Which accounts are affected when making the adjusting entry for office supplies at the end of an accounting period?

• A. Office Equipment and Cash
• B. Supplies Expense and Supplies
• C. Supplies and Accounts Payable
• D. Accounts Receivable and Supplies

Answer: (B)

Verified step by step guidance

1. Understand the nature of the transaction: Adjusting entries for office supplies are made to account for the supplies used during the accounting period. This ensures that expenses are properly matched with revenues in accordance with the matching principle.
2. Identify the accounts involved: The two accounts affected are 'Supplies Expense' (to record the cost of supplies used) and 'Supplies' (to reduce the balance of unused supplies).
3. Determine the adjustment amount: Calculate the value of supplies used during the period by subtracting the ending balance of supplies from the beginning balance plus any purchases made during the period.
4. Prepare the journal entry: Debit 'Supplies Expense' to increase the expense account and credit 'Supplies' to decrease the asset account. The entry ensures proper allocation of costs.
5. Review the impact: The adjusting entry ensures that the financial statements accurately reflect the expense incurred and the remaining supplies on hand, adhering to the accrual basis of accounting.