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

Which of the following is the correct adjusting entry to record the cost of supplies used during the accounting period?

Debit Supplies; Credit Supplies Expense

Debit Supplies Expense; Credit Supplies

Debit Supplies Expense; Credit Cash

Debit Cash; Credit Supplies Expense

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Verified step by step guidance

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.

Identify the nature of the transaction: The problem involves supplies used during the accounting period. Supplies are initially recorded as an asset when purchased, and their usage is recognized as an expense over time.

Determine the accounts affected: When supplies are used, the Supplies account (an asset) decreases, and the Supplies Expense account (an expense) increases to reflect the cost of supplies consumed.

Formulate the adjusting entry: The correct adjusting entry is to debit Supplies Expense (to increase the expense) and credit Supplies (to decrease the asset). This aligns with the accrual basis of accounting.

Review the options provided: Compare the formulated adjusting entry with the options given in the problem. The correct option is 'Debit Supplies Expense; Credit Supplies,' as it accurately reflects the adjustment for supplies used during the period.