Which of the following is the correct adjusting entry to record the cost of supplies used during the accounting period?

• A. Debit Supplies; Credit Supplies Expense
• B. Debit Supplies Expense; Credit Supplies
• C. Debit Supplies Expense; Credit Cash
• D. Debit Cash; Credit Supplies Expense

Answer: (B)

Verified step by step guidance

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. Identify the nature of the transaction: The problem involves supplies used during the accounting period. Supplies are initially recorded as an asset when purchased, and their usage is recognized as an expense over time.
3. Determine the accounts affected: When supplies are used, the Supplies account (an asset) decreases, and the Supplies Expense account (an expense) increases to reflect the cost of supplies consumed.
4. Formulate the adjusting entry: The correct adjusting entry is to debit Supplies Expense (to increase the expense) and credit Supplies (to decrease the asset). This aligns with the accrual basis of accounting.
5. Review the options provided: Compare the formulated adjusting entry with the options given in the problem. The correct option is 'Debit Supplies Expense; Credit Supplies,' as it accurately reflects the adjustment for supplies used during the period.