Income Statement Utilities Expense

A utilities provider may require a deposit from a business prior to providing service.

Income statement utilities expense. Total utilities expenses telephone bills gas bill electricity expenses water charges 1 000 500 1 100 350 2 950. Under the accrual basis of accounting this account reports the cost of the electricity heat sewer and water used during the period indicated in the heading of the income statement. An expense such as rent utilities insurance goes on the income statement because it is an expense that occurs to operate the business and it affects the net income of said business. The expense reduces the net income retained earnings and therefore owners equity in the business.

In this case the balance sheet liabilities accounts payable have been increased by 500 and the income statement has a utilities expense of 500. If so the business records this deposit as an asset on its balance sheet rather than charging it to expense.