And it also doesn’t need to determine whether the recorded expense/accounts payable is bigger or smaller than the cash payment to decide if they need to debit or credit the utilities expense account. It doesn’t need to calculate the difference between the recorded expense/accounts payable and the cash payment. The company only needs to reverse the old entry and post the new expense following the new invoice. In practice, the company usually uses the payment journal entry with the reversing entry as it is simpler and easier. The amount of the accounts payable in this journal entry is the amount that the company recorded previously for the accrued utilities expense. If the recorded expense or accounts payable is bigger than the cash payment Account Debit Credit Accounts payable 000 Utilities expense 000 Cash 000 If the recorded expense or accounts payable is smaller than the cash payment Account Debit Credit Accounts payable 000 Utilities expense 000 Cash 000 Likewise, the company can make the journal entry for the payment of utilities expense without reversing entry as below: And then it can record the discrepancy in the debit or credit side of uttilites expense account. Though, in this case, it needs to determine the difference of amount between the recorded expense/accounts payable and cash payment. Payment of utilities expense Account Debit Credit Utilities expense 000 Cash 000 Payment of utilities expense without reversing entryĪlternatively, the company can choose to make only one journal entry at the time of payment of utilities expense without the reversing entry. Reversing old entry Account Debit Credit Accounts payable 000 Utilities expense 000 Likewise, the company can make the payment utilities expense journal entry with the reversing entry as below:
When the company uses the previous utility invoice to record the current period utilities expense, it usually reverses the journal entry of utilities expense at the time of payment after receiving the actual invoice. Payment of utilities expense with reversing entry Only later, when the company receives the invoice from the utility supplier, does it record the actual amount in the accounting record with the payment made to the utility supplier. When the company only receives the invoice of utility use at the beginning of the next period, it usually uses the amount in the last period utility invoice to record the utilities expense in the above journal entry. Account Debit Credit Utilities expense 000 Accounts payable 000 The company can make the utilities expense journal entry by debiting the utilities expense account and crediting the accounts payable at the period-end adjusting entry. Utilities expense journal entry without current period invoice This practice is common for the utilities expense as many companies usually only receive the current month invoice of the utility usage in a few days after the period end adjusting entry. If the company has not received the utility invoice from the supplier at the period end adjusting, it can use the previous period invoice to make the journal entry for utilities expense if the discrepancy from the current period is estimated to be immaterial, based on past experiences. Likewise, under the accrual basis of accounting, the company needs to make the utilities expense journal entry at the period end adjusting entry regardless it has received the invoice for the current period utility usage or not. In accounting, utilities expense is the cost for using the utilities during the period.
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