Today Nathaniel Letters Inc pays off a 500 telephone bill Wh

Today, Nathaniel Letters, Inc., pays off a $500 telephone bill. When it had received the telephone bill last week, it had properly accrued it on its books. When Nathaniel Letters, Inc., correctly records today\'s payment of the telephone bill in its general journal, correctly match the effect of this transaction on each of these types of Choose ] Choose ] No change There is not enough information to determine the Increase Decrease Liabilities Expenses [Choose ] Revenues [Choose ]

Solution

As the bill was accrued last week itself, the following Journal entry would have been passed in last week

Telephone expenses       $500

       Telephone bill payable       $500

Telephone expenses have already been recorded last week, so there will be no effect of current week payment on expenses

Telephone bill payable is a liability which will reduce at the time of payment of bill and there will be a corresponding reduction in assets (cash / bank) due to this payment

Journal Entry

Telephone bill payable       $500

       Cash/Bank                              $500

So, due to current week payment, Assets will decrease and liabilities will also decrease by $500. There will be No change in Expenses and Revenues due to this transaction