At the end of the current accounting period, Washta Co. recorded depreciation of $25,000 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 increase liabilities.
C) decrease assets and increase owners' equity.
D) decrease owners' equity and decrease assets.

Question

Quizplus · Accepted Answer

Depreciation is an expense that reduces the value of an asset over time. Since assets decrease in value, the entry to record depreciation will also decrease assets, resulting in a decrease in owners' equity as well. Therefore, the correct answer is D, which states that the effect of this entry on the company's balance sheet is to decrease owners' equity and decrease assets.

At the End of the Current Accounting Period, Washta Co