Adjustment No. 7. On May 15, Huske's Consultants acquired supplies for $400. At the end of the accounting period $100 of supplies remained on hand. The difference ($300 = $400 - $100) was used during the year and should be expensed. The adjustment decreases assets and equity. The decrease in assets (Supplies) is recorded as a credit, and the decrease in equity (Supplies Expense) is recorded as a debit:
Illustration 42: Effect of supplies expense in T accounts
Assets |
= |
Liabilities |
+ |
Equity |
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Supplies |
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Supplies Expense |
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Credit |
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Debit |
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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 |
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| (300) |
= |
n/a |
+ |
(300) |
n/a |
- |
(300) |
= |
(300) |
n/a |
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