Question

A manufacturing company received its water bill for the month of December on December 31, 2020. The $8,000 bill represents the cost of water used during December. The bill will be paid on January 15, 2021. The adjusting entry as of December 31, 2020 will include which of the following? Question 9 options:

Credit to cash, $8,000 Credit to utilities expense, $8,000 No adjusting entry is required as the bill will be paid in January, 2021 Credit to utilities payable, $8,000

Answer 1

Credit cash 8000

Answer 2

Ans Water bill relates to the month of december which will be paid in month of January. So, following the accrual principal of Accounting which states that expenses should he recognises in the period to which it relates, an entry will be made on 31st december even if bill is not paid.

Journal entry would be made by crediting Utilities payable and related expenses will be debited.

So correct answer is credit to utilities payable$8000.