Depreciation expense decreases both assets and stockholders' equity.

Name: Depreciation expense decreases both assets and stockholders' equity.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Depreciation expense is recorded to allocate the cost of an asset over its useful life. It reduces the value of the asset on the balance sheet (which is a part of total assets) and reduces retained earnings (which is a part of stockholders' equity) on the income statement. Therefore, depreciation expense decreases both assets and stockholders' equity.

Depreciation Expense Decreases Both Assets and Stockholders' Equity