When the expenses incurred in respect of electricity and water then these expenses are booked under Electricity & Water Expenses. These type of expenses may be direct expenses or indirect expenses. If these expenses are related to production then we will treat them as direct expenses and if these expenses are relating to maintain the office then these expenses will be called as indirect expenses.

Accounting Treatment of Electricity & Water Expenses

For payment of bills in cash or by cheque:-

Debit:-   Electricity & Water Expenses A/c

Credit:-  Cash A/c

or

Bank A/c

For making the provision for outstanding bills:-

Debit:-    Electricity & Water Expenses A/c

Credit:-   Expenses Payable A/c

or

Outstanding Expenses A/c

Treatment of Electricity & Water Expenses in Final Accounts

If the electricity and water expenses are relating to production then these expenses will be shown in trading account otherwise these expenses will be shown in expenses column of profit and loss account.

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