The policy at Pharoah Company is to expense all office supplies at the time of purchase. On the last day of the accounting period, there are $1360 of unused office supplies on hand and the balance of supplies expense is $4340. What should the accountant do?

Question

Business

Margaret Lowe

10 January, 19:47

The policy at Pharoah Company is to expense all office supplies at the time of purchase. On the last day of the accounting period, there are $1360 of unused office supplies on hand and the balance of supplies expense is $4340. What should the accountant do?

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Answers (1)

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Urijah Riddle · Answer 1

The accountant should debit Supplies Account by 1360 and credit the Supplies Expense account by 1360.

Explanation:

Normally we pass the adjusting entries at the year end and do the reverse and calculate supplies on hand at end and determine the supplies expense at the year end by taking difference of balance in supplies account and the supplies on hand.

In this case we are doing the reverse as we are taking the balance of supplies expense account and the supplies on hand and calculate the difference. The difference is the actual supplies that have been used. The supplies on hand are an asset and should be debited to supplies account and the expense is overstated by the same amount of 1360 and should be reduced so it is credited.