What is the adjusting entry needed for $4,700 of unused supplies as of May 31, 2021?
The adjusting entry for unused supplies as of May 31, 2021, involves debiting an expense account and crediting an asset account. The specific accounts used may vary depending on the organization's chart of accounts, but typically, the following entry is made:
Debit: Supplies Expense
Credit: Supplies
Adjusting Entry for Unused Supplies
As of May 31, 2021, there were $4,700 of unused supplies that need to be accounted for in the financial statements. To accurately reflect the value of these unused supplies, an adjusting entry must be recorded.
The adjusting entry for unused supplies as of May 31, 2021, involves recognizing the decrease in the value of supplies over time. This adjustment is necessary to ensure that the financial statements provide a true and fair view of the organization's financial position.
By debiting the Supplies Expense account, the organization acknowledges the expense incurred due to the unused supplies. This expense is recognized in the period in which the supplies were determined to be no longer needed or usable.
The corresponding credit to the Supplies account reduces the asset value on the balance sheet. Since the supplies are no longer available for use, their value as an asset decreases, and this adjustment reflects that change in value.
Recording this adjusting entry ensures that the financial statements accurately reflect the current value of supplies on hand as of the balance sheet date. It also helps to prevent overstatement of assets and understatement of expenses, providing stakeholders with a more realistic picture of the organization's financial health and performance.
In conclusion, the adjusting entry for $4,700 of unused supplies as of May 31, 2021, involves debiting an expense account to recognize the expense related to the unused supplies and crediting an asset account to reflect the decrease in the value of supplies on the balance sheet. This adjustment is crucial for maintaining the integrity and accuracy of the financial statements.