Multiple Choice
Which of the following accounts is always included in adjusting entries for supplies at the end of an accounting period?
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3. Accrual Accounting Concepts
Adjusting Entries: Supplies
Multiple Choice
When should supplies be recorded as an expense in the accounting records?
A
When they are paid for
B
When they are used or consumed in operations
C
At the end of the fiscal year, regardless of usage
D
When they are purchased
Verified step by step guidance1
Understand the concept of the matching principle in accounting, which states that expenses should be recorded in the same period as the revenues they help generate.
Recognize that supplies are considered an asset when purchased because they have future economic benefits and are not yet consumed.
Identify that supplies should be recorded as an expense when they are used or consumed in operations, as this is when their economic benefit is realized.
Distinguish between the timing of payment, purchase, and usage. Payment or purchase does not determine when supplies are expensed; usage does.
Apply this understanding to the accounting records by ensuring that supplies are moved from the Supplies account (asset) to the Supplies Expense account when consumed.
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