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Companies use assets to generate revenues. Sometimes, these assets can be long-term, which requires spreading the cost over various accounting periods. In contrast, some can also be short-term, spanning less than 12 months. In this case, the items may not require the same treatment. These assets can also fall into several categories.
One category of assets that often confuses people is office supplies. The primary issue, in this case, is their value and whether companies can capitalize on them. Before discussing that aspect, it is crucial to understand what these assets include.
What are Office Supplies?
In accounting, office supplies are a type of expense companies incur to support their day-to-day operations. These may include various items, such as pens, paper, staples, printer ink, and other materials employees use in the office. Essentially, these are items that the company may use for administrative purposes. In most cases, these are minimal expenses.
Sometimes, companies purchase office supplies for immediate use. In these cases, the items get consumed as soon as the company acquires them. However, companies may also purchase office supplies for future use. These items remain in inventory until the company uses or consumes them. In these cases, the accounting for office supplies may differ.
Office Supplies: Assets, Liabilities, or Expenses?
The accounting for supplies is not straightforward due to complications. In most cases, they include assets that require minimal expenses. The accounting treatment may become more complex if companies hold office supplies before consuming them. In most cases, these assets fall under expenses since they require minimal costs and get consumed immediately.
However, if the company does not consume office supplies immediately, they may not become an expense. In this case, the company must record these supplies as an asset. For most companies, it is a current asset since it gets consumed within the next 12 months. The liability treatment for office supplies depends on how the company obtains them from the supplier.
What is the journal entry for Office Supplies?
The journal entry for office supplies depends on the accounting treatment. In most cases, office supplies are an expense and recorded the same. Therefore, the journal entry becomes as follows.
| Dr | Office supplies (Expenses) |
| Cr | Bank or Cash or Account payable |
if the company keeps the office supplies for some time before consuming them, the treatment will differ. In this case, these supplies will become inventory or assets. The journal entry, in this case, will become as follows.
| Dr | Office supplies (Current assets) |
| Cr | Bank or Cash or Account payable |
Once the supplies get consumed, the company must convert them into an expense. The journal entry to do so is as below.
| Dr | Office supplies (Expenses) |
| Cr | Office supplies (Current assets) |
Example
A company, Blue Co., purchases $1,000 of office supplies for cash during the period. The company consumes $400 worth of these supplies and keeps the remaining for future use. Blue Co. records the transaction as follows.
| Dr | Office supplies (Expenses) | $400 |
| Dr | Office supplies (Current assets) | $600 |
| Cr | Cash | $1,000 |
Conclusion
Office supplies are items used in a company for administrative or office use. The accounting treatment for these supplies is usually the same as expenses. However, if companies don’t consume those supplies, they must record them as assets. Therefore, office supplies may be an expense or asset based on their usage. The liability treatment depends on the compensation to the supplier.
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