At the end of the month, we record the supplies that have been used throughout the period. Required: For the transaction above, complete the following: (a) Select the accounts that are affected (there will be at least two).
(b) Are the selected accounts increased or decreased?
(c) If Equity is selected, choose the reason that it has changed.

a. The accounts affected are assets (Supplies) and Equity (Retained Earnings).

b. Assets and Equity accounts are decreased.

c. The reason that Equity has changed is because the Retained Earnings are reduced by the Supplies Expense.

Explanation:

The five major classifications of accounts are assets, liabilities, equity, revenue and expenses.  Both revenues and expenses affect the equity balance through retained earnings.  While revenues increase retained earnings, expenses decrease them.

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