Most likely your company maintains a selection of office supplies for employee use, which means you need to maintain a consistently updated list of inventory purchased and used within a specific accounting period. An accurate inventory serves a two-fold purpose: it helps ensure your business does not run out of necessary office supplies, and it allows you to properly account for office supply purchases as assets or liabilities under an accrual system of accounting.
Visit your company supply closet with an inventory log to record the supplies currently on hand. If your company prefers to maintain office supply inventory records in a spreadsheet or word processing table, bring a laptop or tablet to expedite the data entry process.
Separate supplies into common groups such as writing implements, copy paper, notebooks, desktop items and filing supplies. Separating supplies based on their product numbers or UPC codes is also an option. A larger company with expansive use of supplies across multiple departments may prefer a more detailed approach to supply management, but general categories suffice for most small businesses.
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Enter the category of the item or the item number in your inventory log. Record the number of currently available units in an adjacent column.
Determine the reorder level for each item by assessing how quickly your company consumes the product and how quickly the product can be replaced. For example, if your company consumes three boxes of copy paper per week, and it takes one week to receive a new shipment of copy paper from your supplier, then your reorder should occur when your copy paper inventory drops to four to six boxes. Reordering supplies before your inventory reaches a critically low level provides a time cushion in case your paper consumption increases or a delay occurs with delivery.
Add a note specifying the reorder level for each item.
Record new office supply purchases as they are made.
Accounting for Inventory
Record the total value of an office supply purchase in your company's ledger as an asset. When supplies have not yet been used, they are considered assets instead of expenses under an accrual accounting system. If you already have an entry for office supplies in your asset column, add the cost of the new purchases to the existing total.
Visit the company supply closet at the end of an accounting period and perform an inventory check. Compare the total units currently on hand for each item number or category to the totals entered in your inventory log.
Enter your new totals for each inventory item or category in your log.
Multiply the unit cost of an item consumed by the total number of units consumed to arrive at your total inventory expense for that item or category. For example, if pens cost $10 per unit and 12 units were consumed, the total inventory expense for the item is $120.
Add your per item totals together to arrive at your total office supply expense for the accounting period. This total is the accumulated value of the office supplies actually consumed within your company during the current period.
Subtract the office supply expense for the current accounting period from your office supply assets entry in the company ledger. Leave a journal entry explaining the removal of funds. For example: "Office supply expense removal for January."
Enter the total supply expense for the accounting period in the liability section of your ledger.
Consistently recording your office supply purchases and regularly updating your inventory log reduce the stress of income tax preparation because you do not need to account for a year's worth of inventory purchases and usage adjustments. Instead, you only need to update your ledger to reflect end-of-year totals.
Always maintain enough office supplies in inventory to sustain your office for at least one week. Execute a weekly inventory check for four weeks and find the average number of units consumed per week for each item in your company's supply closet. These numbers become your average weekly consumption or reorder level for an office supply. Reorder supplies when your number of in-stock items nears your weekly consumption level.