Camilla wants her bill form to credit an account other than Accounts Payable. Which of the following is the correct advice to give her regarding standard journal entries for bills?

• A. Bills should only credit Cash, since payment is made immediately.
• B. Bills can credit any expense account, such as Rent Expense or Utilities Expense.
• C. Bills should always credit Accounts Payable, as this represents the liability to the vendor.
• D. Bills should credit a revenue account to record income.

Answer: (C)

Verified step by step guidance

1. Understand the purpose of a bill in accounting: A bill represents an obligation to pay a vendor for goods or services received. It is recorded as a liability until payment is made.
2. Review the standard journal entry for bills: When a bill is recorded, the expense account (e.g., Rent Expense, Utilities Expense) is debited to reflect the cost incurred, and Accounts Payable is credited to represent the liability owed to the vendor.
3. Clarify why Accounts Payable is credited: Accounts Payable is a liability account that tracks amounts owed to vendors. Crediting this account increases the liability, which aligns with the nature of a bill.
4. Explain why other accounts are not credited: Cash is not credited because payment is not made immediately when recording a bill. Revenue accounts are not credited because bills do not represent income. Expense accounts are debited, not credited, as they reflect costs incurred.
5. Advise Camilla: Bills should always credit Accounts Payable, as this correctly represents the liability to the vendor. This is the standard practice in financial accounting for recording bills.