At the end of the current accounting period, Ringgold Company recorded depreciation of $15,000 on its equipment. The effect of this entry on the company's balance sheet is to decrease:

Question

Quizplus · Accepted Answer

Recording depreciation decreases the book value of assets (specifically, the equipment in this case) by reflecting their usage and wear and tear over time. This reduction in assets also decreases stockholders' equity because it reduces the net income for the period, which is a component of retained earnings (part of stockholders' equity). There is no direct effect on liabilities from recording depreciation.

At the End of the Current Accounting Period, Ringgold Company