Supplies is classified as an which type of account?

• A. Asset
• B. Revenue
• C. Liability
• D. Owner's Equity

Answer: (A)

Supplies is an asset because it represents a resource the business owns that will yield future benefits as it’s used in daily operations. Assets are items the company controls that will help generate economic value, and supplies on hand are expected to be consumed to support activities in the near term, making it a current asset. It’s not revenue, which comes from earning income; nor a liability, which is something the business owes; nor owner’s equity, which reflects the owner’s claim on assets after liabilities. In practice, you’d debit Supplies when you purchase it (increasing the asset) and credit Cash or Accounts Payable. As supplies are used, you debits Supplies Expense and credit Supplies to reflect the consumption.