Supplies recorded in the General Fund under the consumption method will initially include a debit to which account?

• A. Inventory of Supplies
• B. Supplies
• C. Expenditures
• D. Prepaid Supplies

Answer: (D)

Under the consumption method, purchases of consumable supplies are treated as an asset at the time of purchase because the items will be used in future periods. The initial entry in the General Fund is to debit Prepaid Supplies (a current asset) and credit Cash or Accounts Payable. This records that resources have been acquired for future use rather than expensed immediately. When the supplies are actually consumed, you then debit Expenditures—Supplies and credit Prepaid Supplies to reflect the cost as an expenditure and reduce the asset accordingly. This approach links spending to actual consumption rather than the act of purchasing.