Paid Telephone Bill Journal Entry

Telephone expense is the cost that company spends on the landline, phone service, or other phone usages during the accounting period.

Telephone bill is a statement sent by a service provider to a customer that lists the charges for the services used. The bill will list the services used, the date of use, the duration of use, and the cost per unit for each service. It is important to review the bill carefully to ensure that it is accurate. The bill can be paid online, by mail, or in person. Online payment is typically the most convenient method.

The phone service provider usually sends the telephone bill to the company at the beginning of the month to charge for the previous month’s usage. While some services are able to send the statement at the month-end. It means that the customer will use the service and pay in the following month. It is opposite from the prepaid phone that customers top up the phone and use later.

The phone service charge will be recorded as the expense in the customer income statement. If the company is able to receive the statement at the month-end, the accountant simply records telephone expenses and cash paid or accounts payable. The expense will be recorded directly into the month in which the service is used.

However, if the company is not able to receive the statement on time, they have to make accrue expenses for the usage month. They have to comply with accrue accounting rule which requires the revenue and expense to be recorded base on usage, not the cash paid.

Journal Entry for Paid Telephone Bill

If the company receives the invoice during the month, they have to include the expense in the current month. The other side may impact the cash outflow or accounts payable.

The journal entry is debiting telephone expense and credit accounts payable.

Account	Debit	Credit
Telephone Expense	$$$
Accounts Payable		$$$

When the company makes payment to the phone service provider, they simply reverse the account payable and decrease cash. The journal entry is debiting accounts payable and credit cash.

Account	Debit	Credit
Accounts Payable	$$$
Cash		$$$

Accrued Phone Expense

If the company does not receive the bill at the month-end, they have to estimate the telephone expense and make recordings. They have to close the monthly financial statement. the journal entry is debiting telephone expense and credit accrued payable.

Account	Debit	Credit
Telephone Expense	$$$
Accrued Expense		$$$

At the beginning of the new period, the company has to reverse this transaction and wait for the actual invoice from the supplier.

Account	Debit	Credit
Accrued Expense	$$$
Telephone Expense		$$$

When the actual invoice arrives, we have to record the expense and accounts payable.

Account	Debit	Credit
Telephone Expense	$$$
Accounts Payable		$$$

When the company makes the payment, they have to reverse the accounts payable and cash out.

Account	Debit	Credit
Accounts Payable	$$$
Cash		$$$

Example

Compnay ABC just receive the telephone bill from the service provider at the end of the month. The bill amount is $ 500, and the company manages to pay a week later. Please make journal entry for both transactions.

When ABC receives telephone invoices, they have to record telephone expenses and accounts payable. The journal entry is debiting telephone expense $ 500 and credit accounts payable $ 500.

Account	Debit	Credit
Telephone Expense	500
Accounts		500

When ABC make payment to supplier, they will reduce cash and accounts payable. The journal entry is debiting accounts payable $ 500 and credit cash $ 500.

Account	Debit	Credit
Accounts Payable	500
Cash		500