A new accountant working for Malawi Limited records $800 depreciation expense on store equipment at year end as follows: The effect of this entry is to

Question

A new accountant working for Malawi Limited records $800 depreciation expense on store equipment at year end as follows:  The effect of this entry is to

Quizplus · Accepted Answer

The entry of $800 depreciation expense overstates the carrying amount of the depreciable assets at year end. This is because depreciation expense reduces the carrying amount of depreciable assets, and recording depreciation expense increases the accumulated depreciation account, which is a contra-asset account that offsets the carrying amount of the depreciable assets. Therefore, by not recording this expense, the carrying amount of the assets is overstated.

A New Accountant Working for Malawi Limited Records $800 Depreciation