Question

If the Supplies account had an ending balance of $1,200 and the actual count for the remaining supplies was $400 at the end of the period, what adjustment would be needed?

a) A credit entry of $800 to the Supplies account.
b) A debit entry of $800 to the Supplies account.
c) A credit entry of $400 to the Supplies account.
d) A debit entry of $400 to the Supplies account.

Answer 1

The correct adjustment for a Supplies account with a $1,200 balance when the actual count is $400 is a credit entry of $800 to the Supplies account to match the physical count.

Step-by-step explanation:

If the Supplies account had an ending balance of $1,200 and the actual count for the remaining supplies was $400 at the end of the period, the adjustment needed would be a credit entry of $800 to the Supplies account. This adjustment is necessary to match the Supplies account balance with the physical inventory count of supplies. To record the consumption of supplies that were used up during the period, we decrease the Supplies account with a credit and recognize the expense with a corresponding debit to the Supplies Expense account.