Double-entry Accounting System

4.21. Analysis of supplies expense adjusting entry

Adjustment No. 7: On May 15, Huske's Consultants acquired supplies for $400 (see Event No. 2). At the end of the accounting period $100 of supplies remained on hand. The difference of $300 (i.e., $400 - $100) shows the amount of supplies used during the year that should be recognized as a supplies expense. The adjustment decreases assets and equity. The decrease in assets (Supplies) is recorded as a credit, and the decrease in equity (by increasing Supplies Expense) is recorded as a debit:

Illustration 42: Effect of supplies expense in T accounts

Assets

=

Liabilities

+

 Equity

Supplies

 

 

 

Supplies Expense

 

Credit
(A7) - 300

 

 

 

 

Debit
+ Expense
[ - Equity]
(A7) - 300

 

This is an asset use transaction:

Illustration 43: Effect of supplies expense in the horizontal model

Assets

=

Liabilities

+

Equity

Rev.

-

Exp.

=

Net Inc.

Cash Flow

(300)

=

n/a

+

(300)

n/a

-

(300)

=

(300)

n/a

 

4.22. Presentation of T-accounts for accounting period

We are now going to transfer all transactions to T accounts. Note that we meet the two requirements of the double-entry recording system:

Total Debits = Total Credits

and

Total Assets = Total Liabilities + Total Equity

If the two requirements are satisfied, we are sure that all amounts were posted.

Illustration 44: Summary of all accounts with transactions

Assets

 = 

Liabilities

 + 

 Equity

Cash

 

Accounts Payable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contributed Capital

(1) 10,000

(5)   4,000
(7)   1,500
(8)   3,600
(9)      700
 

(4)       600
(6)    2,400
(10) 3,000
(11) 2,000
(12)    400
(14)    300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12)    400

(2)    400
(13)  800

 

(1)  10,000

 

Bal. 10,000

 

Bal.  800

 

 

 

 

Consulting Revenue

Unearned Revenue

 

(3)   2,600
(9)      700
(A3) 1,800

(A3)  1,800

(8)   3,600

Bal. 11,100

 

 

Bal. 1,800

 

 

 

Bal.  5,100

Accounts Receivable

Notes Payable

 

(3)   2,600

(7)  1,500

 

(5)   4,000

Interest Revenue

Bal.  1,100

 

 

Bal.  4,000

 

(A4)    100

 

 

 

 

Bal.     100

Supplies

Interest Payable

 

(2)      400

(A7)    300

 

(A1)   163

Operating Expense

Bal.    100

 

 

Bal.   163

(4)   600

 

 

 

Bal.  600

 

Prepaid Rent

Salaries Payable

 

(6)   2,400

(A2)  1,400

 

(A6)   600

Salaries Expense

Bal.   1,000

 

 

Bal.    600

(A6)    600

 

 

 

Bal.    600

 

Notes Receivable

 

 

(10)   3,000

 

 

Office Maint. Expense

Bal.   3,000

 

 

(13)   800

 

 

 

Bal.   800

 

Interest Receivable

 

 

(A4)    100

 

 

Interest Expense

Bal.    100

 

 

(A1)   163

 

 

 

Bal.   163

 

Office Equipment

 

 

(11)   2,000

 

 

Depreciation Expense

Bal.   2,000

 

 

(A5)   800

 

 

 

Bal.    800

 

Accum. Depreciation

 

 

 

(A5)   800

 

Supplies Expense

 

Bal.    800

 

(A7)   300

 

 

 

Bal.   300

 

 

 

 

 

 

Rent Expense

 

 

(A2) 1,400

 

 

 

Bal  1,400

 

 

 

 

 

 

Distributions

 

 

(14)    300

 

 

 

Bal.   300

 

 

Assets
17,600

=

Liabilities
7,363

+

Equity
10,237

Assets
17,600

=

Claims
17,600

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