Supplies Adjustment for BAF3M

1. Adjusting Entries
#1 - Supplies

2. Adjusting for Supplies
• The supplies account is an asset.
• However, the portion of the supplies that are “used
up” during the fiscal period are an expense.
• The remaining expenses are physically counted to
determine dollar value of supplies is remaining

3. Adjusting for Supplies
• If we know what we started with, and what we have
remaining, we can determine how much was used up.
• Example  Supplies starts at $1000. You count $300
remaining – this means that ($1000-$300) $700 worth
of supplies was “used up”

4. Adjusting for Supplies
• The Adjusting Entry
• We are recognizing that $700 of supplies was used up and is now an
expense. Also that the Supplies asset account should be at $300.
• The Adjusting Entry for Supplies:
• DR – Supplies Expense $700 (increases an expense)
• CR – Supplies $700 (decreases an asset)
The Supplies Account now looks like:
Supplies
1000 700 (this is the adjustment)
300

5. Another example
•Click through the next 8 slides to see an
additional example

6. Adjusting Entries
Adjustment #1: Supplies
The Supplies balance
shows the total supplies
purchased in the year

7. What is the Balance?
What the
balance is

8. What Should The Balance Be?
What the balance
should be?
What the balance “should be” is determined from
someone counting the supplies that remain in the
business at the end of the year

9. The Adjustment
The required
adjustment

10. Introducing a New Account
What the
balance is
This is an expense account – it has not
been used yet so it is created. It will in the
ledger and also on the income statement

11. Expense: What Should the Balance Be?
What the balance
should be
What the balance “should be” is equal to the amount
of supplies “used up” during the year

12. What the Adjustment Would Be
The required
adjustment

13. The adjusting entry as it would appear in the general
journal
What that Looks Like in the Journal