A company recorded office supplies in an asset account when the supplies were purchased.Failure to take inventory and make an adjusting entry will result in an

Question

Quizplus · Accepted Answer

Failure to take inventory and make an adjusting entry for office supplies will result in an overstatement of assets (since the supplies are being recorded as an asset when purchased). Consequently, this overstatement of assets leads to an overstatement of stockholders' equity, as the equity is calculated based on the assets minus liabilities. Without adjusting for the used supplies, the company's financial statements will not accurately reflect the decrease in assets or the corresponding decrease in stockholders' equity.

A Company Recorded Office Supplies in an Asset Account When