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Hallo,
In the following example:
At the beginning of December, Global Corporation had $2,000 in supplies on hand. During the month, supplies purchased amounted to $3,000, but by the end of the month the supplies balance was only $800. What is the appropriate month-end adjusting entry?
Answer: Debit Supplies Expense $4,200, credit Supplies $4,200
– why Dr Supplies Expense and Cr Supplies – the 4200 isn’t that supplies that have been sold, as we are left with a closing inventory of supplies of 800?
Supplies is not the same as inventory for resale.
Supplies may be inventory for other purposes, for example, we may have maintenance spares as supplies, consumable supplies (oil, etc for machinery), strictly speaking, stationary could also be supplies.
If we are carrying a significant amount of consumable supplies as stock, they should be recorded as an asset. So in this case, supplies have not been sold, they have been used up.
Hope this helps.
Further to the above answer by David.The reduction of an asset always requires a credit entry.This is true whether by reason of sale,impairment,revaluation or depreciation.
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