What is the journal entry to recognize supplies remaining at year-end using the purchase method?

To recognize supplies remaining at year-end using the purchase method, the correct journal entry involves debiting the supplies on hand inventory account and crediting the nonspendable fund balance - inventory account. This reflects that the supplies, which are not yet expensed, are being classified as an asset (inventory on hand) that forms part of the overall nonspendable resources within the fund balance.

In the context of the purchase method, when supplies are purchased, they are initially recorded as expenditures. However, at year-end, it's essential to reflect the leftover supplies correctly as an asset rather than immediately recognizing them as consumption. By doing so, it provides a more accurate picture of the financial position, showing that some supplies are still available for future use.

This entry aligns with the accrual accounting concept where expenses are recognized when incurred, but supplies not used by year-end are attributed to future periods, thereby necessitating the adjustment to inventory.