Electricity Expense Journal Entry

Electricity expenses are a part of the operating expenses for a business. These expenses need to be recorded accurately to reflect the cost incurred for the consumption of electricity.

Scenario 1: Recording Electricity Expense When the Bill is Received

The business receives an electricity bill of ₹15,000 for the month.

Journal Entry to Record the Electricity Expense:

Particulars	Debit (₹)	Credit (₹)
Electricity Expense A/c	15,000
To Accounts Payable A/c		15,000
(Being electricity bill received for the month)

Explanation:

1. Electricity Expense A/c is debited to record the expense incurred.
2. Accounts Payable A/c is credited to reflect the liability to pay the electricity bill.

Scenario 2: Payment of the Electricity Bill

The business pays the electricity bill of ₹15,000.

Journal Entry to Record the Payment of the Electricity Bill:

Particulars	Debit (₹)	Credit (₹)
Accounts Payable A/c	15,000
To Cash/Bank A/c		15,000
(Being payment made for the electricity bill)

Explanation:

1. Accounts Payable A/c is debited to reduce the liability.
2. Cash/Bank A/c is credited to reflect the cash outflow for paying the bill.

Scenario 3: Accrual of Electricity Expense

At the end of the month, if the electricity bill is not yet received but the expense needs to be accrued, let's assume an estimated electricity expense of ₹16,000.

Journal Entry to Accrue Electricity Expense:

Particulars	Debit (₹)	Credit (₹)
Electricity Expense A/c	16,000
To Accrued Expenses A/c		16,000
(Being accrual of estimated electricity expense)

Explanation:

1. Electricity Expense A/c is debited to record the estimated expense.
2. Accrued Expenses A/c is credited to reflect the liability.

Scenario 4: Adjustment After Receiving the Actual Bill

If the actual bill received later is ₹15,500, adjust the accrued expense.

Journal Entry to Adjust the Accrued Expense:

Particulars	Debit (₹)	Credit (₹)
Accrued Expenses A/c	16,000
To Electricity Expense A/c		16,000
(Being reversal of accrued electricity expense)

Journal Entry to Record the Actual Expense:

Particulars	Debit (₹)	Credit (₹)
Electricity Expense A/c	15,500
To Accounts Payable A/c		15,500
(Being electricity bill received)

Summary

1. Recording Electricity Expense: When the bill is received.
2. Paying Electricity Bill: Reflecting the cash outflow.
3. Accrual of Electricity Expense: Estimating the expense at month-end.
4. Adjustment of Accrued Expense: Correcting the estimate with the actual bill amount.