So I cannot use a common purchasing account on both tablets to buy apps and then let different user accounts use the apps bought under the purchasing account. Guess I will just use one common account on both then.
no, you can do what you described.
purchasing account is account P
kids have Accounts 1 and 2
tablet 1has account P and account 1
tablet 2 has account P and account 2
each tablet will be able to use all apps purchased by account P
the only restriction is that account P must be on the tablet for the app to install. you can even add account P, install the app, and remove account P. the app will continue to function, but won't receive updates (until you re-add account P).