Let’s look at recording the same supplies transactions two different ways. The business starts the year (January 1) with $1,800 of supplies on hand. On August 12, the business purchased $10,800 of supplies. On December 31, the count of supplies indicates $3,400 worth on hand.

Required

1. Assume that the business records supplies by initially debiting an asset account.

a. Open T-accounts for Supplies and Supplies Expense and place the beginning balance in the Supplies account.

b. Record the August 12 purchase of the asset in the Supplies account.

c. Record the December 31 adjusting entry into the T-accounts without using a journal.

2. Assume instead that the business records purchases of supplies by debiting an expense account.

a. Open T-accounts for Supplies and Supplies Expense, and place the beginning balance in the Supplies account.

b. Record the August 12 purchase (as an expense) directly in the Supplies Expense account.

c. Record the December 31 adjusting entry into the T-accounts without using a journal.

3. Compare the ending account balances under both approaches. Are they the same? Explain.