Adjusting Enteries are required at the end of the period to ensure that accrual

Question

Adjusting Enteries are required at the end of the period to ensure that accrual accounting principles are applied.  At the beginning of the month, $350 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 the month $100 of supplies remained.  Develop the adjusting entry.  (1) name the accounts impacted and explain how to use the format 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 - $4,000

Accumulated Depreciation - Credit - $4,000

(2) explain how the Accounting Equation is impacted.

The accounting formula is:

Assets = Liabilities + Equity

Here, the changes are:

Assets = ($4,000) - a reduction, as Accumulated Depreciation is a Contra Asset

Liabilities = No Change

Equity = ($4,000) - a reduction as expense lowers the Equity Balance

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