Depreciation decreases____________?
Correct answer: D. Capital
- A. Liabilities
- B. Cash
- C. Bank
- D. Capital
Explanation
Depreciation is an expense that reduces profit, and the resulting lower profit reduces the owner's capital or equity. It does not represent an immediate cash or bank payment.
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About Financial Statements
Financial statements present a business's financial performance and position through the income statement, statement of financial position, cash flow statement and changes in equity. Questions involve preparing and interpreting these statements, adjusting entries, depreciation, closing inventory, accrued and prepaid items, and distinguishing profit from cash flow.
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