GreenSource Company began the period with $330 in supplies. During the month, an additional $1,500 of supplies were purchased. A physical inventory at the end of the period revealed that there were $585 of supplies on hand. The adjusting entry should include a

Debit Supplies expense account (P/L) $1,245

Credit Supplies account (B/S) $1,245

Explanation:

The adjustment required is for the supplies used up during the period.

This can be determined by the net movement in the supplies account considering the opening balance, the purchases or additions and the closing balance.

Supplies used up = $330 + $1,500 - $585

= $1,245

The adjusting entries required is

Debit Supplies expense account (P/L) $1,245

Credit Supplies account (B/S) $1,245

Being entries to recognize supplies used up during the period

A) credit to Supplies for $1,245.

Explanation:

Beginning inventory $330

+ purchases $1,500

- ending inventory $585

total supplies consumed $1,245

The adjusting entry should include a credit to supply inventory, since it is an asset account and it decreases. Since supplies are not usually considered production costs, they are treated as expenses (generally administrative expenses). All expenses are debited.

The complete adjusting entry should be:

End of period date, adjusting entry for consumed supplies.

Dr Supplies expense 1,245

Cr Supplies 1,245