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, $1350 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 hte month, $500 of supplies remained.  Develop the adjusting entry.  (1)  name the accounts impacted and how using the formal account name/debit or credit/dollar amount and (2)  explain how the Accounting Equation is impacted

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 - $500
Accumulated Depreciation - Credit - $500


(2) explain how the Accounting Equation is impacted.

The accounting formula is:

Assets = Liabilities + Equity

Here, the changes are:

Assets = ($5,00) - a reduction, as Accumulated Depreciation is a Contra Asset
Liabilities = No Change
Equity = ($5,00) - a reduction as expense lowers the Equity Balance

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