Adjusting Entry for Supplies Expense

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on February 21, 2023

The accounting process for office or store supplies is similar to the procedure followed for prepaid or unexpired expenses. Specifically, they are initially recorded as assets by debiting the office or store supplies account and crediting the cash account.

At the end of the accounting period, the cost of supplies used during the period becomes an expense and an adjusting entry is made.

Without this adjusting entry, the income statement will show higher income and the balance sheet will show supplies that do not exist.

Accounting Process for Supplies

Entry at the Time of Purchasing Supplies

When supplies are purchased, they are recorded by debiting supplies and crediting cash. The journal entry is given below.

Time of Purchasing Supplies Entry

Adjusting Entry at the End of Accounting Period

At the end of the accounting period, the cost of the supplies used during the period is computed and an adjusting entry is made to record the supplies expense. This entry is made as follows:

Adjusting Entry at the End of Accounting Period

Example

The Green Company purchased office supplies costing $500 on 1 January 2016. Out of this, supplies costing $150 remained unused on 31 December 2016.

Required: In the company's books:

  • Make a journal entry on 1 January 2016, when the office supplies are purchase
  • Make an adjusting entry on 31 December 2016 to record the supplies expense

Solution

1. When supplies are purchased

Journal Entry for Supplies Purchased

2. When cost of supplies used is recorded as supplies expense

Adjusting Entry Solution

Supplies expense for the period = $500 - $150 = $350

Adjusting Entry for Supplies Expense FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.