Question

A company is in its first month of operations. Supplies worth $4,000 were purchased on January 5. At the end of the month supplies worth $3,000 were in hand. What adjusting entry would be made at the end of January? Post the adjusting entry for the scenario provided.

Answer 1

The scenario given in the question is that their is difference between amount of inventory in hand and amount of inventory purchased during the period. This is because we have consumed some of inventory which we have purchased during the period. The inventory consumed is expensed out in the period in which it is purchased.

The adjusting entry for the scenario is given below.

Debit Supplies expense $ 1,000

Credit Supplies Inventoy $ 1,000