What are Office Supplies?
Office supplies refer to items that companies use within office use. They include small stationery and similar materials that are crucial for administrative purposes.
Usually, these materials differ in their usage from other goods or assets. Essentially, office supplies include items that companies regularly use for administrative work. There is no standard definition of what it may contain.
Office supplies may cover various goods and materials that companies use within operations. Usually, they consist of pens, paper, pencils, staplers, binders, file folders, tape, stationery, etc.
These goods are insignificant in their cost to companies. However, companies may also include equipment such as printers, telephones, and copy machines within this category. These assets are relatively higher value.
Office supplies may not include significant expenses. Despite that, they are essential to running operations and business. They are consumable goods that have a finite useful life.
Usually, companies consume them in the same period as they get acquired. However, the definition of office supplies and their usage may vary from one company to another.
In accounting, office supplies include any expenses incurred within the regular course of operations. These are goods that employees need daily to perform their administrative tasks.
However, the accounting treatment of these goods may not be as straightforward. Since office supplies encompass a broad range of materials, accounting for them may require guidance.
What is the accounting treatment for used Office Supplies?
The accounting for used office supplies may differ based on various factors. One of the most prevalent issues when treating these supplies is differentiating between capital and revenue expenditure.
Essentially, companies must determine whether they should capitalize or expense them out for the period. This issue may require companies to consider the value of the goods bought and used.
The accounting treatment for used office supplies also differs based on how companies treat these supplies. If a company records them as a capital expenditure, it will require classifying them as assets.
In that case, the usage of office supplies falls under the accounting standard for fixed assets. Companies cannot record the used office supplies directly. Instead, they must depreciate it over the useful life of those assets.
If companies treat office supplies as revenue expenditure, the same treatment doesn’t apply. Instead, they must expense the bought goods as soon as they are used within operations.
Usually, this treatment applies to office supplies with low value. Companies expense out these items in the same period as they get consumed. Therefore, the accounting treatment will be the same as any other expense.
Sometimes, companies acquire office supplies for future use. However, they cannot capitalize on them due to their low value. In that case, companies will record those supplies as assets.
However, they will not use the same treatment as fixed assets. Instead, they will treat it as a current asset. Once they use those supplies within operations, they can transfer office supplies to the expense account.
Overall, the accounting treatment of office supplies can fall under various situations. Usually, the first case is the most common. Companies capitalize on office supplies and treat their usage under depreciation.
For smaller items, the second and third uses will apply. The primary difference between the two involves the timing of purchase and usage of the office supplies.
How to record used Office Supplies journal entries?
As stated above, the accounting treatment of office supplies may vary depending on various conditions. Based on that treatment, the journal entries will also differ.
Essentially, companies must determine the classification for those supplies. Once they do so, they can record the journal entries accordingly. Given below is a step-by-step guide on recording used office supplies journal entries.
1. Determine the treatment
The most crucial part of recording office supplies’ journal entries is determining how to treat them. Based on that, the journal entry will differ. As stated above, companies usually consider the value of the underlying items for their treatment.
If these items include equipment and other similar assets, companies capitalize them. However, insignificant office supplies become revenue expenditure.
2. Treatment as a fixed asset
If office supplies include equipment, companies may capitalize them. In that case, the journal entry to record these supplies will be as follows.
| Date | Particulars | Dr | Cr |
| Office supplies | X,XXX | ||
| Accounts payable or Bank | X,XXX |
However, this treatment only records the purchase of the supplies. It does not include its use. When companies put these assets through use, they cannot record them directly. Instead, they must use depreciation to record the used office supplies. In that case, the journal entry will be as below.
| Date | Particulars | Dr | Cr |
| Depreciation | X,XXX | ||
| Accumulated depreciation | X,XXX |
3. Treatment as an expense
For smaller items of office supplies, companies can record the expense as it occurs. It happens when companies obtain these assets and use them simultaneously.
Primarily, companies will record an expense to recognize the used office supplies. The credit side will include the compensation account. In this case, the journal entry will be as below.
| Date | Particulars | Dr | Cr |
| Office supplies expense | X,XXX | ||
| Accounts payable or Bank | X,XXX |
4. Treatment as a current asset
Sometimes, companies do not use office supplies in the same period as they purchase them. Usually, companies acquire these supplies in bulk for usage over several periods.
The accounting treatment for the user will be similar to that if treated as an expense. However, it will involve the additional step of recognizing the office supplies as current assets first.
When companies acquire these supplies, they will record them as a current asset. In that case, the journal entry will be as follows.
| Date | Particulars | Dr | Cr |
| Office supplies | X,XXX | ||
| Accounts payable or Bank | X,XXX |
Later, when they consume those supplies, they will treat them as expenses. In that case, the journal entry will involve transferring the balance from current assets to the income statement.
This treatment may occur another time than when companies acquire the goods. Nonetheless, the journal entry will be as follows.
| Date | Particulars | Dr | Cr |
| Office supplies expense | X,XXX | ||
| Office supplies | X,XXX |
Example
A company, ABC Co., uses office supplies in various areas. During a period, the company acquires paper in bulk for printing. ABC Co. expects to use this supply for a year.
This usage will fall under different accounting periods. Therefore, the company must record the acquisition as a current asset first. Later, it can expense it out as the papers get used.
ABC Co. pays $1,000 through a bank account to acquire the printing paper. The company uses the following journal entry to record the acquisition.
| Date | Particulars | Dr | Cr |
| Printing paper supplies | $1,000 | ||
| Bank | $1,000 |
At the end of the first accounting period, ABC Co. only consumes $300 of the printing paper. Therefore, the company uses the following journal entry to record the used office supplies.
| Date | Particulars | Dr | Cr |
| Office supplies expense | $300 | ||
| Printing paper supplies | $300 |
In the next period, ABC Co. consumes the remaining printing paper. The company uses the following journal entries to record it.
| Date | Particulars | Dr | Cr |
| Office supplies expense | $700 | ||
| Printing paper supplies | $700 |
Conclusion
Office supplies include a broad range of goods that companies use within their operations. However, these supplies vary from other materials and assets.
The accounting for office supplies may differ based on how companies treat them. Essentially, they must determine if these supplies are revenue or capital expenditure. Based on that, they can establish how to record used office supplies journal entries.