Are Office Supplies Assets or Expenses?
Office supplies are the items that allow companies and employees to run their business operations effectively. These essential items include paper products, folders, binders, pens, paperclips, and other desk organization materials. Office supplies are also used by students and teachers at school and colleagues. Providing resources such as these increases efficiency, productivity, and morale in the workplace.
Office supplies play an important role in both personal planning and business performance. Whether you are creating spreadsheets or filing documents, proper office supplies help you get everything done that much quicker and smarter. By investing in quality office supplies, you can save money in the long run. Keeping your essentials organized and well-stocked can help keep a happy workspace from day to day.
Office Supplies is Expense or Assets
Whether office supplies should be treated as an asset or an expense is a debate that has been ongoing in the accounting and finance world for many years.
Office supplies can be classified as the current assets on the balance before they are used in the operation. When purchasing office supplies, the company needs to record them as the current assets on the balance sheet.
Office supplies are typically current assets on a company’s balance sheet and are expected to be consumed within one year. Office supply accounts for a relatively small portion of total current assets. Even the office supplies do not have long-term life, but they meet the definition of the current assets.
When office supplies are used, the company needs to reverse them from current assets to expenses base on actual usage.
In some companies, the office supplies are very small amount. The company decided to record to expense directly to prevent any complications of the entry. The company does not expect to have office supplies remaining at the month’s end. Even if it is not the right approach, it can be used as the impact on the financial statement is very low for some small entities.
Most accountants would agree that office supplies used in the day-to-day operations of a business should be considered an expense. This is because these supplies are consumed within a relatively short amount of time and provide no lasting value to the company, meaning they cannot be classified as assets.
Companies can record office supplies as expenses when they do not expect the supply to last more than one accounting period.
Journal Entry for Office Supplies
The office supplies should be recorded as current assets on the balance sheet when purchased from the supplier. The journal entry is debiting office supplies and credit cash.
The office supplies will increase on the balance sheet.
When the company withdraws the items and uses them, we must reverse the office supplies to expense.
The journal entry is debiting expenses and credit office supplies.
Office supplies are essential for an office as they help to make the office space more efficient and organized. Supplies such as filing folders, paper, ink cartridges, and desk organizers can help boost productivity and make important tasks in the office easier. By stocking up on quality office supplies, your business will be well-equipped with the needs it requires to properly function and be successful. It is very important to categorize office supplies in the correct classification. It will help the reader to understand the financial statement more easily.