What are Supplies?

Supplies are incidental items used during the course of production, or as part of an organization’s administrative activities. The total cost of supplies tends to be quite low, and the per-unit cost of supplies is also usually quite low. Examples of supplies are paper, staples, and toner cartridges.

Accounting for Supplies

Supplies are usually charged to expense when they are acquired. This is because their cost is so low that it is not worth expending the effort to track them as an asset for a prolonged period of time. If the supplies are related to the administrative area, then they are charged to expense within the selling, general and administrative area of the income statement. If the supplies are related to the cost of goods sold, then they are charged to expense within the cost of goods sold area of the income statement.

Presentation of Supplies

If the decision is made to track supplies as an asset, then they are usually classified as a current asset. To be classified as a current asset, there must be a reasonable expectation that the supplies will be used within the next 12 months. If not, then the supplies are instead classified as long-term assets. When supplies are classified as assets, they are usually included in a separate inventory supplies account, which is then considered part of the cluster of inventory accounts. If so, supplies then appear within the “inventory” line item in the balance sheet.