Multiple Choice
Which of the following transactions would most likely require an adjusting entry for supplies at the end of the accounting period?
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3. Accrual Accounting Concepts
Adjusting Entries: Supplies
Multiple Choice
Which of the following is NOT an adjusting entry related to supplies at the end of an accounting period?
A
Debiting Supplies Expense and crediting Supplies
B
Debiting Supplies Expense and crediting Supplies for the difference between beginning and ending supplies
C
Debiting Supplies and crediting Cash when supplies are purchased
D
Debiting Supplies Expense and crediting Supplies for the amount used
Verified step by step guidance1
Understand the concept of adjusting entries: Adjusting entries are made at the end of an accounting period to update account balances before preparing financial statements. They ensure that revenues and expenses are recognized in the period they occur.
Review the typical adjusting entry for supplies: Supplies are initially recorded as an asset (debit Supplies and credit Cash or Accounts Payable when purchased). At the end of the period, the amount of supplies used is determined, and an adjusting entry is made to transfer the used portion from Supplies (asset) to Supplies Expense (expense).
Analyze the options provided: The first three options involve adjusting entries related to supplies, where Supplies Expense is debited and Supplies is credited to reflect the amount used or the difference between beginning and ending supplies. These are valid adjusting entries.
Identify the incorrect option: The option 'Debiting Supplies and crediting Cash when supplies are purchased' is not an adjusting entry. This is a regular transaction entry made when supplies are purchased, not an adjustment made at the end of the accounting period.
Conclude: Adjusting entries for supplies always involve Supplies Expense and Supplies accounts to reflect the usage of supplies during the period. Transactions involving Cash are not part of adjusting entries.
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