Utilities payable are obligations that a business has to pay for services such as electricity, water, gas, and internet. These expenses are commonly incurred during the normal course of operating a business and are typically recorded in the company’s financial statements as liabilities.
In accounting terms, utilities payable usually fall under current liabilities because they are expected to be settled within a year. When a utility service is used, the company recognizes the expense and records a liability on its balance sheet until the bill is paid.
For example, if a company receives a monthly electricity bill of $500, it will record this amount in its utilities payable account. Once the payment is made, the company will reduce its cash account and eliminate the liability. This process ensures that all expenses are accurately reflected in the financial records, maintaining compliance with the accrual basis of accounting.