At year-end, electricity consumed but not yet paid is recorded by which entry?
Correct answer: A. Debit electricity expense and credit accrued electricity
- A. Debit electricity expense and credit accrued electricity
- B. Debit accrued electricity and credit electricity expense
- C. Debit electricity expense and credit bank
- D. Debit bank and credit accrued electricity
Explanation
An accrued expense has been incurred in the current period but remains unpaid. The expense is debited to match it with current-period revenue, while the accrual is credited as a current liability.
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About Accruals, Prepayments and Provisions
Accruals and prepayments adjust income and expenses to the accounting period in which they are earned or incurred, following the matching principle. Provisions recognise expected obligations or losses when their amount or timing is uncertain, which distinguishes them from ordinary accruals and from general reserves.
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