Question

The Book Binders Company’s Supplies account balance at the end of the period is $44,000. Supplies totaling $37,600 have been purchased during the period and debited to Supplies. A physical count shows $10,000 worth of supplies on hand at the end of the period.

Answer 1

• Supplies account balance at the end of period = $ 44,000

This is the debit balance of an “Asset” account which is “Unadjusted”

• However, physical count shows $ 10,000 worth of supplies.

This $ 10,000 should be the “adjusted balance” of the Supplies account.

• Hence, the difference between “Unadjusted” balance and “physical count” balance refers to the the Supplies amount that has been used or consumed in the business process. The difference is treated as “Supplies expense”

Supplies Expense = $ 44,000 – $ 10,000 = $ 34,000

• Beginning Balance for Supplies would have been Total purchases - Unadjusted balance = 37600 - 44000 = $ 6,400
• Full detail regarding Supplies account:

Beginning Balance	$          6,400.00	Debit
Purchases	$       37,600.00	Debited by
Supplies expense	$     (34,000.00)	Credited by
Ending Balance (=Physical balance) [ 6400 + 37600 – 34000]	$       10,000.00	Debit