Question

Egret Consulting immediately paid $500 cash for utilities for the current month. Given the choices below, determine the general journal entry that A. Egret Consulting will make to record this transaction.

(A) Utility expense 500
Cash 500
(B) Cash 500
Utility expense 500
(C) Cash 500
Account payable 500
(D) Utility expense 500
Account payable 500

Answer 1

(A) Utility expense 500

Cash 500

Step-by-step explanation:

When utilities have been incurred but unsettled, liability in form of accrued utilities is created for the entity. This is recognized as a debit to utilities expense and a credit to accrued utilities.

However, where cash is paid, the debit is the same but the credit entry is posted to the cash account.