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Homework answers / question archive / Describe how the paid-for utilities used in the business affects the three elements of the accounting equation

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

Accounting

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

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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.