Question

Brief Exercise 3-3

Wow Advertising Company’s trial balance at December 31 shows Supplies £7,654 and Supplies Expense £0. On December 31, there are £1,811 of supplies on hand.

Prepare the adjusting entry at December 31 and, using T-accounts, enter the balances in the accounts, post the adjusting entry, and indicate the adjusted balance in each account.

Answer 1

Ans:

Adjusting entry on Dec 31:

Balance of Supplies account got reduced to £1,811 from £7,654, Therefore, the advertising company needs to make an adjusting entry to get the reduced balance of supplies account by debiting supplies expense account and crediting supplies account with the difference in amount i.e., £5.843 (£7,654 - £1,811). This means that  £5.843 of supplies has been consumed by the company.

Date	Account Name	Debit	Credit
Dec 31	Supplies expense	£5.843
	Supplies		£5.843
	(Being supplies consumed and inventory reduced)

T- account after adjusting entry:

Supplies account

Particulars	Debit	Particulars	Credit
Beginning balance	£7,654	Supplies expense	£5.843
Ending balance	£1,811

Supplies expense account

Particulars	Debit	Particulars	Credit
Supplies	£5,843