Adjusting Entries for Supplies in Accounting

What is the primary objective of accrual accounting?

What is the term for the action taken by the senior accountant at the end of the fiscal period?

What would be the normal debit account when office supplies are purchased?

Why are adjusting entries necessary at the end of the fiscal period?

What type of account is Supplies in the context of Markell Company?

What would be the result of not making adjusting entries for supplies used during the year?

What is the purpose of adjusting entries for supplies?

What is the balance of the Supplies account at the end of the year, according to Markell Company's records?

Why are daily entries not made to record the usage of office supplies?

What is the purpose of the adjusting entry for supplies?

Accrual Accounting

Accrual accounting aims to match revenues earned with the expenses incurred in generating those revenues.

Adjusting Entries

Adjusting entries are made at the end of each accounting period to ensure that revenues and expenses are recorded in the correct period.
These entries update accounts to reflect the actual economic events that have occurred during the period, even if those events haven't been formally recorded in daily transactions.
Adjusting entries are necessary to ensure that financial statements accurately reflect the company's financial performance and position.

Supplies Account

The Supplies account is an asset account.
It represents the value of supplies that are available for use by the company.
Supplies are considered assets because they represent resources with future economic benefit.

Supplies Usage

Daily entries are not made to record the usage of office supplies because it is impractical to track the exact amount used on a daily basis.
Instead, the company adjusts the Supplies account at the end of the accounting period to reflect the actual amount of supplies used.

Adjusting Supplies

The adjusting entry for supplies will decrease the balance in the Supplies asset account.
The corresponding credit will be to an expense account, such as Supplies Expense.
This adjustment ensures that only the supplies actually used during the period are recorded as an expense.
This ensures the balance of the Supplies account at the end of the year represents the actual amount of supplies still on hand.

Learn how to accurately account for supplies in financial statements by taking inventory and adjusting entries. Understand the importance of adjusting supplies account to reflect the actual amount used during the year.