What is the effect of recording depreciation expense on the accounting equation?
Understand the Problem
The question is asking about the effects of recording depreciation expense on the accounting equation, specifically how it affects total assets, liabilities, and shareholders' equity. It implies a need to analyze the principles of accounting to determine the correct answers.
Answer
Total assets decrease, and Total shareholders' equity decreases.
The final answer is: Total assets decrease, and Total shareholders' equity decreases.
Answer for screen readers
The final answer is: Total assets decrease, and Total shareholders' equity decreases.
More Information
Recording depreciation lowers the value of assets and reduces net income, leading to decreased shareholders' equity.
Tips
A common mistake is forgetting that depreciation affects the income statement, thus impacting equity through reduced retained earnings.
Sources
- What will be the impact in accounting equation for recording depreciation - byjus.com
- What is the effect of this entry on the accounting equation - homework.study.com
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