On December 31,Winters Company received a $385 bill for the purchase of supplies in December that it will not pay for until January 15.Winters follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment.The adjusting entry needed on December 31 to accrue this cost is:
A) Debit Supplies $385; credit Accounts Payable $385.
B) Debit Accounts Payable $385; credit Supplies $385.
C) Debit Accounts Payable $385; credit Cash $385.
D) Debit Supplies Expense $385; credit Cash $385.
E) Debit Supplies Expense $385; credit Supplies $385.

Question

Quizplus · Accepted Answer

The adjusting entry needed on December 31 to accrue the cost of $385 for supplies received in December that will be paid for on January 15 would be to debit Supplies (an asset account) and credit Accounts Payable (a liability account) for the same amount of $385. This entry records the anticipated expense as an asset and the future payment as a liability. It also ensures that the expense is properly matched with the period in which it was incurred, in this case, December.

On December 31,Winters Company Received a $385 Bill for the Purchase