Which of the following correctly lists the steps in the adjusting process for supplies in the proper order?

• A. 1. Increase Supplies Expense; 2. Increase Supplies.
• B. 1. Determine the supplies used during the period; 2. Record an adjusting entry to decrease Supplies and increase Supplies Expense.
• C. 1. Record an adjusting entry to increase Supplies; 2. Determine the supplies used during the period.
• D. 1. Determine the supplies purchased during the period; 2. Record an adjusting entry to increase Supplies Expense and decrease Cash.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of adjusting entries. Adjusting entries are made at the end of an accounting period to update account balances before preparing financial statements. They ensure that revenues and expenses are recognized in the period they occur.
2. Step 2: Identify the supplies used during the period. This involves calculating the difference between the beginning supplies balance, any supplies purchased during the period, and the ending supplies balance.
3. Step 3: Record the adjusting entry. To account for the supplies used, decrease the Supplies account (an asset) and increase the Supplies Expense account (an expense). This reflects the consumption of supplies during the period.
4. Step 4: Use the correct journal entry format. The adjusting entry will typically look like this: Debit Supplies Expense and Credit Supplies for the amount of supplies used.
5. Step 5: Verify the adjustment. Ensure that the Supplies account reflects the remaining balance of unused supplies and that the Supplies Expense account accurately represents the cost of supplies used during the period.