At the end of the current accounting period,Ringgold Co.recorded depreciation of $15,000 on its equipment.The effect of this entry on the company's balance sheet is to:
A)decrease assets and increase liabilities.
B)decrease owners' equity and decrease assets.
C)decrease assets and increase owners' equity.
D)decrease owners' equity and increase liabilities.

Question

Quizplus · Accepted Answer

Depreciation is a non-cash expense, meaning it does not involve an actual outflow of cash. Instead, it reduces the value of an asset over its useful life. When Ringgold Co. records depreciation of $15,000, it decreases the value of its equipment on the balance sheet by that amount. This reduction in asset value causes a corresponding decrease in owners' equity since owners' equity is calculated as assets minus liabilities. Therefore, the effect of the entry is to decrease owners' equity and decrease assets, which is reflected in choice B.

At the End of the Current Accounting Period,Ringgold Co