[djsheen]

General Question for my books:

Prior to recording adjusting entries on December 31, the Store Supplies account had an $880 debit balance, while a physical count of the supplies showed $325 of unused supplies on hand. I need to prepare the required adjusting entry and am not sure how.

[CaptainForest]

So your books say you should have 880, and yet you only have 325 left.

Therefore you used up 880-325 = 555

Therefore, the adjusting JE would be:
Dr. Supplies Expense 555
Cr. Supplies 555

[AdamUTsel]

Your entry depends. Was your original entry Dr. Supplies Cr. Cash for payment of supplies? Since your books do not match the physical account you may need to check your cash balance. If there is no mistake there, it appears there is a loss or theft of your supplies. In this case, you would need to adjust your asset balance for the supplies against a loss account.

However, if you original entry was entered incorrectly, this should have appeared when you cash balances did not reconcile to your bank statements. You may need to look into this further...