How to document a State Machine testing procedure

I'm supposed to test a state machine for an embedded system. There have been some discussions on how the testing procedure should be documented:

-One opinion is that each test case description should include all the steps required from the initial state to the state to be tested, verifying those steps along the way e.g: Initial state 1 -> Test transition to State 2->...->Test transition to final state

-Another opinion is to map each state transition to a test case. The various state transitions are tested by specifying testing scenarios, e.g: Scenario 1: Test case 1 -> Test case 2 -> ... -> Test case N, where each test case contains test steps that check the transition from one particular state to another one. That way, if someone wants to test the transitions up to 'State N', he would specify a scenario 'Test case 1' -> 'Test case 2' -> ... -> 'Test case N-1' -> 'Test case N'. That way he would not need to document separate test cases that would repeat and re-test all the transitions required to reach test states 'N-1', 'N-2' etc.

What is your opinion on that matter, is any of the above methods more suitable? Or could there be any other suggestions?