If the dollar amount of supplies is significant, the amount of unused supplies as of the balance sheet date should be reported in the asset account Supplies or Supplies on Hand. The supplies that have been used during the accounting period should be reported in the income statement account Supplies Expense. Basically, supplies are assets until they are used. When they are used, they become an expense.
When the dollar amount of supplies is not significant, many companies will simply debit Supplies Expense when the supplies are purchased. They will report no supplies on hand or a small constant amount. This less-than-perfect accounting treatment of an insignificant amount is allowed because of an accounting concept known as materiality.
To learn more, see the Related Topics listed below:
After working as an accountant, consultant, and university accounting instructor for more
than 25 years, Harold Averkamp formed AccountingCoach.com in 2003. His goal was to
share his knowledge and passion for teaching accounting with people throughout the
world at a very low cost. Read More...