Supplies on Hand
“Supplies on Hand” refers to the supplies that a business currently has in its possession, which have not yet been used or consumed. In accounting terms, these supplies are considered a current asset on the balance sheet until they are used up. Once consumed, the value of these supplies is transferred to an expense account, often termed “Supplies Expense.”
Think of “Supplies on Hand” as the stockpile of consumable items that support the day-to-day operations of a business but aren’t necessarily for sale. They’re necessary for the business to function but get used up over time.
Examples of items that might be included in Supplies on Hand include:
- Office Supplies: Items such as paper, pens, printer ink, and envelopes.
- Maintenance Supplies: Items like cleaning agents, tools, or replacement parts for machines.
- Industrial or Medical Supplies: Depending on the industry, it could include raw materials, gloves, safety equipment, or syringes.
Accounting for Supplies on Hand:
- Purchase of Supplies: When a business purchases supplies, the “Supplies on Hand” account (an asset account) is debited, and the cash or accounts payable account is credited.
- Use of Supplies: Periodically, businesses will count or estimate the supplies that have been used. The difference between the beginning balance and the ending balance (after accounting for any new purchases) represents the amount of supplies consumed. This amount is then moved from the “Supplies on Hand” asset account to the “Supplies Expense” account.
Example of Supplies on Hand
Let’s delve into a more detailed, fictional scenario involving “Supplies on Hand.”
Scenario:
“GreenLeaf Art Studio” is a community-based art studio offering classes in painting, pottery, and sketching. At the start of September, they conduct an inventory check and discover they have the following supplies on hand:
- Acrylic Paints: $500
- Sketching Pencils: $150
- Pottery Clay: $350
- Canvas: $300
This gives a total of $1,300 worth of supplies on hand at the beginning of September.
During September, “GreenLeaf” makes the following purchases:
- September 10th:
- New set of Acrylic Paints: $200
- Pottery Clay: $200
Total = $400
- September 22nd:
- Canvas: $100
- Sketching Pencils: $50
Total = $150
On September 30th, they conduct another inventory check and find:
- Acrylic Paints: $300
- Sketching Pencils: $100
- Pottery Clay: $300
- Canvas: $250
This gives a total of $950 worth of supplies on hand at the end of September.
Accounting for Supplies on Hand:
- Beginning Balance for September:
Supplies on Hand = $1,300 - Purchases in September:
Total purchases = $400 + $150 = $550 - Total Supplies before Usage:
$1,300 (beginning balance) + $550 (purchases) = $1,850 - End of September Balance:
Supplies on Hand after usage = $950 - Supplies Used in September:
Supplies used = $1,850 (total before usage) – $950 (end of September balance) = $900
In this example, “GreenLeaf Art Studio” started September with $1,300 worth of supplies, purchased an additional $550 throughout the month, and used up $900 worth of supplies in its operations. At the end of September, they have $950 worth of supplies left on hand. This $900 used will be reflected as an expense for the month of September.
