Entry date of electricity bills

[Bill Johnson]

the meter of electricity counter for the period (5 Oct till 25 Nov is read on 25 Nov, and billed on 3 Dec, but delivered to the customer on 10 Dec, What would be the date of entering this transaction into the books?

 

[kirby]

Electric company records transaction on 12/3. Their customer is aware of the bill on 12/10. So that would be the earliest date the customer could record a payable for that bill

 

[Bill Johnson]

Electric company records transaction on 12/3. Their customer is aware of the bill on 12/10. So that would be the earliest date the customer could record a payable for that bill

Thanks Kirby but I want to prepare the report of each month for budget analysis, and I want to know what is really the expenses of November

 

[kirby]

I see what you are getting at.

Assume you begin business -using your dates above- on Oct 5th. At the end of October you will not have the electric bill. So now you have two choices: Keep the books open for October until you do get the bill on Dec 10th -which has Oct and Nov costs - so then you must create an allocation for period from Oct 5 to Oct 31 out of the bill you get on Dec 10th.
OR - On Oct 31st estimate your electric costs and record an accrual.
Note that unless the Dec 10th bill shows daily usage, you will not accurately know your Oct (or Nov) electric costs. So, relax, estimate, accrue and move on to bigger issues.....

 

[Samir]

I'd think that you can do this using the accrual method, dating the expense for whatever month you want it to fall in.

 

[Counterofbeans]

OR - On Oct 31st estimate your electric costs and record an accrual.

This is what you want.

The company knows they received a benefit in the form of electrical services and should record such as an accrual for the period ended both October and November. This would simply be estimated each month, with the difference between the estimate and the actual invoice to be cleaned out in December.

It would seem strange to me to hold the books open that long (until December to get the actual invoice), as the close related to October wouldn't be timely and management would generally need that information far sooner than that. For the November close, depends on how fast the company closes their books. Holding such open until Dec 10 might be reasonable.

 

[Gerald]

Since the period includes about 25 days (remaining) in October and 25 days in November, one could accrue 1/2 the bill in October (31st) and 1/2 the bill in November (25th). Due to materiality and cost vs benefit, "in the real world" one would probably record the whole amount in November.