Final answer:
The original journal entry for purchasing $500 of supplies would be to debit Supplies for $500 and credit Cash or Accounts Payable for $500. An adjusting entry is made later to reflect the used supplies by debiting Supplies Expense and crediting Supplies for $200.
Step-by-step explanation:
The student asked about the original entry for the purchase of $500 worth of supplies on December 5, when $200 of supplies have been used by December 31. In accounting, the original entry on the purchase date should record the entire amount of supplies as an asset. This is because the supplies are expected to provide future economic benefits to the business. For example, the journal entry to reflect the purchase would be:
- Debit Supplies: $500
- Credit Cash (or Accounts Payable if bought on credit): $500
As of December 31, after using $200 of the supplies, an adjusting entry would be made to reflect the usage:
- Debit Supplies Expense: $200
- Credit Supplies: $200
This reflects the expense recognition principle, as expenses should be reported in the period in which they are incurred.