Let’s be real—most businesses out there need supplies to keep things running smoothly. Whether it’s printer paper that seems to vanish overnight or those tiny paperclips that somehow end up everywhere except your desk, these little items are the unsung heroes driving employee efficiency and, ultimately, the company’s income.

Now, here’s where the accounting adventure begins: making an adjusting entry for supplies. This typically happens at the end of an accounting period, right before you polish up those financial statements. Think of it as tidying up your financial closet—making sure everything is where it should be. Depending on your company’s pace (and how quickly those pens disappear), adjusting entries for supplies might be made weekly or monthly, but let’s face it, monthly is the sweet spot for most of us.

These adjustments help you keep track of what’s been used up and what’s still hanging around in the supply closet (probably buried under last year’s holiday decorations). By making these entries, you’re ensuring your financial statements tell the real story—highlighting which supplies are still assets chilling on your balance sheet and which ones have turned into expenses on your income statement. But before we dive deeper into the nitty-gritty, let’s make sure we’re all on the same page about what “supplies” actually mean in the accounting world (hint: it’s not just about hoarding office pens).

See also: Sale of Assets journal entry examples

What Are Supplies?

Supplies are the everyday items that keep your business humming along. We’re talking about tape that holds packages together, printer toner that keeps reports rolling, tissues for those unexpected sneezes, boxes for shipping products, pens that somehow always go missing, and even the bubble wrap that protects your precious merchandise. These are the essentials you purchase for use within your organization or for packaging products headed out the door.

Not only do supplies make life easier for your team by boosting efficiency and productivity, but they also play a sneaky role in driving income. After all, that bubble wrap and those boxes ensure your products arrive safely, keeping customers happy and coming back for more.

Because supplies are used daily—and let’s be honest, they tend to disappear quickly—most companies opt to buy them in bulk. It’s like a Costco run on steroids: more stuff for less cash. Bulk purchasing not only saves money (hello, discounts!) but also saves you from frequent supply runs that eat up time.

To keep track of all these office goodies, businesses use journal entries. Think of them as the diary entries of your financial life—recording every transaction to keep things tidy. But here’s where it gets interesting: the way you record these supply purchases depends on how much you splash out.

If the amount spent is insignificant—so small it wouldn’t make your accountants raise an eyebrow—you can record it directly as a supplies expense. Easy peasy, no adjusting entries needed. But if you’ve gone on a supply shopping spree and dropped some serious cash, that purchase is treated as an asset because you haven’t used everything up yet. As you start dipping into your stash of supplies, you’ll need to adjust your records to reflect what’s been used and what’s still waiting for its moment in the spotlight. That’s where adjusting entries come in!

See also: Gain on Sale journal entry examples

Making Adjusting Entries for Supplies

Alright, let’s talk about how the magic happens—the nuts and bolts of making adjusting entries for supplies.

When you buy supplies in bulk (because nobody wants to run out of printer ink mid-report), you initially record them as an asset in your supplies account. Think of it like stocking up your pantry—those supplies are there, ready to be used.

As you start using up these supplies (and we all know how fast that can happen), it’s time to make an adjusting entry in your general ledger. This entry reflects the reduction in your supplies on hand. When done properly, the value of the remaining supplies matches what’s recorded in your supplies account, and the value of the used supplies shows up in your supplies expense account.

So, how exactly do you make this adjusting entry? Let’s dive in.

Step 1: Take Stock of Your Supplies (Time to Play Detective)

First things first—you need to know what’s actually left in your supply stash. Put on your detective hat and take an inventory of the supplies you still have on hand. Add up their value to get the total worth of your remaining goodies.

For example, maybe you’ve got:

• 1 carton of paper valued at $30 (because who doesn’t love printing reams of documents?).
• A pack of pens valued at $10 (hopefully ones that won’t vanish into thin air).
• 2 boxes of paperclips valued at $8 (because you can never have too many paperclips).

Add them up: $30 + $10 + $8 = $48 worth of supplies still kicking around.

Step 2: Figure Out What You’ve Used (The Case of the Missing Supplies)

Now, subtract the value of your remaining supplies from your starting balance to find out how much you’ve used. If you started with $100 worth of supplies, here’s the math:

$100 (starting balance) – $48 (supplies on hand) = $52 used up.

Looks like $52 worth of supplies have made their way into the wild!

Step 3: Make the Adjusting Entry (Time to Set the Record Straight)

Now that you know how much has been used, it’s time to update your accounts.

• Debit the supplies expense account by the amount you’ve used ($52). This increases your expenses on the income statement.
• Credit the supplies on hand account by the same amount ($52). This decreases the asset value on your balance sheet.

This adjusting entry ensures your financial statements accurately reflect reality—because nobody likes surprises during tax season!

See also: Credit Sales Journal Entry Examples

What Is the Entry to Adjust for the Cost of Supplies?

The adjusting entry for the cost of supplies involves a little accounting magic called double-entry bookkeeping. Here’s the scoop:

• Debit the supplies expense account. This increases your expenses, reflecting the cost of supplies you’ve used.
• Credit the supplies or supplies on hand account. This decreases your assets, showing that your stockpile has shrunk.

This is based on the fundamental double-entry accounting rules, where every debit has an equal and opposite credit. It keeps your books balanced and your accountants happy!

See also: Cash sales journal entry examples

Examples of Adjusting Entry for Supplies

Let’s bring this to life with some real-world examples. Supplies normally include items businesses use regularly, like sticky notes, binder clips, coffee (lots of coffee), receipt paper, markers, envelopes—you get the idea. When you purchase these in bulk, they initially get recorded as an asset. The journal entry involves two accounts:

• Supplies or Supplies on Hand
• Accounts Payable or Cash

If you paid cash for your supplies, the journal entry would look like this:

Date	Account	Debit	Credit
DD/MM/YYYY	Supplies or Supplies on Hand	$$
	Cash		$$

If you purchased the supplies on credit (because who doesn’t love a good “buy now, pay later” deal?), the entry would be:

Date	Account	Debit	Credit
DD/MM/YYYY	Supplies or Supplies on Hand	$$
	Accounts Payable		$$

As you start using those supplies, you’ll need to make an adjusting entry to reflect the reduction in your supplies on hand. This helps keep your financial statements accurate and up-to-date.

The adjusting entry involves:

• Debiting the supplies expense account (increasing expenses)
• Crediting the supplies or supplies on hand account (decreasing assets)

Here’s how the adjusting entry looks:

Date	Account	Debit	Credit
DD/MM/YYYY	Supplies Expense	$$
	Supplies or Supplies on Hand		$$

Example of Adjusting Entry for Supplies

Let’s say Alphabet purchased supplies worth $7,000 at the beginning of 2023. After reviewing their supplies at the end of February, they discovered that $600 worth of supplies had been used up during the month. To reflect this, the company will make the following adjusting entry:

Date	Account	Debit	Credit
28/02/2023	Supplies Expense	$600
	Supplies on Hand		$600

The debit to the supplies expense account increases expenses by $600, while the credit to the supplies on hand account reduces the asset by the same amount. This keeps everything in balance and accurately reflects the company’s financial position.

See also: Deferred revenue journal entry with examples

Takeaways

The adjusting entry for supplies is a crucial part of keeping your financial statements accurate. By adjusting your supplies accounts at the end of each accounting period, you’re ensuring that your balance sheet reflects the supplies you still have (assets), and your income statement shows the supplies you’ve used up (expenses). This practice keeps your financial records transparent and helps in making informed business decisions.

Remember, if you make bulk purchases of supplies, these adjusting entries aren’t just a good idea—they’re essential. They help prevent your financial statements from being skewed by outdated information. However, if your supplies are expensed immediately upon purchase or the cost is negligible, you might skip the adjusting entry altogether. The key is to match expenses with revenues in the period they’re incurred, providing a true picture of your business’s financial health.

So the next time you’re restocking those office supplies, remember that a little adjustment goes a long way in keeping your finances in check!