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On December 31, the brown company estimates the utility expense for December to be $780. The bill will not be received and paid until January. Journal entries in the books of Brown Company: date - 31 December Utility expense (Debit) $780, To Utility expense payable A/c (Credit) $780. (Being utility expense accrued and shown as liability).
All of the utility expenses are to be recorded as prices within the account; subsequently, they're to be debited within the earnings and loss account, and in the case of the accrual system of accounting, they may be charged in the income and loss account as in line with the actual intake no matter being paid to the supplier.
Utility expenses have a debit balance. Debits: A debit is an accounting transaction that will increase both an asset account like cash or a cost account like utility cost.
An adjusting entry is surely an adjustment in your books to make your financial statements greater as it should to replicate your income and prices, generally — however no longer always — on an accrual basis. Adjusting entries are made on the giving up of the accounting period. this may be at the end of the month or the end of the year.
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