What is the impact of depreciation on the trial balance?

Practice Questions

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It increases asset balances
It decreases asset balances
It has no effect on the trial balance
It only affects the income statement

Questions & Step-by-step Solutions

1 item

Q: What is the impact of depreciation on the trial balance?

Solution: Depreciation decreases asset balances on the trial balance as it represents the allocation of the cost of an asset over its useful life.

Steps: 5

Step 1: Understand what depreciation is. It is the process of allocating the cost of a physical asset over its useful life.
Step 2: Recognize that assets are recorded on the trial balance. These include things like buildings, machinery, and vehicles.
Step 3: Know that as depreciation is recorded, it reduces the value of these assets on the trial balance.
Step 4: Realize that this reduction in asset value is important for accurately reflecting the company's financial position.
Step 5: Remember that depreciation also affects the income statement, as it is an expense that reduces profit.

What is the impact of depreciation on the trial balance?

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Questions & Step-by-step Solutions

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