What is the effect of recording depreciation on the trial balance?

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Question: What is the effect of recording depreciation on the trial balance?

Options:

Correct Answer: Decrease in equity

Solution:

Recording depreciation decreases the value of assets and also reduces equity, as it is an expense.

What is the effect of recording depreciation on the trial balance?

What is the effect of recording depreciation on the trial balance?

Step 1: Understand what depreciation is. It is the process of allocating the cost of a tangible asset over its useful life.
Step 2: Know that when depreciation is recorded, it reduces the value of the asset on the balance sheet.
Step 3: Realize that depreciation is considered an expense on the income statement.
Step 4: Understand that recording an expense reduces the overall equity of the company.
Step 5: When you record depreciation, you will see a decrease in the asset value and a decrease in equity on the trial balance.

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