utilities expense definition

Under the accrual basis of accounting, this account reports the cost of the electricity, heat, sewer, and water used during the period indicated in the heading of the income statement. Because utility companies deliver the service and then later measure the amounts used and then prepare the billing, a company's Utilities Expense amount should be based on the amount of utilities used during the period (as opposed to the amount paid during the accounting period). The amount of Utilities Expense for the sales function is classified as a selling expense and the amount used for administration is classified as an administrative expense. Utilities used in the manufacturing process will be part of the cost of the products manufactured.