Question

Which of the following is included in the journal entry to record the use of utilities in a factory?

1) Debit Utilities Expense, Credit Cash
2) Debit Utilities Expense, Credit Accounts Payable
3) Debit Cash, Credit Utilities Expense
4) Debit Accounts Payable, Credit Utilities Expense

Answer 1

The correct journal entry to record the use of utilities in a factory is to debit Utilities Expense and credit Accounts Payable, reflecting the incurred cost that is to be paid in the future.

Step-by-step explanation:

The question asks which journal entry correctly records the use of utilities in a factory. When a company uses utilities, the cost is not necessarily paid immediately in cash; instead, the expense is often recognized first and paid later.

Therefore, the correct journal entry to record the utility expense would be a debit to Utilities Expense, which represents the cost of utilities used, and a credit to Accounts Payable, which represents the company's obligation to pay this cost in the future. This is reflected in option 2: Debit Utilities Expense, Credit Accounts Payable. When the payment is made later, the entry would then be a debit to Accounts Payable and a credit to Cash.