Question

1) A company had $4,300 in its “Supplies” account before adjusting entries.

A physical count showed that $1,700 of supplies are on hand at the end of the year.

What is the amount of Supplies Expense that would be recorded as an adjusting entry?

2) Which types of adjusting entries increase expenses? ( not related question 1 , this is different question)

3)

What amount carries forward from the Statement of Retained Earnings to the Balance Sheet?

Answer 1

Part 1

A company had $4,300 in its “Supplies” account before adjusting entries.

A physical count showed that $1,700 of supplies are on hand at the end of the year

Supplies Expense that would be recorded as an adjusting entry is $4300 - $1700= $2600 as on physical count closing stock will be valued at 1700 but in books supplies amounting to 4300 thus the remaining amount of 2600 will be expensed off.

Part 2

Adjusting entries deal mainly with revenue and expenses. When you need to increase a revenue account, credit it. And when you need to decrease a revenue account, debit it. Oppositely, debit an expense account to increase it, and credit an expense account to decrease it.

Adjusting entries examples

Take a look at these three adjusting entries examples and solutions to further clarify the topic.

Example #1: Accruals

Let’s say you operate a lawn mowing service. You mowed a customer’s lawn in one accounting period, but you will not bill the customer until the following accounting period. You performed a service worth $1,000.

Even though you won’t bill the customer until the following period, you still need to record the amount of your service in your books.

To record the amount of your services performed in one accounting period, you need to create the following adjusting entry. Debit your accounts receivable account and credit your service revenues account.

Date	Account	Notes	Debit	Credit
6/30/2018	Accounts Receivable	Lawn services	1,000
	Service Revenues			1,000

Creating this adjusting entry will increase the amount of your accounts receivable account in your books.

Example #2: Deferrals

You run a jelly of the month subscription business. A customer pays you $300 for a 12-month supply of jelly. Because the customer pays you before they receive all their jelly, not all the revenue is earned. Instead, it is deferred revenue. However, your cash account increases because your business receives more cash.

Date	Account	Notes	Debit	Credit
1/1/2018	Cash	Payment for jelly subscription	300
	Deferred Revenue			300

Each month, one-twelfth of the deferred revenue becomes earned revenue, which works out to $25 per month ($300 / 12). Create an adjusting entry to decrease your deferred revenue account by debiting it, and increase your revenue account by crediting it.

Date	Account	Notes	Debit	Credit
1/15/2018	Deferred Revenue	One month of jelly subscription	25
	Revenue			25

Example #3: Estimates

You set up an allowance for doubtful accounts. An allowance for doubtful accounts is a contra-asset account that decreases your accounts receivable. It estimates that some of your customers won’t pay you.

Let’s say you predict that you won’t receive $800 of your receivables. Because a debit increases expenses, you must debit your bad debts expense account. Take a look at your adjusting entry:

Date	Account	Notes	Debit	Credit
1/5/2018	Bad Debts Expense	Estimated default payments	800
	Allowance for Doubtful Accounts			800

PArt 3

1700 will be taken as closing stock and it will be carried forward and 2600 will be expensed off .

In case of any further query feel free to ask in comment section .