When a business pays cash for a cell phone bill, which two accounts are affected in the journal entry?

• A. Cash and Utilities Expense
• B. Cash and Revenue
• C. Accounts Receivable and Cash
• D. Cell Phone Equipment and Accounts Payable

Answer: (A)

Verified step by step guidance

1. Identify the nature of the transaction: The business is paying cash for a cell phone bill, which is an expense incurred for utilities (cell phone usage). This means the transaction involves an expense account and the cash account.
2. Determine the accounts affected: Since the payment is for a cell phone bill, the expense account affected is 'Utilities Expense.' The payment is made in cash, so the 'Cash' account is also affected.
3. Understand the journal entry structure: In accounting, expenses are debited because they decrease equity, and cash is credited because it decreases the asset account.
4. Write the journal entry: Debit the 'Utilities Expense' account to record the expense incurred, and credit the 'Cash' account to reflect the reduction in cash due to payment.
5. Review the options provided: The correct answer is 'Cash and Utilities Expense,' as these are the two accounts impacted by the transaction.