How do the adjusting entry to record the supplies used during the period affect the financial statements?Multiple select question.Supplies on the balance sheet will decreaseAccounts Payable on the balance sheet will decreaseSupplies Expense on the income statement will increaseNet Income on the income statement will decrease
Question
How do the adjusting entry to record the supplies used during the period affect the financial statements?Multiple select question.Supplies on the balance sheet will decreaseAccounts Payable on the balance sheet will decreaseSupplies Expense on the income statement will increaseNet Income on the income statement will decrease
Solution
The adjusting entry to record the supplies used during the period will have the following effects on the financial statements:
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Supplies on the balance sheet will decrease: This is because the supplies that were used up during the period are no longer available as a current asset.
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Accounts Payable on the balance sheet will not be affected: The use of supplies does not involve the company's payable accounts. Therefore, there will be no change in the Accounts Payable on the balance sheet.
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Supplies Expense on the income statement will increase: The cost of the supplies that were used up during the period will be recorded as an expense on the income statement, increasing the total expenses for the period.
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Net Income on the income statement will decrease: As the Supplies Expense increases, the total expenses of the company also increase. Since net income is calculated as revenues minus expenses, an increase in expenses will result in a decrease in net income.
Similar Questions
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Consider the following independent scenarios. For each, you need to identify three things: (i) the type of adjusting entry (either prepaid expense, prepaid income, accrued expense, accrued income, depreciation or doubtful debts) (ii) the accounts involved and the adjustment that is needed (increase/decrease) (iii) the effect on the Income Statement AND Balance Sheet of recording the adjustment. (a) A consulting firm had office supplies on hand at the start of May worth $450 recorded as an asset. During May they purchased another $250 worth of supplies. At the end of May, there were only $130 worth of supplies remaining. (b) A delivery business purchased a new truck on 1 April for $100,000. It was expected to last for five years with $20,000 residual value. Depreciation needs to be recorded at the end of June the same year. (c) A business receives its electricity account every three months, with the next one expected at the end of July. It needs to record electricity consumption for May and June, which is estimated at $400 per month. (d) A business has an investment of 1,000 shares of a publicly listed company. The dividend of $0.20 per share has just been announced at 30 June, but will not be paid for several weeks. (e) A gym received a $300 payment from a member on 1 June 2024 for three months membership, recording it as a liability. An adjustment is required at 30 June. (f) A business needs to increase its allowance for doubtful debts by $2,000. In addition, it has been notified that a customer who owes $250 will not pay.
When an adjusting entry is made for supplies used, the Supplies Expense account is increased and which account is decreased?Multiple Choicefees incomecashsuppliesaccumulated depreciation
The adjusting entry for supplies used during the period will result in Blank______ to the Supplies Expense account.Multiple choice question.an increaseno changea decrease
The adjustment for supplies used during the period will result in a debit to the ______ account and a credit to the ______ account.Multiple choice question.Supplies; Supplies ExpenseSupplies Expense; SuppliesInventory; Cost of Goods SoldCost of Goods Sold; Revenue
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