Karcan, Inc. purchased supplies costing ₤2,500 on January 1, 2014 and recorded the transaction by increasing assets. At the end of the year ₤1,100 of the supplies are still on hand. If Karcan, Inc. does not make the appropriate adjusting entry, what is the impact on its statement of financial position at December 31, 2014?

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If Karcan, Inc. does not make the appropriate adjusting entry, the supplies will be overstated by ₤1,400 on the statement of financial position at December 31, 2014. This is because the supplies account will still reflect the original cost of ₤2,500, even though only ₤1,100 of the supplies are still on hand.