Unit 4 - Activity 2 - Transaction 1: Supplies Journal Adjustment (BAF3M1)

Supplies Journal Adjustment

The video explains how to record an adjusting journal entry for supplies used during December. Supplies are treated as an asset while they remain on hand. When they are used, their cost is recorded as an expense.

Calculate Supplies Used

• Unadjusted Supplies balance: $4,000
• Supplies on hand after a physical count: $2,750
• Supplies used: $4,000 − $2,750 = $1,250

Record the Adjustment

Date the adjusting entry December 31:

Account Debit Credit Supplies Expense $1,250 Supplies $1,250

Expenses increase with a debit, and the Supplies asset decreases with a credit. Indent the credit account in the journal and add a description, such as “To record supplies used for December.”

This adjustment is categorized as an allocation. It records the supplies consumed during the period and leaves $2,750 as the Supplies asset balance.

Speaker

• Mr. Holliday — instructor and narrator