What You Need to Know About Recording and Adjusting Supplies in Accounting
How can we properly record and adjust supplies in accounting based on the given data?
Recording the Purchase of Supplies on May 31, 2024
Supplies 3,255
Cash (or Accounts Payable) 3,255
This entry debits the Supplies account to increase it by the amount of supplies purchased and credits the Cash (or Accounts Payable) account to reflect the payment made for the supplies.
Calculating the Amount of Supplies Used in 2024
To calculate the amount of supplies used in 2024, we need to determine the change in supplies from the beginning of the year to the end of the year. The formula is as follows:
Supplies Used = Beginning Supplies + Purchases - Ending Supplies
Given:
Beginning Supplies (January 1, 2024) = $785
Purchases = $3,255
Ending Supplies (December 31, 2024) = $1,035
Supplies Used = $785 + $3,255 - $1,035 = $3,005
Therefore, the amount of supplies used in 2024 is $3,005.
Preparing the Adjusting Entry at December 31, 2024
The adjusting entry required at December 31, 2024, is necessary to adjust the Supplies account to reflect the actual supplies on hand at the end of the year. This adjustment ensures that the Supplies account reflects the correct amount of supplies consumed during the year. The adjusting entry is as follows:
Supplies Expense X
Supplies X
This entry debits the Supplies Expense account to recognize the expense for the supplies used during the year and credits the Supplies account to reduce it to the actual supplies on hand at the end of the year. The specific dollar amount would depend on the calculated supplies used in part (b) above.
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