On April 1, Jackson Company purchased $2,440 of supplies on account. On April 1, Jackson Company debited Supplies Expense, which is an alternate way of recording the initial expenditure. By the end of the calendar year, $390 of supplies was used.

Required:

Journalize the adjusting entry on December 31.

The answer is given below;

Explanation:

Supplies (2,440-390) Dr.$2,050

Supplies Expense/Retained Earnings Cr.$2,050

The correct entry on April 1 should have been

Supplies Dr.$2,440

Accounts Payable Cr.$2,440

But erroneously instead of debiting supplies, the supplies expense was debited and as result supplies expense was overstated and supplies understated. The entry made was;

Supplies expense Dr.$2,440

Accounts Payable Cr.$2,440

As at December 31, $390 supplies have been expense out, therefore by the difference amount (2,440-390), the expense and supplies will be reinstated to their actual values