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 transactions would most likely require an adjusting entry for supplies at the end of the accounting period?
A
Supplies were purchased and immediately expensed upon purchase.
B
No supplies were purchased or used during the period.
C
Supplies were purchased and fully used on the same day.
D
Supplies were purchased during the period and recorded as an asset, but some remain unused at period end.
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 financial statements are prepared. They ensure that revenues and expenses are recognized in the period they occur.
Identify the scenario requiring adjustment: In this case, supplies were purchased during the period and recorded as an asset. At the end of the period, some supplies remain unused, meaning the asset account (Supplies) needs to be adjusted to reflect the actual amount of supplies used.
Determine the accounts involved: The adjustment will involve reducing the Supplies asset account and recognizing the expense for the supplies used during the period in the Supplies Expense account.
Calculate the adjustment amount: To determine the adjustment, calculate the difference between the beginning balance of the Supplies account, any purchases made during the period, and the ending balance of unused supplies. The formula is: \( \text{Supplies Used} = \text{Beginning Balance} + \text{Purchases} - \text{Ending Balance} \).
Record the adjusting entry: Prepare the journal entry to decrease the Supplies account (credit) and increase the Supplies Expense account (debit) by the amount of supplies used during the period.
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