On 1 January,Smith had $2 500 of supplies on hand.During January,Smith purchased $6 000 worth of new supplies.At the end of the month,a count revealed $800 worth of supplies remaining on the shelves.The adjustment entry needed will include a debit to Supplies expense of $7 700.The supplies were initially recorded as an asset.

Question

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The adjustment entry needed to record the supplies used during the month would be a debit to Supplies expense and a credit to Supplies. Since the total supplies purchased during the month ( $6 000) plus the supplies on hand at the beginning ($2 500) minus the supplies on hand at the end ($800) equals $7 700, the adjustment entry will include a debit to Supplies expense for that amount. The fact that the supplies were initially recorded as an asset is also true.

On 1 January,Smith Had $2 500 of Supplies on Hand