Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Adjusting Entries: Supplies

Financial Accounting

3. Accrual Accounting Concepts

Adjusting Entries: Supplies

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Multiple Choice

Adjusting entries are required for supplies at the end of an accounting period in order to:

Record the supplies that have been used during the period.

Increase the supplies account to reflect purchases made after year-end.

Recognize supplies as revenue for the period.

Eliminate the supplies account from the balance sheet.

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Verified step by step guidance

Understand the purpose of adjusting entries: Adjusting entries are made at the end of an accounting period to ensure that the financial statements reflect the true financial position and performance of the company. They are necessary to comply with the accrual basis of accounting.

Focus on the supplies account: Supplies are considered a current asset when purchased. However, as they are used during the accounting period, their value decreases, and this usage needs to be recorded as an expense.

Determine the adjustment needed: At the end of the period, calculate the value of supplies used by subtracting the ending balance of supplies (remaining unused supplies) from the beginning balance of supplies (total supplies available). This difference represents the supplies expense for the period.

Prepare the adjusting entry: Debit the Supplies Expense account to recognize the cost of supplies used during the period. Credit the Supplies account to reduce its balance, reflecting the decrease in unused supplies.

Ensure proper financial statement presentation: The adjusting entry ensures that the Supplies Expense is reported on the income statement, and the remaining balance of Supplies is reported as a current asset on the balance sheet.