A company records the following journal entry:\[\begin{align*}\text{Debit: Supplies Expense} \quad \$500 \\\text{Credit: Supplies} \quad \$500\end{align*}\]Which of the following transactions would cause this journal entry to be made?

• A. Receiving cash from a customer for services performed
• B. Purchasing supplies on account
• C. Paying cash to purchase new equipment
• D. Adjusting for supplies used during the period

Answer: (D)

Verified step by step guidance

1. Understand the journal entry: The debit to 'Supplies Expense' indicates an increase in expense, while the credit to 'Supplies' indicates a decrease in the asset account for supplies. This suggests that supplies were used during the period and need to be accounted for as an expense.
2. Recognize the purpose of adjusting entries: Adjusting entries are made at the end of an accounting period to ensure that revenues and expenses are recorded in the correct period. In this case, the adjustment reflects the supplies used during the period.
3. Analyze the options provided: Receiving cash from a customer for services performed would involve accounts like 'Cash' and 'Service Revenue,' not 'Supplies Expense' or 'Supplies.' Purchasing supplies on account would involve 'Supplies' and 'Accounts Payable,' not 'Supplies Expense.' Paying cash to purchase new equipment would involve 'Equipment' and 'Cash,' not 'Supplies Expense.'
4. Match the journal entry to the correct transaction: The journal entry aligns with the transaction of adjusting for supplies used during the period because it reflects the consumption of supplies as an expense and reduces the supplies asset account.
5. Conclude the reasoning: The correct transaction is 'Adjusting for supplies used during the period,' as this journal entry is specifically designed to account for the supplies that were consumed and need to be expensed in the current accounting period.