Accounting Chapter 3 Notes

Ex land buildings furniture as a business uses the

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Unformatted text preview: EXPENSES Prepaid Rent Prepaid Expense May 1 3,000 May 31 1,000 May 31 1,000 Balance 2,000 Balance 1,000 Supplies - Supplies are also accounted for a prepaid expense. For example, a company brought supplies for $500 on May 2, and again on May 15, spent $200 on supplies. The trail balance will list supplies with a $700 dollar debit balance, but the companies Balance sheet SHOULD NOT report supplies of $700. - why not? B/c the cost of supplies used becomes supplies expenses. To measure supplies, companies need to count supplies on hand at the end of May. ASSETS EXPENSES Supplies Supplies Expenses May 2 $ 500 ??? May 15 200 Supplies Used ??? Catherine Liou Accounting 121 Feb 17, 2013 Balance 600 Balance ??? We can solve for supplies by doing… Beginning Supplies + Supplies Purchased – Supplies Used = Ending Supplies $0 + (500+200) - Supplies Used = $600 Supplies Used = $100 Adjusting Entry update should look like" May 31 Supplies Expenses ($700 – $600) (E+) 100 Supplies (A- ) 100 To record Supplies used. Then posting should look like" ASSETS EXPENSES Supplies Supplies Expense...
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