Electricity

This Overheads code records the cost of electricity incurred in running the business. As an expense account, it normally carries a debit balance: debit entries increase the balance (recording new costs) and credit entries decrease it (for example, correcting an error or a refund received).

Real-world examples

Retail shop

A small independent shop's monthly bill comes to £210 (£175 net of VAT) — lighting, tills and a couple of chest freezers being the main draw. The entry is a debit of £175 to 7200 (Electricity), a debit of £35 to 2201 (Purchase Tax Control Account), and a credit of £210 to 2100 (Creditors Control Account).

Manufacturing

A production line running multiple machines pushes usage far higher — a typical invoice might land at £3,240 (£2,700 net). The entry follows the same pattern at a larger scale: debit £2,700 to 7200, debit £540 to 2201, credit £3,240 to 2100. Sites with genuinely low, domestic-scale consumption can sometimes qualify for the reduced 5% VAT rate on fuel and power, so it's worth checking the rate actually charged rather than assuming 20%.

Professional services (office-based)

A consultancy or agency renting a desk in a serviced office often never sees an electricity invoice at all — it's bundled into the monthly service charge and posted to 7100 (Rent) instead. Code 7200 only comes into play here if the business leases space directly and holds its own supply contract.

Commonly confused with

Because code 7201 (Gas) sits right next to this one in Overheads, it's a common mis-posting target. Code 7200 is specifically for electricity, while 7201 covers gas — similar in nature, but keeping them separate is what makes the overheads section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

An error posting to Electricity won't change total overhead spend, but it will distort the overheads breakdown that's usually reviewed line by line each month to spot cost creep.

Other codes in Overheads