When a business purchases office supplies on account, it means that the payment for these supplies will be made at a later date, rather than at the time of purchase. This transaction affects both the Office Supplies account and the Accounts Payable account. Here's how the journal entry is recorded:

Journal Entry for Office Supplies Purchased on Account

1. Debit: Office Supplies (Asset Account)
   • This increases the value of office supplies on hand, as the business has acquired more supplies.
2. Credit: Accounts Payable (Liability Account)
   • This increases the amount owed to the supplier, as the business has not yet paid for the supplies.

Example Journal Entry

Suppose a business purchases $500 worth of office supplies on account from a supplier. The journal entry would look like this:

Explanation

• Office Supplies (Debit): The business records the increase in office supplies as an asset. This reflects the value of the supplies now available for use.
• Accounts Payable (Credit): The business acknowledges the obligation to pay the supplier in the future. This liability will be settled when the payment is made.

Subsequent Payment

When the business eventually pays the supplier for the office supplies, the following journal entry is made to record the payment:

Key Points to Remember

1. Office Supplies is an asset account and is debited when supplies are purchased.
2. Accounts Payable is a liability account and is credited when the business owes money to a supplier.
3. The journal entry reflects the accrual basis of accounting, where expenses are recognized when incurred, not when paid.
4. If the supplies are used immediately, they may be expensed directly to an Office Supplies Expense account instead of being recorded as an asset.

This journal entry ensures accurate tracking of both the supplies acquired and the liability incurred, maintaining the integrity of the business's financial records.