Accounting Question: Telephone Bill Expense
Dr. Peabody recorded an $82 telephone bill that he will pay within thirty days. Which of the following statements is correct?
A. Telephone expense is debited $82; accounts payable is credited $82.
B. Telephone expense is debited $82; cash is credited $82.
C. Telephone expense is debited $82; accounts payable is debited $82.
D. Telephone expense is credited $82; accounts payable is debited $82.
Answer:
A. Telephone expense is debited $82; accounts payable is credited $82.
Explanation:
Mr. Peabody has incurred a debt of $82 on telephone expenses. His expenses have increased by $82, and his debts (liabilities) have also increased by $82.
An increase in expenses is recorded by debiting the relevant expense account. Mr. Peabody will debit the telephone expense account by $82.
Liabilities have increased by $82. An increase in liabilities is recorded by crediting the liabilities account. Mr. Peabody will complete this transaction by crediting the liabilities account by $82.