Adjusting Entries are required at the end of the period to ensure that accrual a

Question

Adjusting Entries are required at the end of the period to ensure that accrual accounting principles are applied. At the beginning of the month, $350 of office supplies were purchased. There was not a beginning balance and the one purchase was the only one for the month. At the end of the month, $100 of supplies remained. Develop the adjusting entry. (1) Name the accounts impacted and explain how to use the format account name/debit or credit/dollar amount (10 points), and (2) explain how the Accounting Equation is impacted. (10 points)                    (Points : 20)

Explanation / Answer

Develop the adjusting entry for year end.

(1) Name the accounts impacted and how using the format account name/debit or credit/dollar amount:

Depreciation Expense - Debit - $4,000

Accumulated Depreciation - Credit - $4,000

(2) explain how the Accounting Equation is impacted.

The accounting formula is:

Assets = Liabilities + Equity

Here, the changes are:

Assets = ($4,000) - a reduction, as Accumulated Depreciation is a Contra Asset

Liabilities = No Change

Equity = ($4,000) - a reduction as expense lowers the Equity Balance

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