A physical count of supplies on hand at the end of May for Masters, Inc. Indicated $1,245 of supplies on hand. The general ledger balance before any adjustment is $2,050. What is the adjusting entry for office supplies that should be recorded on May 31?

Answer: In your entry you should debit a loss account and credit a reduction in your asset. Eg

Office Suplies Loss 805

Office Supplies 805

Explanation: Once you record the entry above the balance of account Office Suplies should be reduced from 2050 to 1245. By this way, the reality (physical count) and the accounting match.

Debit Supplies Expense $805 and credit Supplies $805.

Explanation:

The variance or discrepancy between the physical count of supplies on hand and the general ledger balance must be corrected. this is done by passing an adjustment entry that will bring the general ledger balance in line with the physical inventory.

The difference between the physical count and the system balance is $805, To bring the book balance to reflect the physical count value, we need to reduce the value from $2,050 to $1,245 by passing a credit entry to Supplies account and a corresponding debit to Supplies expenses account.

The International Accounting standard requires inventories be measured at the lower of cost and net realisable value (NRV).