Adjusting Journal Entry for Supplies Expense
What is the appropriate adjusting journal entry to be made for supplies expense?
At the end of the period, which adjusting journal entry is correct:
A. debit Supplies Expense, $1300; credit Supplies, $1300.
B. debit Supplies Expense, $2800: credit Supplies, $2800.
C. debit Supplies, $2800; credit Supplies Expense, $2800.
D. debit Supplies, $1300; credit Supplies Expense, $1300.
Answer:
The appropriate adjusting journal entry to be made at the end of the period would be: Debit: Supplies Expense, $2,800, Credit: Supplies, $2,800.
When supplies are purchased, they are initially recorded as an asset in the Supplies account. However, as supplies are consumed or used, their value needs to be recognized as an expense in the financial statements. In this case, the company purchased supplies worth $4,100 and initially debited the Supplies account for the full amount.
At the end of the accounting period, a physical count is conducted to determine the value of supplies still on hand. The count reveals that $1,300 worth of supplies remain unused. To adjust the accounting records and reflect the actual value of supplies consumed, an adjusting journal entry is required.
The appropriate adjusting entry in this case would be to debit the Supplies Expense account for $2,800 and credit the Supplies account for the same amount. This entry recognizes the $2,800 worth of supplies that have been used during the period as an expense, reducing the value of supplies on hand to the actual amount of $1,300.
By making this adjustment, the financial statements will accurately reflect the consumption of supplies and the corresponding expense incurred by the company during the accounting period.