Assets = Liabilities + Equity) remains in balance.
For the transaction "Paid Interest," the interest expense is treated as an operating expense for the business. Therefore, the account that should be debited is the "Interest Expense" account. By debiting this account, you are increasing the expense, reflecting the cost incurred by the business for borrowing money or utilizing credit.
On the other hand, the payment made to settle the interest is recorded as a decrease in cash or bank balance. Hence, the account that should be credited is typically the "Cash" or "Bank" account, reflecting the reduction in funds due to the payment made.
Regarding the transaction "Electric Charge Paid," the expense associated with electricity usage is recorded as a utility expense. Thus, the account that should be debited is usually the "Utility Expense" or "Electricity Expense" account. By debiting this account, you are increasing the expense, reflecting the outflow of funds for paying the electric charge.
Similarly, the payment made for the electric charge is considered a reduction in cash or bank balance. Therefore, the account that should be credited is typically the "Cash" or "Bank" account, indicating the decrease in funds resulting from the payment.
It's important to emphasize that the specific accounts to be debited or credited may differ depending on the organization's chart of accounts and accounting practices. It's advisable to consult with an accountant or refer to the organization's accounting policies for precise guidance on recording such transactions.