Reese Ltd purchased office supplies costing $4,000 and debited Office supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,600 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be:

Question

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The purchase of supplies is an example of a prepaid expense. An adjusting entry is required to recognise the cost of supplies consumed (debit Supplies expense) during the period the reduction in the asset (credit Supplies).

Reese Ltd Purchased Office Supplies Costing $4,000 and Debited Office