Supplies on Hand Adjusting Entry Example
Adjusting entries for supplies on hand are necessary to account for the usage of supplies over a period. At the end of an accounting period, the supplies account needs to reflect the actual amount of supplies remaining.
Scenario:
At the beginning of the month, a company has supplies worth ₹15,000. During the month, the company purchased additional supplies worth ₹10,000. At the end of the month, a physical count reveals that supplies on hand are worth ₹8,000.
1. Initial Purchase of Supplies
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2024-06-01 | Supplies A/c | 10,000 | |
| To Cash/Bank A/c | 10,000 | ||
| (Being supplies purchased) |
2. Adjusting Entry for Supplies Used
To adjust for the supplies used, we need to determine the cost of supplies used during the period:
- Beginning supplies: ₹15,000
- Additional supplies purchased: ₹10,000
- Total supplies available: ₹25,000
- Ending supplies on hand: ₹8,000
- Supplies used: ₹25,000 - ₹8,000 = ₹17,000
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2024-06-30 | Supplies Expense A/c | 17,000 | |
| To Supplies A/c | 17,000 | ||
| (Being adjustment for supplies used during the period) |
Explanation:
Initial Purchase of Supplies:
- Supplies A/c is debited to reflect the increase in supplies.
- Cash/Bank A/c is credited to record the cash outflow for the purchase.
Adjusting Entry for Supplies Used:
- Supplies Expense A/c is debited to recognize the expense for supplies used during the period.
- Supplies A/c is credited to decrease the supplies account to match the actual amount of supplies on hand.
