Question

Supplies are (assets/expenses/liabilities) until they are used. When they are used up, their costs are reported as (assets/expenses/liabilities)?

1) Assets
2) Expenses
3) Liabilities

Answer 1

Supplies are considered assets until they are used, at which point their cost is reported as expenses in the company's accounts. Assets represent items of value owned by a business, while liabilities are the debts it owes.

Step-by-step explanation:

Supplies are assets until they are used. When they are used up, their costs are reported as expenses. The accounting treatment of supplies involves initially recognizing them as assets on a balance sheet because they provide future economic benefits. As these supplies are consumed in the course of business operations, their value is transferred from an asset account to an expense account, which reflects their consumption as part of the cost of doing business.

When discussing assets, we consider them to be items of value that a firm or an individual owns. Liabilities, on the other hand, are obligations or debts owed by a business. In accounting, an important document known as the balance sheet lists all of a company's assets and liabilities, along with the company's equity, which represents the owner's interest in the company.