Cara, Inc.purchased supplies costing ₤2,500 on January 1, 2011 and recorded the transaction by increasing assets.At the end of the year ₤1,300 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, 2011?

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The supplies used during the year amount to ₤1,200 (₤2,500 - ₤1,300). If no adjusting entry is made to account for the supplies used, assets will be overstated by ₤1,200.

Cara, IncPurchased Supplies Costing ₤2,500 on January 1, 2011 and Recorded