Proper classification of purchases ensures accurate accounting and financial reporting.
Supplies Accounts (Operating Expenses)
Use a supplies account for items that:
- Are generally used up or consumed within one year.
- Have a short useful life and are not expected to last more than one year.
- Are low-cost and do not meet the criteria under What is an Equipment Asset?
- Include disposable, expendable, or frequently replaced items.
Examples of Supplies: Office supplies (paper, pens, toner, folders), Cleaning materials (disinfectants, wipes, gloves), Small tools (screwdrivers, hammers, tape measures), Computer accessories (mice, keyboards, cables), and Lab or medical consumables (test tubes, gloves, reagents).
Equipment Accounts (Fixed Assets)
Use an equipment account for items that:
- Have a useful life of more than one year.
- Are not regularly replaced and provide long-term use.
- Meet the criteria under What is an Equipment Asset?
- Can be tracked and assigned an asset tag for inventory purposes.
Examples of Equipment: Computers, servers, and large IT hardware, Office furniture (desks, chairs, filing cabinets), Vehicles and large machinery, Scientific or lab equipment, and Audio-visual or production equipment.
