Is Utilities Expense a Debit or Credit?
Utilities expense is a debit. Expenses increase with debits, so electricity, gas, water, telephone and internet charges are debited to utilities expense. Its normal balance is a debit, and December service billed in January belongs in this year through an accrual.
- Account category
- Expense
- Normal balance
- Debit (Dr)
- Increases with
- Increase (Dr)
- Decreases with
- Decrease (Cr)
- Financial statement
- Income statement
Classifying one account is easy. Ledger IQ classifies the whole trial balance.
Try it freeUtilities expense on a trial balance
| Acct # | Account | Debit | Credit |
|---|---|---|---|
| 1000 | Cash | 48,200.00 | |
| 1200 | Accounts receivable | 86,400.00 | |
| 1300 | Inventory | 72,500.00 | |
| 1500 | Equipment, net of depreciation | 82,000.00 | |
| 2000 | Accounts payable | 31,500.00 | |
| 2400 | Notes payable | 85,000.00 | |
| 3900 | Equity, beginning of year | 172,600.00 | |
| 4000 | Sales revenue | 550,000.00 | |
| 4100 | Sales returns and allowances | 12,000.00 | |
| 4200 | Interest income | 1,200.00 | |
| 5000 | Cost of goods sold | 240,000.00 | |
| 6000 | Salaries and wages | 96,000.00 | |
| 6050 | Officer compensation | 60,000.00 | |
| 6060 | Payroll taxes | 11,900.00 | |
| 6100 | Rent expense | 36,000.00 | |
| 6150 | Insurance expense | 14,400.00 | |
| 6200 | Utilities expense (the account this page is about) | 9,600.00 | |
| 6250 | Advertising expense | 7,200.00 | |
| 6275 | Meals | 4,800.00 | |
| 6300 | Depreciation expense | 19,000.00 | |
| 6350 | Amortization expense | 4,000.00 | |
| 6400 | Bad debt expense | 3,500.00 | |
| 6450 | Interest expense | 6,800.00 | |
| 6900 | Other operating expenses | 26,000.00 | |
| Total | 840,300.00 | 840,300.00 |
Example journal entries
| Account | Debit | Credit |
|---|---|---|
| Utilities expense | 800.00 | |
| Cash | 800.00 |
| Account | Debit | Credit |
|---|---|---|
| Utilities expense | 740.00 | |
| Accrued expenses | 740.00 |
Why it works that way
Utilities are consumed, billed and paid, in that order. The expense belongs to the period the service was used, and expenses are debits.
Because utilities bill in arrears, the December invoice usually arrives in January. On an accrual basis that month belongs to the year that used it, through an accrued liability. It is a small adjustment that is missed constantly, and the effect is consistent year to year, which is why nobody notices.
Where it lands on the return
There is no utilities line on any of the three business returns. It falls into other deductions, which has to be supported by a statement listing the components. That is not a formality; a large unexplained other deductions figure is exactly what draws attention.
What gets mixed in and should not
Home office utilities. For a corporation, paying the owner's home utility bills is not a utilities expense. Either there is a documented reimbursement arrangement for business use of the home, or the payment is compensation or a distribution.
Personal cell phones. A phone used for both work and personal calls is deductible only to the extent of business use. The whole bill coded to utilities is a frequent and easily corrected overstatement.
Equipment and installation. A new HVAC unit is a capital asset, not a utility, even if the bill came from the same company that supplies the gas.
Deposits with the utility company. A refundable deposit is an asset, not an expense.
A quick check
Divide the balance by twelve and compare it to a typical monthly bill. A result that looks like thirteen months usually means a bill was paid early. A result closer to eleven suggests the December accrual was never made, which is the more common of the two.
Where it fits in the accounting equation
Tax return treatment
| Form | Line |
|---|---|
| Form 1120 | Page 1 line 26, other deductions |
| Form 1120S | Page 1 line 19, other deductions |
| Form 1065 | Page 1 line 20, other deductions |
Common questions
Is utilities expense a debit or credit?
A debit. It is an expense account, so recording a utility bill debits it and the credit goes to cash or to accounts payable.
Where do utilities go on a business tax return?
In other deductions, since none of the three business returns has a utilities line. Other deductions needs a supporting statement that lists the components, so the account cannot simply disappear into one total.
Can the company deduct the owner home utilities?
Not as a utilities expense. A corporation needs a documented arrangement for business use of the home, usually a reimbursement under an accountable plan. Otherwise the payment is compensation or a distribution, not a deduction.
Do I need to accrue the December utility bill?
On an accrual basis, yes. Utilities bill in arrears, so December service is normally invoiced in January and belongs to the year that used it. The adjustment is small, recurs every year, and is one of the most commonly skipped accruals.
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Last reviewed October 17, 2026.