Utilities Expenses

Article byWallstreetmojo Team
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

What are Utilities Expenses?

Utilities Expenses are costs incurred by the company for using the services of public utility companies like sewage, electricity, waste disposal, water, broadband, heating, and telephone. Usually, these costs make up a significant portion of the opexOpexOperating expense (OPEX) is the cost incurred in the normal course of business and does not include expenses directly related to product manufacturing or service delivery. Therefore, they are readily available in the income statement and help to determine the net profit.read more for almost all businesses.

Examples

For Example, the accountant of Company Y ltd is confused that all the expenses out of the below-mentioned incurred expenditure for August 2019 should be treated as the utility expenses of the company for the period or not. Calculate the total value of utility expenses out of the total below-mentioned expenses of the company during the period:

  • Telephone Bills: $1,000
  • Gas Bill: $500
  • Rent Expenses: $2,400
  • Salary Paid: $150,000
  • Electricity Expenses: $1,100
  • Water Charges: $350

Solution:

Utilities Expenses are the cost that the company incurs during a period to avail of the services provided by the public utility companies in the place of operation like the telephone facility, electricity, gas, water, sewer, etc. Out of the expenses mentioned above, Telephone bills, Gas Bill, Electricity expenses, and water charges will be considered, as these are the services for which the infrastructure provided by the public utility companies is used. For the rest of the expenses, i.e., rent and salary, there is no use of the services provided by the public utility companies, so they will not be considered.

Utilities Expenses Example 1-1
  • Total Utilities Expenses = Telephone bills + Gas Bill + Electricity expenses + Water charges
  • = $ 1,000 + $ 500+ $ 1,100 + $ 350
  • = $ 2,950

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Important Points

Conclusion

Utilities Expenses in accounting are the cost that the company incurs during a period to avail of the services provided by the public utility companies in the place of operation of the company like the telephone facility, electricity, gas, water, sewer, etc. The company calculates these expenses incurred in the accounting period are calculatedAccounting Period Are CalculatedAccounting Period refers to the period in which all financial transactions are recorded and financial statements are prepared. This might be quarterly, semi-annually, or annually, depending on the period for which you want to create the financial statements to be presented to investors so that they can track and compare the company's overall performance.read more and the same remains as the liability until the company makes the payment to the respective service provider. Most of the utilities are the basic utilities without which the organization will not be able to continue its operations and thus plays an essential part in the organization’s work.

This article has been a guide to Utilities Expenses. Here we discuss the example of Utilities Expenses in accounting, such as telephone, gas, electricity, etc., along with advantages and disadvantages. You can learn more about accounting from the following articles –

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