Supplies is under the asset category, specifically, the current asset. When supplies is used, the journal entry would be:

The expenses of the company will increase and the related asset is decreased. Owner's equity is decreased by expenses and is increased by income or revenues. Therefore, If supplies that have been purchased are used in the course of business, then owner's equity will decrease.

• First item is incorrect as the event will decrease the equity account.
• Second item is incorrect as shown in the journal entry above. Asset will decrease.
• Third item is incorrect because liability will not be affected by such event. Liability is only affected by the time of purchase and if the purchase was on account.