Utility bills are invoices received by a business for natural gas, electricity, water, and sewer charges incurred in the previous month or other period. The consumption and amount of each bill are usually determined by the metres on the company’s premises. To put it another way, utilities supply gas, electricity, and other services in advance of being paid. As a result, the corporation receives gas, electricity, and other utilities before paying for them, and it is liable until the bills are paid.
Is paying your power bills a liability?
Bills payable can also refer to liabilities that are still owed and must be paid in the context of personal finance and business accounting (such as utility bills or rent). On a balance sheet, these items are documented as accounts payable (AP) and shown as current liabilities.
Is a utility a valuable asset?
An asset is a cost that will be useful in numerous accounting periods in the future. If a spending does not serve a useful purpose, it is classified as an expense. A firm, for example, pays its electric bill. This expense is for something (electricity) that was only used during the billing period, which is in the past; so, it is recorded as an expense. The corporation, on the other hand, purchases a machine that it plans to utilise for the next five years. This expenditure is recognised as an asset since it will be useful in the future.
An asset is documented on the balance sheet if it was purchased by an entity. Some assets, on the other hand, are acquired at such a low cost that it is more efficient from an accounting standpoint to charge them to expense all at once; otherwise, the accounting staff must track these assets over multiple periods to determine when they have been consumed and should be charged to expense.
Unless they have been purchased or acquired, some intangible assets are not reported on the balance sheet. A taxi licence, for example, can be classified as an intangible asset because it was purchased. In addition, the value of a client list acquired as part of a business acquisition might be reported as an asset. An internally developed client list, on the other hand, cannot be recorded as an asset.
Is it true that a bill is a liability?
Liabilities are any debts owed by your organisation, including bank loans, mortgages, unpaid payments, IOUs, and any other sum of money owed to another party. A liability exists when you have pledged to pay someone a sum of money in the future but have yet to do so.
What do you mean by utility bills?
Your utility bills reflect the most fundamental costs of owning and operating a home. Gas, electricity, and water are all included.
All of them are items that you simply cannot live without. From your lights to your TV, computer, WiFi connection, and any security system you may have in place, such as a burglar alarm, nearly everything in your home is powered. Gas heats your water and living areas, as well as powering your oven, guaranteeing that you can prepare your meals!
Utility bills are needed to keep track of how much of these essential services we use and how much we owe to our suppliers.
Utility bill meaning
Any utility bill’s aim is to collect money for the gas, electricity, and water you use.
Your utility bill details how much gas, electricity, and water you used during a specific time period and how much it cost you. It should show how many units you’ve used and how much each unit costs. It will also show you the overall cost of the services you’ve used.
Most utility rates are set for a set length of time, so you should have a good idea of what to expect from your statement.
Utility costs, such as gas and electricity, should be paid in regular monthly instalments. Any underpayment or overpayment will be resolved with the supplier at the end of your contract.
Facts about utility bills
- Water bills are typically charged quarterly, so you should expect four bills per year.
- Although many organisations are now migrating to email-based invoices, paper utility bills are still issued to your address.
- Going paperless with your bills can result in savings of up to 510 on your bill.
- Each bill will list the acceptable payment methods as determined by your supplier.
What is the difference between utility, electricity, energy and gas bills?
Utility bills are a broad phrase that encompasses your usage and prices for power, gas, and water.
It can also include invoices for vital services such as sewer services provided by the council. Utility costs do not include optional services like cable television or cell phones.
Frequently, the terms utility, electricity, energy, and gas are used interchangeably. A utility bill, often known as an energy bill, typically includes electricity, gas, and, in some cases, water. A telephone bill is not considered a utility bill.
What other household bills do I need to worry about?
Other expenditures involved with maintaining a household may exist in addition to electricity, gas, and water bills. These could include the following:
- Payments for rent or a mortgage
- Connections to the internet and mobile phones
- Cable TV contract, TV licence
- Payments by credit card
These bills do not fall under the category of utility bills. Other common household expenses, such as groceries, are not included.
How do utility bills impact my credit score?
Utility providers frequently share payment history with credit companies, thus how you pay your utility bills has an impact on your credit score (or “credit rating”).
What does this mean?
If you have a good track record of paying your payments on time, you will find it easier to get a loan or a contract (for example a mobile phone contract). If you skip a payment, it may indicate that you are more likely to default on a loan. That implies lenders may refuse to give you money or charge you a higher interest rate.
The credit history from the previous twelve months is usually the most essential. Wait until you’ve built up a stronger credit record if you’ve missed payments in the last twelve months. Lenders are sometimes willing to overlook prior flaws. If your current payments are on time, this should happen.
Setting up direct debits with your bank can help you avoid late payments. You might also use your calendar to establish a recurring reminder. Regular payments will ensure lenders that you are a reliable borrower.
In accounting, how do you record utility bills?
You’ll credit accounts payable and debit the utilities expense account. Accounts payable and cash will be affected when the bill or invoice is paid. It’s the debit side of the transaction because you’re lowering your accounts payable liability. You’re going to credit cash because you’re diminishing the cash asset.
Utilities is a sort of account.
As of the balance sheet date, a current liabilities account reports the amounts owed to utility companies for electricity, gas, water, and phone. If the company has not received a utility bill, it will have to estimate the amount owed for the service it has utilised up until the balance sheet date. The amounts owed are frequently included in Accounts Payments rather than having a separate account for utilities payable.
On a balance sheet, where do utilities go?
Customer debt, contrary to popular belief, does not appear in a utility’s financial statements in the same way that other “debt” items do. Unpaid bills, in reality, are not classified like debt at all, but rather as an asset, because the utility expects to be paid part of the money owed to them at some point. Customer debt is thus recorded as accounts receivable, an asset rather than a liability, in a utility’s balance sheet. (If you want to learn more about how to assess a utility’s liabilities, check out our blog post on utility debt risk.)
Financial Statement Sleuthing 101
Let’s say you want to figure out what’s up with a utility’s delinquent payments in light of all of this. Returning to Western Pennsylvania, it turns out that Duquesne Light is the primary power distribution firm in Pittsburgh, so we may begin by reviewing Duquesne Light’s financial accounts. Unfortunately, Duquesne was formerly a publicly traded firm, but it is currently controlled by Macquarie Group, an Australian corporation. Unfortunately, while the Macquarie Group’s financial papers are out to the public, the corporation is so large that it’s difficult to separate anything relevant to Duquesne.
As a result, a comprehensive examination of Duquesne’s financial accounts is impossible. Continuing our investigation, we may check into a different, stand-alone utility whose financial statements are available to the public to get a feel of how consumer debt is handled. In North Carolina, Duke Energy is a good example. I began my search on Duke’s investor relations portal, which provides quick access to a range of documents. It may be tempting to open the company’s 2014 Annual Report (the most recent report), but resist! Annual reports are great for photographs of happy people and young children, but we want the real figures. As a result, skip the fancy photos and jump to Duke Energy’s 2014 Form 10-K. When we want to discover more about a company’s finances, we should start here.
Here are a few pointers on how to navigate a 10-K, which in Duke Energy’s instance is only 275 pages long:
If you know exactly what you’re looking for, you can:
- The first step is to skip through the first few pages and head right to the table of contents. Is it possible to find what you’re looking for? Get right to the point.
- Use the Find feature to search the document for those terms if you’re looking for anything specific that isn’t listed in the table of contents but has a unique word or two to describe it (only use this technique if your search terms yield fewer than 20 results or so).
If you’re not sure what you’re looking for, try these suggestions:
- Start with Item 1: “Enterprise.” What exactly does this business do? What is their source of income?
- Continue to Item 1A, “Risk Factors.” This section offers a fascinating list of all the numerous things that could have an impact on the utility’s financial results, either directly or indirectly, via altering operations.
- Take a look at the part titled “Financial Statements.” This is not to be confused with the “Selected Financial Data” part, which is less thorough and lightweight. The Financial Statements Section of Duke Energy’s 10-K includes sections for the entire company as well as each business unit. Look at the statements for a specific business unit if you’re interested in that one; otherwise, look at the statements for the entire company (“Duke Energy Corporation).
- Start with the Consolidated Balance Sheets and the Consolidated Statement of Cash Flows, regardless of which set of Financial Statements you’re looking at. If necessary, branch out to other statements.
I knew I was looking for information about unpaid customer bills in this case, but a search of the 10-K for “unpaid” yielded nothing. A second search for “unbilled, nevertheless,” yielded several results, including this portion on page 123:
When a service or a product is delivered, revenues from electricity and gas sales are recognised. Unbilled revenues are calculated by multiplying projected amounts of energy delivered but not yet billed by customer billing rates. Seasonality, weather, customer consumption patterns, customer mix, average pricing in effect for customer classes, and metre reading schedules can all affect unbilled income dramatically from one period to the next. On the Consolidated Balance Sheets, unbilled revenues are reflected in Receivables and Restricted receivables of variable interest entities…. In addition, Duke Energy Ohio and Duke Energy Indiana sell nearly all of their retail accounts receivable, including unbilled revenue receivables, to an affiliate, Cinergy Receivables Company, LLC (CRC), on a revolving basis and account for the transfers of receivables as sales. As a result, the receivables sold are not shown on Duke Energy Ohio and Duke Energy Indiana’s Consolidated Balance Sheets.
Unpaid invoices are not viewed the same as debt, according to this wording, and instead appear on the asset side of the balance sheet, under accounts receivable. This is because unpaid bills represent money that the firm hasn’t yet received but expects to, and Duke has already “given away the electricity” for which the bills were issued. Duke Energy transfers the asset of those receivables to a collections company (Cinergy Receivables Company) in Ohio and Indiana, and Cinergy pays Duke Energy a fee for the right to collect on those accounts. Cinergy is likely to pay a fraction of the actual amount of overdue invoices because they know they won’t be able to collect on all of them, and Duke records the money as sales revenue.
So, while unpaid bills are unquestionably distinct from utility debt, how do the two compare in terms of magnitude? To put these figures in context, Duke Energy Carolinas has $776 million in accounts receivable (not all of which is delinquent bills), with $33.8 billion in total assets and $7.6 billion in long-term debt. As a result, delinquent bills are a drop in the bucket.
Understanding private sector financial accounts is crucial for a lot more than just addressing queries about overdue debts. To fill finance or knowledge deficiencies, the public sector now frequently partners with the private sector (see the EFC’s current initiative on public-private partnerships and alternative service delivery models for water utilities). Even if you’re not a millionaire stockholder or run a hedge fund, spending the time to review a potential partner’s financial documents might be a good investment.
Is the cost of utilities a current asset?
Inventory assets are expenses associated with units that aren’t sold.Inventory is a current asset account on the balance sheet that includes all raw materials, work-in-progress, and finished commodities that aren’t immediately shown as an expense.
Do utilities fall within the category of accounts payable?
Bills payable are invoices that detail the amount owed for products and services purchased on credit. Service invoices, phone bills, and utility bills are examples of bills payable. Small businesses that use the accrual approach to monitor their financial accounting must carefully record their business debts. In the general ledger, businesses track their short-term debts as accounts payable, which includes the amount owed for their bills payable. Physical bills of sale that require payment by a specified date are known as bills payable.
These topics will describe bills payable and how debts are recorded in the general ledger:
