Cara, Inc. purchased supplies costing $2,500 on January 1, 2014 and recorded the transaction by debiting an expense. At the end of the year $1,000 of the supplies are still on hand. If Cara, Inc. does not make the appropriate adjusting entry, what is the impact on its statement of financial position at December 31, 2014?

Question

Quizplus · Accepted Answer

If Cara, Inc. does not make the appropriate adjusting entry, the supplies on hand will not be recorded and the assets will be understated by $1,000. The original expense of $2,500 will still be recorded, therefore there will be no impact on equity.

Cara, Inc Purchased Supplies Costing $2,500 on January 1, 2014 and and Recorded