Question

. A purchase of supplies for $500 on account was recorded and posted as a debit to Supplies for $200 and as a credit to Accounts Receivable for $200. Journalize the entries on December 31 to correct the errors occurred during recording. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

Answer: Debit to supplies $300; Debit to Accounts Receivable $200; Credit to cash or accounts payable $500

Explanation: Supplies are inventories of an organisation. Tgey are components of current assets and have a debit balance.

When supplies are purchased, current assets are to be debited to increase the asset.

Depending on the means of purchase either cash or on credit. The credit entry will be passed according. If cash was paid for the supplies, cash is a current asset hence it is credited with the actual amount paid for the supplies inorder to reduce it.

However, if the supplies were bought on credit, accounts payables will be credited. Accounts payables is a liability account that has a credit balance. As such, to increase your liability, you credit it.