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 transactions would most likely require an adjusting entry for supplies at the end of the accounting period?

Supplies were purchased and immediately expensed upon purchase.

Supplies were purchased during the period and recorded as an asset, but some remain unused at period end.

No supplies were purchased or used during the period.

Supplies were purchased and fully used on the same day.

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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 financial statements are prepared. They ensure that revenues and expenses are recognized in the correct period.

Identify the scenario that requires adjustment: Supplies purchased and recorded as an asset but some remain unused at the end of the period require an adjusting entry. This is because the unused portion needs to be reclassified from an expense to an asset to reflect the correct financial position.

Determine the accounts involved: The accounts affected are the Supplies account (an asset) and the Supplies Expense account. The unused supplies will remain in the Supplies account, while the used portion will be transferred to Supplies Expense.

Calculate the adjustment amount: To determine the adjustment, calculate the value of supplies used during the period. This is done by subtracting the value of unused supplies (determined through a physical count or other methods) from the total supplies purchased.

Record the adjusting entry: Prepare the journal entry to reflect the adjustment. Debit the Supplies Expense account to recognize the expense for the used supplies, and credit the Supplies account to reduce the asset balance for the used portion.