_________ normally are carried on an organization's books as expenses because they tend to be consumed by the organization within a year of purchase.
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A. B. C. D.A
The correct answer to the question is A. Supplies.
Supplies are normally carried on an organization's books as expenses because they tend to be consumed by the organization within a year of purchase. Here's a detailed explanation:
Supplies: Supplies refer to items that are used in the day-to-day operations of an organization, such as office stationery, cleaning supplies, and other consumable materials. These items are typically purchased and used up or consumed within a relatively short period of time.
Expense recognition principle: In accounting, the expense recognition principle states that expenses should be recognized and recorded in the same period in which the related revenues are recognized. This principle ensures that the financial statements accurately reflect the organization's financial performance for a given period.
Matching principle: The matching principle is a fundamental concept in accounting that requires expenses to be matched with the revenues they help generate. By matching expenses with the related revenues, the financial statements provide a more accurate representation of the organization's profitability.
Timing of supply consumption: Supplies are considered to be consumed relatively quickly compared to other assets. Unlike long-term assets such as buildings or equipment, supplies are typically used up or depleted within a short time frame, often within a year or less.
Treatment as expenses: Due to their relatively short useful life, supplies are generally treated as expenses in the accounting records. They are recorded as an expense when they are purchased or used, and their cost is recognized in the income statement for the period in which they are consumed.
Impact on financial statements: Treating supplies as expenses has an impact on the financial statements. The cost of supplies is recognized as an expense in the income statement, which reduces the organization's net income. As a result, the balance sheet will show a decrease in equity and assets (specifically, a decrease in retained earnings if the organization is using the accrual basis of accounting).
In summary, supplies are considered expenses because they are consumed or used up within a relatively short period of time. This treatment aligns with the expense recognition and matching principles in accounting, ensuring that the financial statements accurately reflect the organization's financial performance.