Describe how the paid-for utilities used in the business affects the three elements of the accounting equation

Accounting Dec 16, 2020

Describe how the paid-for utilities used in the business affects the three elements of the accounting equation.

Expert Solution

Paid utilities used in the business will decrease both the assets and equity while leaving the liabilities unaffected.

The proforma journal entry for this transaction is as follows:

Account	Debit	Credit
utility expense	XXX
Cash		XXX

Cash is an asset account and a credit to it decreases it. A debit on utility expense will result in a decrease in equity, particularly on retained earnings, after the closing entries are recorded.

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