Question

Received a telephone bill of $110 for the current month. The journal entry to record the transaction is:

Select one:

a. debit, telephone payable $110 and credit, telephone expense $110.

b. debit, telephone expense $110 and credit, telephone payable $110.

c. debit, telephone expense $110and credit, cash $110.

d. debit, telephone payable $110 and credit, cash $110.

Answer 1

SoL:

The correct option for the journal entry to be recorded for telephone bill payable (to be paid) is

Option b. debit, telephone expense $110 and credit telephone payable $110.

That is the correct entry is Telephone expense a/c - Dr. $110

To Telephone bill payable a/c - Cr $110   

The reason for the correct option b is as follows:

Telephone charges is an expense and the telephone bill payable is a liability.

So as per the Accounting Rule of double entry Debit increase in expense and Credit Increase in liability.

So, when telephone charges are unpaid, expense account is debited and unpaid liability of telephone bill payable is crediited.

The reasons for the other incorrect options are as follows:

Option a is incorrect because increase in liability should not be debited and increase in expense should not be credited.

Option c is incorrect because even though expense is debited cash does not decrease as the telephone bill is not yet paid. So cash a/c should not be credited

Option d is incorrect because increase in liablity should not be debited and cash should not be credited as the telephone bill is unpaid and cash does not decrease.