What Happens to the Accounting Equation When the Adjustment for Depreciation

question 100

Multiple Choice

What happens to the accounting equation when the adjustment for depreciation expense for the accounting period is recorded?

• A) Assets decrease and shareholders' equity decreases.
• B) Assets increase and shareholders' equity increases.
• C) Assets decrease and liabilities decrease.
• D) Liabilities increase and shareholders' equity decreases.

---

Definitions:

Mutual Agency

The legal principle that allows each partner in a partnership firm to represent and make decisions for the firm.

Entity Principle

An accounting concept that treats a business as separate from its owners or other businesses for financial reporting.

Executive Officers

High-ranking executives who are responsible for managing the operations and resources of a company, making major corporate decisions, and ensuring the company's operational success.

Stock Dividend

A payment made by a corporation to its shareholders in the form of additional shares rather than cash.