![]() ![]() ![]() In this accounting system, however, we expense them when we get around to it, which is just before we create the financial statements. We pay for the supplies so we have them on hand when we need them, and then expense them as we use them. That’s because this is a deferred expense. This account needs to be adjusted, and a quick look at the ledger account reveals that none of the supplies used up during the year were recorded as expenses. ![]() You check Sally’s note to you and see the actual balance was $650. In January, as you are going through the unadjusted trial balance, line by line, one of the first asset accounts you come across after verifying that the checking account was accurate was supplies, which shows a balance of $7,700. She fills out a little worksheet that you designed and puts in on your desk on her way out to her New Year’s Eve party. So, ending paints supplies “inventory” is $650 in her professional opinion. Let’s say her end of year count is 65 cans of paint, and the last purchase was that December 1 purchase of 120 cans at $10 each. In this case, it looks as if the company only produces financial statements at the end of the year because there are no adjustments to the supplies inventory during the year.Īt the close of business on December 31, Sally, the supplies manager, counts the cans of paint and makes some kind of calculation about how much those cans cost. Someone has the job of counting the paint on hand at the end of each accounting period and putting a historical cost to it. They are only recording when they buy paint. They don’t make a journal entry when they use a gallon or two of paint. ![]()
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