Question

Journalize liabilities of unknown amount. Give an example.

Answer 1

· Liabilities are ‘obligations’ that are to be paid off in future.

· Liabilities accounts have normal CREDIT balance.
They are created by crediting the account.
When these are paid off, the accounts id debited.

· Example:
Received a utility bill for the month, to be paid next month for $ 20,000.

--Journal entries

Accounts title	Debit	Credit
Utilities expense	$20,000
Utilities Payable [a liability]		$20,000
(to record liability, as expense accrued)
Utilities Payable [a liability]	$20,000
Cash		$20,000
(to record payment of liabilities)