Incurring a utility expense with a bill to be paid later affects which accounts?

Incurring a utility expense with a bill to be paid later affects which accounts?

• A. Utilities Expense increases; Accounts Payable increases
• B. Cash decreases; Utilities Expense increases
• C. Utilities Expense decreases; Accounts Payable decreases
• D. Accounts Payable increases; Cash increases

Answer: (A)

When you incur a utility expense and will pay later, you recognize the cost now and create a liability. Utilities Expense increases to reflect the cost in the period, and Accounts Payable increases because you owe the utility company that amount. Cash isn’t affected yet since no payment has been made. The other options would require cash to decrease (payment already made) or would imply opposite effects (a decrease in expense or a cash increase) that don’t fit a bill that’s due but not paid.

When you incur a utility expense and will pay later, you recognize the cost now and create a liability. Utilities Expense increases to reflect the cost in the period, and Accounts Payable increases because you owe the utility company that amount. Cash isn’t affected yet since no payment has been made. The other options would require cash to decrease (payment already made) or would imply opposite effects (a decrease in expense or a cash increase) that don’t fit a bill that’s due but not paid.