Question

At the beginning of December, Global Corporation had $2,000 in supplies on hand. During the month, supplies purchased amounted to $3,000, but by the end of the month the supplies balance was only $800. What is the appropriate month-end adjusting entry?

Answer 1

Answer:

Debit - Supplies expense $4,200

Credit - Supplies $4,200

Explanation:

Adjusting entries are prepared to ensure that the revenue and expense recognition rules, are properly applied each accounting period.

Expenses  are the outflows of assets or incurrence of liabilities during a period from delivering or producing goods or services.  They are incurred in an attempt to produce revenues.

The principle says that expenses should be recognized in the same period as the revenues to which they relate.

According to this rule, we should use the next equation:

Supplies expense = supplies at the beginning of the period + supplies purchased - supplies balance at the end of the period

Supplies expense = $2,000 + $3,000 - $800

Supplies expense = $4,200

Adjusting entry:

Debit (expense account) - Supplies expense $4,200

Credit (asset account) - Supplies $4,200