Depreciation expense has the immediate effect of increasing the cash account.

Name: Depreciation expense has the immediate effect of increasing the cash account.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Depreciation expense decreases the value of the asset on the balance sheet, which in turn reduces the company's net income for the period. This reduction in net income results in a decrease in retained earnings, which decreases the overall equity of the company. As a result, depreciation expense does not increase the cash account.

Depreciation Expense Has the Immediate Effect of Increasing the Cash