What is the impact of recording depreciation on the trial balance?
Practice Questions
1 question
Q1
What is the impact of recording depreciation on the trial balance?
Increases total assets
Decreases total liabilities
Decreases total equity
Increases total revenues
Recording depreciation decreases total equity as it is an expense that reduces net income.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the impact of recording depreciation on the trial balance?
Solution: Recording depreciation decreases total equity as it is an expense that reduces net income.
Steps: 5
Step 1: Understand what depreciation is. Depreciation is the process of allocating the cost of a tangible asset over its useful life.
Step 2: Know that depreciation is considered an expense. When a company records depreciation, it is recognizing that the asset has lost value.
Step 3: Realize that expenses reduce net income. When expenses increase, net income decreases.
Step 4: Understand how net income affects equity. Net income is part of the equity section in the balance sheet. If net income decreases, total equity also decreases.
Step 5: See the effect on the trial balance. The trial balance shows all accounts and their balances. When depreciation is recorded, it will show as an expense, reducing the total equity.
