Question

Consumer Power bills the Diaz Company for gas used during the month of December. Until they pay their gas bill to Consumer Power, Diaz Company would consider the amount owed to be:

Answer 1

Answer: Accrual account payable

Explanation:

An account payable is a current liability whereby a company receives and utilises a good or service first and makes payment for it at a later stage. This type of transaction is made on credit.

An accrued expense is a type of current liability where the expense is recordedas a liability in the books of the company before payment has been made.

Diaz Company will record this bill as an accounts payable (accrued expense) until they physically make the payment, then it will become an expense.